STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Senator TROY SINGLETON
District 7 (Burlington)
SYNOPSIS
Requires certain disclosures by providers of commercial financing.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning commercial financing and supplementing P.L.1964, c.162 (C.17:9A-59.25 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
Broker means a person who, for or in expectation of consideration:
(1) arranges or offers to arrange commercial financing for a recipient; or
(2) assists or advises or offers to assist or advise a recipient in obtaining or attempting to obtain a commercial financing.
Notwithstanding the above definition, broker does not include a provider when referring a recipient to another provider, or a provider that enters into a written agreement with a financial institution to arrange for the extension of commercial financing by the financial institution to a recipient via an online lending platform administered by the provider.
"Closed-end financing" means a closed-end extension of credit, secured or unsecured and including equipment financing, that does not meet the definition of a lease as that term is defined in N.J.S.12A:2A-103 and the proceeds of which the recipient does not intend to use primarily for personal, family, or household purposes. "Closed-end financing" includes financing with an established principal amount and duration.
"Commercial financing" means open-end financing, closed-end financing, sales-based financing, factoring transaction, or any other form of financing, the proceeds of which the recipient does not intend to us primarily for personal, family, or household purposes.
Commissioner means the Commissioner of Banking and Insurance.
"Factoring transaction" means an accounts receivable purchase transaction that includes an agreement to purchase, transfer, or sell a legally enforceable claim for payment held by a recipient for goods that the recipient has supplied or services that the recipient has rendered that have been ordered but for which payment has not yet been made.
"Finance charge" means the cost of financing as a dollar amount. Finance charge includes any charge payable directly or indirectly by the recipient and imposed directly or indirectly by the provider as an incident to or a condition of the extension of financing. It includes all charges that would be included under 12 C.F.R. s.1026.4 as if the transaction were subject to 12 C.F.R. s.1026.4. Finance charge also includes any charges as determined by the commissioner. As it relates to an open-end financing, the finance charge shall assume the maximum amount of credit available to the recipient, in each case, is drawn and held for the duration of the term or draw period. For the purposes of a factoring transaction, the finance charge includes the discount taken on the face value of the accounts receivable.
"Financial institution" means any of the following:
(1) a bank, trust company, or industrial loan company that is doing business under the authority of, or in accordance with, a license, certificate or charter issued by the United States, this State, or any other state, district, territory, or commonwealth of the United States;
(2) a federally chartered savings and loan association, federal savings bank, federal credit union that is authorized to transact business in this State, or any credit union service organization, as defined in 12 C.F.R. s.704.11; or
(3) a savings and loan association, savings bank, or credit union that is authorized to transact business in this State and that is organized under the laws of this or any other state.
"Open-end financing" means an agreement for one or more extensions of open-end credit, secured or unsecured, the proceeds of which the recipient does not intend to use primarily for personal, family, or household purposes. "Open-end financing" includes credit extended by a provider under a plan in which:
(1) the provider reasonably contemplates repeated transactions;
(2) the provider may impose a finance charge from time to time on an outstanding unpaid balance; and
(3) the amount of credit that may be extended to the recipient during the term of the plan, up to any limit set by the provider, is generally made available to the extent that any outstanding balance is repaid.
"Person" means an individual, sole proprietor or other unincorporated organization, association, joint venture, partnership, limited partnership association, limited liability company, corporation, trust, or joint stock company.
"Provider" means a person who extends a specific offer of commercial financing to a recipient. Except as otherwise provided in this act, "provider" also includes a person, including a broker who solicits and presents specific offers of commercial financing on behalf of a third party.
"Recipient" means a person, or the authorized representative of a person, who applies for commercial financing and is made a specific offer of commercial financing by a provider. Recipient shall not include a person acting as a broker.
"Sales-based financing" means a transaction that is repaid by the recipient to the provider, over time and as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the volume of sales made or revenue received by the recipient. Sales-based financing includes a true-up mechanism where the financing is repaid as a fixed payment but provides for a reconciliation process that adjusts the payment to an amount that is a percentage of sales or revenue.
"Specific offer" means the specific terms of commercial financing, including price or amount, that is quoted to a recipient, based on information obtained from, or about, the recipient which, if accepted by a recipient, shall be binding on the provider, as applicable, subject to any specific requirements stated in the terms. Where a provider allows a recipient to choose from various offers, specific offer shall mean the specific offer the recipient elects to pursue.
2. A provider shall, at the time of extending a specific offer of sales-based financing in a form and manner prescribed by the commissioner, disclose to the recipient:
a. the total amount of the commercial financing, and the disbursement amount, if different from the financing amount, after any fees deducted or withheld at disbursement;
b. the finance charge;
c. the estimated annual percentage rate, using the words annual percentage rate or the abbreviation "APR", expressed as a yearly rate, inclusive of any fees and finance charges, and calculated in accordance with section 1026.22 of Subpart C of Regulation Z (12 C.F.R. s.1026.22) of the federal Truth in Lending Act (15 U.S.C. s.1601 et seq.) based on the estimated term of repayment and the projected periodic payment amounts. The provider shall clearly disclose the estimated annual percentage rate as an estimate, and may include additional statements informing the recipient that the actual annual percentage rate may vary depending on actual time to repay. The estimated term of repayment and the projected periodic payment amounts shall be calculated based on the projected sales volume, which is the projection of the recipient's sales. The projected sales volume may be calculated using the historical method or the opt-in method. The provider shall provide notice to the commissioner on which method the provider will use across all instances of sales-based financing offered in calculating estimated annual percen