A number of states have enacted laws requiring consumer-like disclosures in certain commercial financing transactions. These state statutes resemble the Truth in Lending Act (TILA) in certain respects but apply only to commercial loans. TILA is a federal statute that applies to consumer loans and requires disclosures of credit terms in consumer credit transactions, credit that is offered for personal, family or household purposes. The Consumer Financial Protection Bureau (CFPB) is the federal regulatory body charged with, among other things, enforcing TILA and determining whether TILA may preempt other laws.
CFPB received a request from an industry trade association for guidance on whether TILA preempts the New York Commercial Financing Disclosure Law (CFDL). The request pointed out both statutes use similar terms (i.e., “finance charge,” “APR” and “estimated APR”) but each statute defines the terms differently. The trade association urged CFPB to find preemption where the conflicting terms may impede the operation of TILA and interfere with the purposes of the federal regulatory scheme.
CFPB has made a preliminary determination that TILA does not preempt New York’s CFDL and, likewise, does not preempt the similar CFDLs in California, Virginia and Utah. Not surprisingly, CFPB arrived at that conclusion because the New York CFDL regulates commercial loans, not consumer ones, so the agency determined the laws do not appear contradictory and preemption will not apply. CFPB published Dec. 15 in the Federal Register notification of its intent to finalize its preemption determination and to request public comment. Public comments are due on or before Jan. 20.
Miles & Stockbridge is closely monitoring developments in this area and remains ready to assist clients with navigating these proposed changes.
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