Substitute House Bill No. 5211 seeks to amend existing laws governing commercial financing by redefining key terms and enhancing disclosure requirements for providers of sales-based financing. The bill notably removes the previous cap of $250,000 on sales-based financing, thereby expanding the scope of transactions subject to regulation. It introduces new definitions such as "finance charge" and "specific offer," clarifying the roles of various parties involved in financing, including providers and brokers. Additionally, the bill outlines exemptions for certain entities like banks and credit unions. It mandates that providers disclose essential information, including the total financing amount, disbursement amount, finance charge, and an estimated annual percentage rate (APR), which must be calculated using either a safe harbor or underwriting method.

Moreover, the bill establishes that commercial financing contracts entered into on or after October 1, 2026, cannot include nondisclosure clauses that require recipients to keep contract terms confidential, rendering such provisions void. It also delays the effective date for certain registration and disclosure requirements for larger financing transactions from October 1, 2026, to July 1, 2027, and eliminates the requirement for providers to notify the banking department about their APR calculation method. The bill further changes the status of nondisclosure provisions from unenforceable to void and requires providers to report data on estimated and actual APRs to the banking commissioner starting October 1, 2027, ensuring greater transparency and consumer protection in the commercial financing sector.

Statutes affected:
Raised Bill:
BA Joint Favorable Substitute:
File No. 134:
JUD Joint Favorable:
File No. 729: