A proposed regulation that aims to improve transparency for small businesses seeking commercial financing was announced on Tuesday by Adrienne Harris, acting superintendent of the state’s Department of Financial Services.
The proposed regulation would require that companies that offer commercial financing in amounts under $2.5 million make standardized disclosures about the terms of credit, which would help businesses and individuals understand and compare the terms of different commercial financing offers, according to DFS.
To address the lack of standardized disclosures in the commercial context, the New York State Legislature passed the Commercial Finance Disclosure Law, or CFDL, mandating disclosures for commercial financing, effective Jan. 1, 2022. The DFS-proposed regulation implements the CFDL, and as statutorily required, DFS is issuing the proposed regulation now in order to facilitate implementation of the CFDL in time for the Jan. 1, 2022 deadline.
“Small businesses are the lifeblood of New York’s economy and the engines of the recovery; they need transparent access to capital now more than ever,” Harris said. “This proposed regulation helps to ensure Main Street small businesses have the ability to obtain clear and detailed information in terms of credit financing opportunities, helping small employers make informed financial decisions to grow their businesses.”
The proposed regulation is subject to a 60-day comment period following publication in the State Register.
To learn more about what the proposed regulation could mean for credit unions, check out the New York’s State of Mind blog, written by Henry Meier, the New York Credit Union Association’s SVP/general counsel.