Plain English Breakdown
The specific details of exemptions ('except as specified') are not described in the provided summary text.
Commercial Financing Regulation
Starting January 1, 2028, this law requires commercial financing providers and brokers to get a license from the state commissioner.
What This Bill Does
- Defines 'commercial financing' as transactions like factoring, asset-based lending, or lease financing intended for business use rather than personal purposes.
- Requires anyone acting as a commercial financing provider or broker to obtain a license from the Commissioner of Financial Protection and Innovation.
- Prohibits providers and brokers from taking a confession of judgment or power of attorney before a borrower defaults on payment.
- Authorizes the commissioner to require that interest rates and fees be stated clearly so borrowers do not misunderstand them.
- Makes changes to the California Financing Law (CFL) to include these new rules for commercial financing.
Who It Names or Affects
- Commercial financing providers who lend money or sell accounts receivable to businesses.
- Commercial financing brokers who arrange loans between lenders and business borrowers.
- Businesses that receive loans, factoring services, or lease financing for non-personal use.
Terms To Know
- Factoring
- A type of accounts receivable purchase transaction included in the definition of commercial financing.
- Confession of judgment
- An agreement that providers and brokers are prohibited from taking before a borrower defaults on payment.
- Power of attorney
- A legal authority document that providers and brokers are prohibited from taking before a borrower defaults on payment.
Limits and Unknowns
- The law takes effect beginning January 1, 2028.
- Licensing requirements have exceptions as specified in the bill text.
- Prohibitions on confessions of judgment and power of attorney apply only before a default occurs.