CFGMS Admin May 31, 2023 Categories: Business Tips, Compliance Regulation, Direct Business Lending

New York Enacts Commercial Financing Disclosure Law with August 1, 2023, Effective Date

New York’s new law requires commercial financing providers to issue consumer-style disclosures for transactions of $2.5 million or less, where the recipient is a New York legal resident or primarily manages their business in the state. The Final Regulations reflect industry feedback and offer more flexibility in compliance—particularly for broker compensation, electronic disclosures, and signature requirements. CFGMS™ remains fully compliant and supports ISO partners in navigating these changes.

New York’s Commercial Financing Disclosure Law: What Do Funders Need to Know?

On August 1, 2023, New York began enforcing commercial financing disclosure regulations that bring consumer-style transparency to certain business financing deals. These changes follow the release of Final Regulations by the New York Department of Financial Services (NYDFS) on February 1, 2023.

The regulations impact non-bank commercial financing providers, including revenue-based funders and ISOs. If you’re funding or brokering deals involving New York-based businesses, here’s what you need to know.

What are the Key Changes Under New York’s Final Regulations?

1. Narrowed Scope of Application

Applies only when:

– The recipient’s business is primarily managed or directed from New York, or
– The recipient is a legal resident of New York

This is a change from earlier proposals that would have triggered compliance if either the provider or the recipient was located in New York

2. Subsidiary Exemption

– Exempts depository institutions and their majority-owned subsidiaries
– Broadens relief to certain affiliates not clearly protected in earlier drafts

3. Updated Notice Requirements

Aligns disclosure timing and notice provisions with Uniform Commercial Code (UCC) norms—streamlining some operational requirements.

4. Flexible Broker Compensation Disclosures

– Broker compensation must still be disclosed

However, rigid formatting requirements have been relaxed, making compliance more manageable for ISOs and funders

5. Simplified Signature Requirements

Disclosures may now be provided electronically or via other reasonable means

Supports digital-first workflows without requiring paper documentation

– Who Is Exempt from These Regulations?
– Certain entities and transactions are excluded from compliance:
– Depository institutions and majority-owned subsidiaries
– Real estate-secured transactions
– Technology service providers offering backend funding platforms
– Funders regulated under the Federal Farm Credit Act
– Entities conducting five or fewer commercial financing transactions in New York within a 12-month period

How Does New York Compares to Other States?

New York joins California, Utah, and Virginia in leading the shift toward transparent commercial finance practices. But each state has its own thresholds and nuances.

New York ≤ $2.5 million Applies based on recipient’s business location/residency

California ≤ $500,000 Requires precise APR-like disclosures

Utah ≤ $1 million Requires registration and disclosures

Virginia Varies Disclosure laws focus on revenue-based finance

Providers can rely on representations during the application process to determine whether New York’s law applies—mirroring a similar provision in California’s regulations.

The Federal Lens: CFPB Eyes Commercial Finance

The Consumer Financial Protection Bureau (CFPB) is also expanding its reach into commercial finance. A pending rule, authorized under Section 1071 of the Dodd-Frank Act, would:

1. Require commercial lenders (banks and non-banks) to collect and report demographic and financial data

2. Increase regulatory oversight and transparency

3. Create new compliance burdens for all lenders engaged in small business finance

4. The rule is expected to reshape the landscape of commercial funding nationwide, building on momentum already seen at the state level.

How CFGMS™ Supports ISO Partners: Compliance Made Simple

At CFG Merchant Solutions (CFGMS™), we are fully prepared for the evolving regulatory landscape. Our in-house compliance team actively monitors changes across all 50 states and ensures:

All disclosure requirements are met, including for deals in New York, California, Utah, and Virginia

ISO partners receive direct guidance on state-by-state rules

Merchants remain fully informed during the application and funding process

📩 Whether you’re submitting a deal in New York or advising a merchant on the implications of new disclosure laws, CFGMS™ is your partner in navigating compliance with confidence.

The Bottom Line: How to Stay Ahead of the Compliance Curve

With more states proposing commercial financing disclosure laws—and federal regulators closing in—transparency and compliance are no longer optional. Funders and brokers must adapt to a new standard of disclosure, especially for small-dollar commercial finance deals.

CFGMS™ remains committed to helping our partners and clients stay compliant, competitive, and informed.