CFGMS Admin November 8, 2023 Categories: Business Tips, Compliance Regulation, Merchant Cash Advance, Small Business Funding, Working Capital Financing

On June 26, 2023, Florida Governor Ron DeSantis signed into law the Florida Commercial Financing Disclosure Law (FCFDL)—a landmark step aimed at enhancing transparency and protecting small businesses in the commercial financing space. This legislation establishes detailed disclosure requirements for covered transactions and introduces clear prohibitions for brokers, including a ban on collecting advance fees.

Who and What Is Covered Under the FCFDL?

The FCFDL applies to various types of commercial financing, including:

1. Commercial loans

2. Lines of credit

3. Accounts receivable purchase transactions

4. Certain transactions are exempt, but for those that are covered, funders must provide specific disclosures before consummation.

Required Disclosures Under the FCFDL – What are they?

The law mandates the following information be disclosed:

– Total Financing Amount: The full amount of financing extended to the business.
– Disbursement Amount: The net amount received by the recipient, including a breakdown of any deductions or withholdings.
– Total Amount Owed: The overall sum to be repaid to the financing company.
– Cost of Financing: A clear explanation of the total financing cost.
– Payment Details: Includes payment frequency, method, and amount. If payments vary, the disclosure must include:
– An estimated initial payment
– The method for calculating variable payments
– Information about when payments may change
– Prepayment Rights: Details on the business’s ability to prepay and any applicable penalties.

Exemptions and Constitutional Considerations

The FCFDL includes several exemptions, notably:

1. Transactions involving federally insured Florida or federal depository institutions

2. Commercial mortgages

3. Transactions over $500,000

4. Financing related to products manufactured, licensed, or distributed by the provider or its affiliates

However, the exemption for depository institutions and affiliated entities could face future legal scrutiny under the Commerce Clause of the U.S. Constitution.

How Does Florida Compare to Other States?

Compared to broader statutes in California and New York, Florida’s FCFDL imposes more limited disclosure obligations. Importantly, the FCFDL does not include:

*A requirement to disclose an APR

*A licensing or registration requirement

*A private right of action

Enforcement authority lies solely with the Florida Attorney General, who may seek voluntary compliance, pursue administrative actions, or file legal proceedings. Penalties are capped at $20,000, or $50,000 for repeated violations following prior notice.

What are the Legislative Trends Across the U.S.?

Florida joins a growing list of states—New York, California, Utah, and Virginia—that have enacted commercial financing disclosure laws. Meanwhile, Connecticut, Illinois, Maryland, and Missouri are considering similar legislation. These evolving laws signal a broader trend toward regulatory oversight and standardization in small business finance.

What This Means for Funders and ISO Partners

The FCFDL represents a major shift toward transparency and fairness in commercial finance. As regulations continue to expand across the country, it’s essential for funders and referral partners to remain informed and compliant.

CFGMS™ ISO Partners Get Direct Compliance Support

CFG Merchant Solutions (CFGMS™) provides its ISO partners with up-to-date compliance guidance for all active and pending state disclosure laws. For any questions regarding laws in Florida, California, New York, Virginia, Utah, Connecticut, Georgia, or emerging states, ISO partners can contact:

📧 compliance@cfgms.com
Dan Taylor, Vice President of Compliance & Data Assurance, is available for direct support.