On June 28th Connecticut Governor Ned Lamont signed a significant piece of commercial disclosure legislation, Senate Bill 1032. This law imposes a compliance deadline of July 1, 2024, granting businesses ample time to prepare for the impending changes.
The new law mandates total cost of capital disclosures, a preferred method of transparency for revenue-based financing products over the sometimes used Annual Percentage Rate (APR) disclosure. This change aligns Connecticut with Florida, Georgia, Utah, and Virginia, all states that have already adopted similar commercial finance reforms.
However, Connecticut's legislation is not a mere carbon copy of the laws passed in other states. It introduces a unique set of additional provisions that promise to add extra layers of protection for businesses.
For one, the law ensures that a provider cannot alter, revoke, or withdraw a specific offer until the end of the third day following the offer's issuance.
This provision provides businesses with a window of certainty during which they can consider the offer without fear of sudden changes.
In addition, the bill requires that all commercial finance providers and brokers register with the Banking Commissioner. This move aims to promote transparency and accountability within the industry.
Furthermore, the legislation also says providers will have to document 'whether, in connection with the specific offer of sales-based financing, the provider will pay compensation directly to a commercial financing broker out of the financed amount and, if so, the amount of such compensation'. This is now another state that requires broker compensation to be revealed to the credit applicant.
There are many other provisions in this law but overall this law represents a significant stride forward in commercial finance legislation, with Connecticut taking part in the movement of promoting transparency, accountability, and fairness within the sector.