Virginia State Disclosure Laws
Revenue-based financing has become a popular option for many businesses in Virginia to access funding for their operations. However, the State Corporation Commission has introduced new regulations that financing providers and brokers must adhere to. This is to protect the interests of businesses and consumers. These regulations, which apply to sales-based financing contracts or agreements entered on or after July 1, 2022, aim to ensure transparency, fairness, and accountability in the financing industry.
Registration and Disclosures
Under the new regulations, any provider or broker of revenue-based financing must register with the State Corporation Commission. In accordance with established procedures. You must do this by November 1, 2022, and every year after. Additionally, financing providers must provide disclosures to the recipient when they extend a specific offer of financing. These disclosures are designed to provide clear and comprehensive information about the terms and conditions of the financing, including interest rates, fees, and repayment obligations. By providing these disclosures, financing providers enable recipients to make informed decisions about whether to accept the financing offer.
Jurisdiction and Arbitration Proceedings
The new regulations also address the jurisdiction and arbitration proceedings in sales-based financing contracts or agreements. The Commonwealth of Virginia is the required jurisdiction for bringing any cause of action arising under a contract or agreement for financing. Additionally, the jurisdiction where the recipient’s principal place of business is located must hold any face-to-face arbitration proceedings required in such contracts or agreements. Furthermore, providers are required to pay any expenses or fees incurred by arbitrators. Or, any other administrative fees associated with arbitration proceedings. Provisions in the contract or agreement that mandate bringing actions outside the recipient’s jurisdiction are unenforceable under the new regulations.
Fund Your Virginia Files with CFGMS!
CFG Merchant Solutions, a revenue-based financing provider, recognizes the importance of staying ahead of regulatory requirements to protect its ISO partners and borrowers. As such, CFGMS has implemented robust compliance policies and procedures and regularly reviews its products and practices to ensure compliance with all applicable laws and regulations.
It’s worth noting that Virginia is not the only state implementing MCA disclosure regulations. Virginia is the second state, after California, to implement MCA disclosure regulations. Additionally, Utah has signed SB183 into law, effective from January 1, 2023. For future reference, please note that New York has established a compliance deadline of August 1, 2023, for final regulation.
These developments demonstrate the growing momentum for increased transparency and protection in the small business financing industry across multiple states. These regulations aim to provide greater protection for small business owners by requiring MCA providers to disclose key terms and conditions, including the total cost of the advance expressed as an APR. This empowers small business owners with the information they need to make informed decisions about their financing options.
In conclusion, the implementation of MCA disclosure regulations in multiple states, including California, Utah, and Virginia, is a positive step toward providing increased transparency and protection for small business owners. CFGMS remains committed to complying with these regulations and ensuring that its ISO partners and borrowers are fully informed and protected throughout the financing process.