Florida Governor Ron DeSantis (R) has recently signed a Florida Commercial Financing Disclosure Law (FCFDL), Florida HB 1353, into law, marking a significant development in the regulation of commercial financing. This legislation, which is set to take effect by January 1, 2024, aims to enhance transparency and provide greater protection for borrowers engaging in commercial financing transactions within the state.
The Florida law focuses on "commercial financing transactions," encompassing various types such as commercial loans, commercial open-end credit plans, and accounts receivable purchase transactions. Notably, the law applies solely to transactions involving $500,000 or less, while certain financial institutions are exempt from its provisions.
One of the key aspects of this legislation is the introduction of disclosure requirements for lenders. Under the new law, lenders will be obligated to provide borrowers with specific information, including the total amount of funds provided and the cost of capital. Unlike traditional lending practices, the law does not require lenders to disclose the Annual Percentage Rate (APR), a calculation that has been a subject of controversy within the industry. One group that has influenced this law and similar laws in other states is the RBFC (Revenue Based Finance Coalition).
The Florida law also places certain obligations on brokers operating in the commercial financing space. It prohibits brokers from collecting advance fees from businesses, with a few exceptions, and from engaging in any false or deceptive representations. .
Furthermore, brokers will be required to disclose their address and telephone number in all advertisements promoting their services, enhancing transparency and ensuring businesses can make informed decisions.
One thing it does not require is for brokers to register or pay any fees annually, as other states have required.
The enactment of this legislation in Florida signifies a significant step forward in the regulation of commercial financing within the state.
By providing borrowers with essential information and safeguards, the law aims to create a more equitable and transparent lending environment.
The Florida commercial financing disclosure law represents a growing trend in states recognizing the importance of transparency and borrower protection in commercial financing transactions.
By addressing key disclosure elements and introducing obligations for brokers, the law seeks to foster fair and responsible lending practices.
As other states continue to assess their commercial finance regulations, Florida's enactment of this legislation sets a precedent for ensuring greater accountability and transparency in the industry.