In an unprecedented move, The California Department of Financial Protection and Innovation (DFPI) has put the final touches on regulations that ban unfair, deceptive, and abusive acts and practices (UDAAP) within the scope of commercial financing or other financial products or services targeted towards small businesses and other organization. As a result of these regulations, California has firmly positioned itself as the inaugural state to apply UDAAP to commercial (instead of consumer) financing transactions. The specifics of this development have been outlined in an article published here at Morrison & Foerster LLP.
This development is reflective of an expanding regulatory climate in California where preventative measures are being implemented to curb exploitative business practices in the commercial finance industry. This is a significant shift from the traditional scheme where UDAAP regulations have predominantly been applied to consumer rather than business transactions.
In taking this step, California has forged a path into uncharted territory and it’s worth keeping a close watch on the impact these new laws will have on commercial finance regulatory norms both within the state and potentially at a broader scale. Whether this trend will be echoed by other states or whether it will impose noteworthy changes on businesses operations remains to be seen, and will be under the microscope in the coming months as these regulations take effect.