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On November 1, the OCC issued Bulletin 2023-34 addressing the topic of “venture lending,” referred to as “commercial loans to early-, expansion-, and late-stage companies.” According to the Bulletin, venture lending is often used to fund new business growth and development but comes with its own set of risks and challenges, and financial institutions must take care to meet the agency’s expectations for risk management and risk-rating of venture loans. Key takeaways from the OCC’s Bulletin including the following:Continue Reading OCC Issues Bulletin on Risks Related to Venture Lending

On October 26, the United States District Court for the Southern District of Texas issued a nationwide preliminary injunction barring the CFPB from moving forward with implementing or enforcing the recently finalized Small Business Lending Rule, designed to implement Section 1071 of the Dodd-Frank Act. The injunction will likely remain in effect pending either the outcome of a trial on the underlying merits of the case or the Supreme Court’s reversal of Community Financial Services Association of America Ltd. v. CFPB. The Southern District of Texas previously issued a similar injunction in July in the same case, however, the original injunction applied only to the parties to the case (see previous blog post here).Continue Reading Federal Court Issues Nationwide Injunction of CFPB’s Small Business Lending Rule

On October 18, the Senate voted 53-44 to approve S.J. Res. 32, a resolution sponsored by Sen. Kennedy (R-LA) to overturn the implementation of the CFPB’s final rule under Section 1071 of the Dodd-Frank Act requiring lenders to report demographic data on small-business loan recipients (see our previous blogs on the rule here and here). The resolution invoked the Congressional Review Act (CRA) to disapprove the CFPB’s final rule – the CRA allows lawmakers to revoke a recently issued federal agency rulemaking by passing a resolution of disapproval against it. The resolutions must pass each chamber of Congress and need a presidential signature to take effect. The White House has threatened to veto the bill.Continue Reading Senate Votes to Repeal CFPB Small Business Lending Rule

On September 14, U.S. District Court for the Eastern District of Kentucky granted a motion brought by the Kentucky Bankers Association (KBA) and eight Kentucky-based banks (plaintiffs), seeking a preliminary injunction enjoining the CFPB from enforcing the Small Business Lending Rule (the Rule) against the plaintiffs and their members. In granting the motion, the court agreed to halt the rule until the Supreme Court rules on the CFPB’s funding structure in Consumer Financial Protection Bureau et al. v. Community Financial Services Association of America Ltd. The court also noted that the banks are incurring expenses related to “training programs, seminar fees, staff time, and new software” to comply with the ule, which they cannot recover due to the federal government’s sovereign immunity and “are likely unrecoverable, resulting in irreparable harm to plaintiffs.”Continue Reading Kentucky Court Grants Injunction on Small Business Lending Rule

Recently, the California Department of Financial Protection and Innovation (DFPI) approved the final rule implementing and interpreting certain sections of the California Consumer Financial Protection Law (CCFPL) that prohibit persons from engaging in unfair, deceptive, or abusive acts or practices (UDAAP) related to commercial financial products and services and establishes data collection and reporting requirements.Continue Reading California DFPI Finalizes Small Business UDAAP Rule

On May 1, Georgia signed SB 90 to become the latest state to require disclosures for small-business financing (see our prior posts on this here, here, and here). Providers of commercial financing in the amount of $500,000 or less who conduct more than five transactions in Georgia annually will be required to comply with the new law. Among other exclusions from the legislation, it does not cover real-estate secured loans, purchase-money loans, motor-vehicle floor plan financing, credit extended in connection with the sale of the creditor’s goods or services, or if the lender makes 5 or fewer such loans in any 12-month period. The legislation will go into effect on January 1, 2024.Continue Reading Georgia Introduces New Commercial Financing Disclosure Requirements

On March 28, the CFPB issued a preemption determination that that TILA does not preempt commercial lending disclosure regulations enacted in California, New York, Utah, and Virginia (we discussed state commercial financing disclosure laws in previous posts here, here, and here). After analyzing public comments on its preliminary determination about whether New York’s commercial financing disclosure law is not preempted by TILA, the CFPB reiterated there is no preemption because the states’ statute require lenders to include disclosures in their commercial financing transactions with businesses, and commercial financing transactions are not covered by TILA.Continue Reading CFPB: TILA Does Not Preempt State Commercial Financial Disclosures

On February 1, NY DFS announced the adoption of the final regulation implementing the New York State Commercial Finance Disclosure Law (CFDL) (N.Y. Fin. Serv. Law §§ 801 to 812). The regulations require companies that offer commercial financing less than or equal to $2.5 million (providers) to make standardized disclosures about the commercial financing’s credit terms to recipients of the commercial financing (recipients). The final regulations were effective February 1, 2023, and the compliance date for the final regulation is August 1, 2023 (see our previous post on the regulations here).Continue Reading New York Adopts Final Commercial Financing Disclosure Regulations

On September 14, the New York Department of Financial Services (NYDFS) published a notice of proposed rules under New York’s Commercial Financing Disclosure Law (CFDL) (we discussed this previous rulemaking in a blog post here). Under the CFDL, commercial finance companies are required to give consumer-style loan disclosures to potential recipients when a specific offering of finance is extended for certain commercial transactions of $2.5 million or less. We note some items in particular from the latest proposed rule:
Continue Reading New York Publishes Proposed Rules on Commercial Financing Disclosures

Two weeks after the DFPI set a Dec. 9 effective date for its long-threatened commercial financing disclosure requirement (we discussed these regulations in a previous bog, here), the DFPI issued proposed commercial UDAAP and annual reporting regulations likely impacting many of the same companies. Specifically, the proposed regulations would apply to providers of commercial financing or other financial products and services to small businesses, nonprofits, and family farms, and would (i) expand the DFPI’s UDAAP authority, and (2) impose annual reporting requirements on covered providers (we briefly discussed these proposed regulations in a previous blog post here).
Continue Reading Proposed California Commercial UDAAP and Annual Reporting Regs to be Promulgated Under California Consumer Financial Protection Law