Utah enacts Trade Finance Disclosure and Registration Act – Finance and Banking – Natural Self Esteem

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Attention merchant cash advance providers, commercial litigation lenders, online SMB lending platforms, and other non-small business lenders, following California and New York, Utah is now the third state to enact disclosure requirements for commercial lending transactions. Unlike the otherwise similar laws of California and New York, Utah law does not require disclosure of an APR and requires commercial lenders to register as commercial lenders with the Utah Department of Financial Institutions. Factoring transactions are excluded. Several similar laws are pending in various other states.

The law applies to “providers” of “commercial loans” originating on or after January 1, 2023. A “provider” includes anyone who “completes more than five commercial financing transactions in the state in any calendar year” and a “commercial loan.” Loan” is also expressly referred to as the purchase of receivables. In particular, the definition of a “provider” also includes any person who “offers, under a written agreement with a custodian, one or more commercial financing products to be made available by the custodian through an online platform managed by the person”.

However, the new law does not apply to transactions of more than 1 million completed commercial loans of $50,000 or more to a motor vehicle dealership or rental company, or commercial loans related to the sale of a product or service that that person or an affiliate of that person person manufactures, licenses or distributes.

Commercial lenders must disclose:

  • The total amount of funds committed.

  • The total amount of funds disbursed to the borrower, if less than the amount committed.

  • The total amount payable to the commercial lender.

  • The total cost of the transaction in dollars.

  • The type, frequency and amount of each payment or, if the amount of each payment may vary, “the type, frequency and estimated amount of the initial payment”.

  • A statement of whether there is a cost or discount associated with prepaying the commercial loan, including a reference to the section of the agreement that provides for such cost or discount.

  • If part of the borrower’s loan was paid to a broker and not to the borrower, the amount paid to the broker must be disclosed.

  • A description of the method used to calculate variable payment amounts and the circumstances that may cause the payment amount to vary.

For perpetual commercial loan transactions, such disclosures must be made prior to the closing of the perpetual loan and again within 15 days of the end of each month in which funds are disbursed under the perpetual loan.

Commercial loan providers must register through the Nationwide Multistate Licensing System and Registry beginning January 1, 2023.

The content of this article is intended to provide a general guide to the topic. In relation to your specific circumstances, you should seek advice from a specialist.

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