What do disclosure requirements entail? 

Disclosure requirements in the alternative financing industry refer to the regulations and rules that require lenders and other providers of alternative financing to disclose certain information to borrowers or investors. The purpose of these requirements is to ensure that borrowers and investors have sufficient information to make informed decisions. Including their investment or borrowing decisions. 

Many specific states in the US have implemented their own disclosure requirements for alternative financing. In California, the Department of Business Oversight requires companies that offer financing to provide detailed information about the loan terms. This includes interest rates, fees, annual percentage rate (APR) of the loan, and repayment schedules. Lenders are also required to disclose any prepayment penalties, as well as any potential risks associated with the loan. 

In New York, the Department of Financial Services requires companies that offer alternative financing to disclose the APR of the loan, as well as any fees or charges associated with the loan. They must also provide information about the total repayment amount and the payment schedule. 

Overall, these state-specific disclosure requirements are designed to ensure that borrowers and investors have access to clear and accurate information about their terms and any risks. By promoting transparency and protecting consumers, these regulations can help to ensure that the alternative financing industry remains a viable and sustainable option for those seeking to access capital or invest in new opportunities. 

Utah Disclosure Requirements  

Following California and New York, Utah has also implemented its own disclosure requirements for alternative financing. Utah has signed SB183 into law requiring providers to formally register with the State. The State’s Department of Financial Institutions requires companies that offer commercial financing to provide borrowers with clear and accurate information about the loan terms. 

Specifically, lenders must disclose the annual percentage rate of the loan. As well as any fees or charges associated with the financing. They must also provide a clear explanation of the repayment terms. Including the total amount due, the payment schedule, total funds disbursed, and any penalties for late or missed payments. 

In addition to these general requirements, Utah also has specific regulations related to brokers. Brokers must disclosure their commission amounts and provide an explanation of the payment method. They must also describe any potential hypothetical situations that could result in variances. 

By ensuring that borrowers have access to clear and accurate information about the terms of their financing, Utah’s regulations can help to prevent financial harm and promote responsible borrowing practices.  

Important Dates Regarding Utah Compliance and Disclosure Regulations  

Starting January 1, 2023, anyone engaging in a commercial financing transaction with a resident of the state of Utah or a provider in Utah must register with the Utah Department of Financial Institutions (DFI). This requirement pertains to deals that meet the criteria of a commercial loan, purchases of accounts receivable, factoring, and merchant cash advances for amounts up to $1 million. Additionally, financing providers must be registered with the Nationwide Multistate Licensing System and Registry (NMLS).  

Fund Your Utah Deals with CFGMS! 

CFG Merchant Solutions is a leading provider of merchant cash advances (MCAs). CFGMS strives to ensure its ISO partners and borrowers are fully informed and protected by staying ahead of regulatory requirements. To achieve this goal, CFGMS has implemented strong compliance policies and procedures. They do this by regularly evaluating its products and practices to ensure they adhere to all applicable laws and regulations. For any questions regarding compliance or disclosure regulations, ISOs are encouraged to reach out to Dan Taylor,VP of Compliance & Data Assurance. Dan Taylor can be reached at compliance@cfgms.com or through our direct line at 844-662-3467.  

In summary, the MCA disclosure regulations implemented in Utah represent an important step towards safeguarding small business owners. These regulations mandate that MCA providers disclose key terms and conditions. This empowers small business owners with the necessary information to make informed decisions about their financial options.