Senate Commerce Committee Statement to Senate, No. 1397 (October 10, 2024)

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Senate Commerce Committee statement to Senate, No. 1397, with committee amendments, State of New Jersey, dated October 10, 2024. The committee reports favorably and with committee amendments Senate Bill No. 1397, which as amended requires certain providers of commercial financing to provide disclosures to recipients. The statement says the required disclosures vary by the type of commercial financing or factoring transaction and include the finance charge, the estimated annual percentage rate, the total payment amount, and a description of collateral requirements or security interests, if any. It says a broker who charges any fees is to provide a written disclosure in a document separate from the provider’s contract.

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     SENATE COMMERCE COMMITTEE

                    STATEMENT TO

                  SENATE, No. 1397
                   with committee amendments



 STATE OF NEW JERSEY
                    DATED: OCTOBER 10, 2024

     The Senate Commerce Committee reports favorably and with
committee amendments Senate Bill No. 1397.
    As amended, this bill requires certain providers of commercial
financing to provide disclosures to recipients.
    Under the bill, “provider” is defined to mean a person who
extends a specific offer of commercial financing to a recipient and
includes a person, including a broker, who solicits and presents
specific offers of commercial financing on behalf of a third party.
“Commercial financing” is defined to mean 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.
    The bill requires a provider to, at the time of extending a specific
offer of commercial financing that is a sales-based, closed-end, or
open-end financing, or a factoring transaction, make certain
disclosures to the recipient in a form and manner to be determined
by the Commissioner of Banking and Insurance. The required
disclosures vary by the type of commercial financing or factoring
transaction, and include, but are not limited to:
    (1) the finance charge;
    (2) 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.) and according to certain tolerances
and requirements; or, for factoring transactions and sales-based
financing transactions, the estimated yearly total dollar cost;
    (3) the total payment amount;
    (4) a description of all other potential fees and charges; and
    (5) a description of collateral requirements or security interests,
if any.
    The bill also provides that the commissioner may require by
regulation a provider extending a specific offer of commercial
financing that is not open-end financing, closed-end financing,
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sales-based financing, or a factoring transaction but otherwise
meets the definition of commercial financing pursuant the bill to
make certain disclosures to the recipient that are delineated in the
bill.
   Under the bill, in addition to other disclosures required pursuant
to the bill, a broker who charges any fees, charges, or commissions
that would be paid by the recipient of the financing is to provide, at
the time of extending a specific offer for a commercial financing
transaction and in a form and manner prescribed by the
commissioner, a written disclosure of certain information, in a
document separate from the provider’s contract with the recipient.
   The bill stipulates that regulations issued by the Department of
Banking and Insurance pursuant to the bill are required to be, to the
extent possible, consistent with and substantially similar to
regulations concerning commercial financing disclosures adopted in
other states.
   A provider or broker that violates any provision of the bill, as
determined by the commissioner, is to be liable to a civil penalty of
not more than $2,000 for each violation, or not more than $10,000
for each willful violation. In addition, upon a finding by the
commissioner that a provider or broker has recklessly or willfully
violated the provisions of the bill, the commissioner may order
additional relief, including, but not limited to, a permanent or
preliminary injunction on behalf of any recipient affected by the
violation. A recipient or provider that is subject to a violation of
the bill may bring an action against the provider or broker and
recover a civil penalty if the court finds the provider or broker
recklessly or willfully violated the provisions of the bill.
    This bill was prefiled for introduction in the 2024-2025 session
pending technical review. As reported, the bill includes the changes
required by technical review, which has been performed.

COMMITTEE AMENDMENTS:
    The committee amended the bill to:
    (1) require providers of factoring transactions and sales-based
financing transactions to disclose to the recipient either the estimated
annual percentage rate or the estimated yearly total dollar cost of the
transaction;
    (2) provide that regulations issued pursuant to the bill be, to the
extent possible, consistent with and substantially similar to regulations
concerning commercial financing disclosures adopted in other states;
    (3) provide that relief may be ordered by the Commissioner of
Banking and Insurance upon a finding by the commissioner that the
provider or broker acted recklessly or willfully;
    (4) provide that a recipient or provider subject to a violation of the
bill may recover a civil penalty upon a finding by the court that the
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provider or broker recklessly or willfully violated the provisions of the
bill;
     (5) change the entities subject to the provisions of the bill;
     (6) prohibit brokers from charging any fee that is assessed or
collected prior to the closing of a commercial financing transaction by
a broker; and
     (7) prohibit brokers from false, misleading, or deceptive
representations, or omitting material facts.


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