In the wake of California’s push to implement commercial financing disclosure laws in 2018, a host of other states across the U.S. have followed suit. The list of states includes, but is not limited to, Utah, Virginia, Florida, Georgia, Connecticut, and New York. These laws focus on transparency and accountability in the commercial financing sector, aiming to ensure fair dealing practices and enable informed decision-making among borrowers.
However, recent legislation indicates that certain exemptions within these laws, particularly those regarding floorplan financing, may not be as comprehensive as lenders perceive them to be. The laws, as passed, offer stipulations intended to clarify which transactions qualify for exemptions. Nevertheless, nuances in their legal application could leave some lenders non-compliant.
In order to ensure compliance and avoid legal ramifications, it is imperative for lenders to be thoroughly familiar with these laws. Instead of presuming broad-based exemptions, lenders must consider the specific components of their respective floorplan financing deals. They need to understand whether each of these operations complies with the provisions detailed in the disclosure laws of the respective states in which they operate.
In order to support the finance sector’s need for understanding from both a legal and a financial perspective regarding these laws, an analysis has been published on JD Supra by McGlinchey Stafford and originally in Auto Finance Excellence, August 29, 2023. This detailed analysis sheds even more light on the current state of commercial financing disclosure laws and the implications of floorplan financing exemptions.
Indeed, understanding this evolving legal landscape is essential for lenders. Only through thorough knowledge and understanding of these laws and their nuances can lenders ensure ongoing compliance and evade potential legal hiccups.