The New York State Commercial Finance Disclosure Law (CFDL) requires that certain commercial finance providers need to disclose the specific details of the financing they provide. The objective is to provide greater transparency and specificity to borrowers who need to review and compare financing options. Individuals and companies in New York avoid making fraudulent transactions when they understand all of the terms and fees.
The state’s requirements
In 2020, New York’s Disclosure Law was passed to protect the recipients of commercial loans and financial deals. Any individual or company that offers commercial financing has to disclose certain information about the agreement first.
The disclosure rules affect sales, factoring, open-end and closed-end commercial financing. However, not every type of commercial financing agreement, bank, lender or finance provider has to follow this law.
Types of disclosures
General types of information that are disclosed include the individual and total costs of a commercial financing agreement. This includes the disbursement amount and the total repayment amount plus fees. Every fee is included, such as the finance charge, the APR fee and the late payment fees. Additional information includes the payment schedule with the frequency of the payments and the estimated amounts every month.
By mid-2022, companies are required to comply with this banking & finance law. Violating the CFDL could result in penalties that vary from $2,500 to $10,000 in fines.
Individual states have to pass their own laws to regulate disclosures for commercial financing. New York’s commercial finance disclosure law requires that certain providers of financial transactions provide disclosures to their borrowers. Lawmakers plan to implement the final regulations and enforce the law throughout the state.