Senate Commerce Committee Statement to Senate, No. 1397 — State of New Jersey (October 10, 2024)

Summary

A Senate Commerce Committee statement to the Senate on Senate Bill No. 1397 with committee amendments, State of New Jersey, dated October 10, 2024, reporting the bill favorably. As amended, the bill requires certain providers of commercial financing, including brokers presenting offers for a third party, to make disclosures to recipients in a form set by the Commissioner of Banking and Insurance. Disclosures include the finance charge, the estimated annual percentage rate or, for factoring and sales-based financing, the estimated yearly total dollar cost, the total payment amount, other potential fees and collateral requirements. A provider or broker that violates the bill is liable to a civil penalty of not more than $2,000 for each violation, or not more than $10,000 for each willful violation.

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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, 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 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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