Georgia enacted its own Commercial Financing Disclosure Law (“CFDL”), which is similar to the disclosure laws of California, Florida and New York. The Georgia CFDL applies to insured “Commercial Financing Transactions“Agreed on or after January 1, 2024 for $500,000 or less and originating from an insured person”Provider.” The disclosure document itself is an early disclosure that must be provided once for each commercial financing transaction prior to its consummation.
Where to find the Georgia Commercial Finance Disclosure Act
SB90 (2023), the Georgia CFDL is added to the Georgia Fair Business Practices Act in Title 10, Official Code of Georgia Annotated, Sections 10-1-393.18 et seq. Click HERE to read.
Covered “Commercial Financing Transactions” defined; Excluded Transactions
The Georgia CFDL defines “Commercial Financing Transaction” as “a business transaction made to a corporation or intended to continue the business, with a principal purpose other than personal, family, or domestic (traditional consumer) purposes.” Among the types of commercial financing transactions covered under SB 90 cases include commercial loans, commercial perpetual credit plans, and accounts receivable purchase transactions. [GA Code Ann. §§ 10-1-393.19(a)(5), (6).]
Commercial financing transactions outside the scope of SB90 insurance are:
- Commercial financing transactions secured by real estate.
- Commercial “lease” transactions as defined in GA Code Section 11-2A-103.
- Commercial “Purchase Obligation” as defined in Section 11-9-103 of the GA Code.
- Commercial loans and perpetual lines of credit of $50,000 or more made to an automobile dealership or the dealership’s subsidiary or to an automobile rental company as defined in GA Code Section 40-2-167 or the rental company’s subsidiary.
- Commercial financing business offered by an individual in connection with the sale or rental of a product or service that the individual (or its parent company and its subsidiaries) manufactures, licenses, or distributes.
- Commercial financing transactions over US$500,000.
- Commercial financing product that is a factoring transaction, purchase, sale, advance or similar of receivables owed to a healthcare provider as a result of a patient’s personal injury treated by the healthcare provider.
- Disclosure is not required as a result of modification, omission or alteration of a covered commercial financing transaction entered into.
[GA Code Ann. §§ 10-1-393.19(b), (e)(2).]
“Provider” defined; exceptions
A covered commercial financing transaction must be accompanied by a covered “Provider”as defined in the CFDL. “Provider” has the following double meaning in the CFDL:
- Any person “who accomplishes no more than five commercial financing transactions in that state during any calendar year.” In each calendar year, Georgian law does not consistently use the term to define covered and excluded commercial financing transactions. This term is used interchangeably with the exclusion under Section 10-1-393.19(b)(5) of transactions conducted by “a provider that completes five or fewer commercial financing transactions in the State in any 12 month period.” [See below.]
- Any person who, under a written agreement with a Custodian, offers one or more of the Custodian’s commercial financing products through an online lending platform managed by the person. This category of providers making a specific offer for a commercial financing transaction on behalf of a custodian is expressly stated by SB90 that they do not engage in or arrange for lending or financing, i.e. activities that the provider provides for Credit, licensing and usury laws could open more stores in Georgia.
[GA Code Ann. § 10-1-393.19(a)(10).]
Elsewhere in SB 90, the Georgia CFDL excludes from its scope of insurance any provider that is a federally insured custodian or an affiliate, service company, subsidiary or holding company of that institution. [GA Code Ann. § 10-1-393.19(b)(1). (2).] SB 90 also exempts the following providers from Georgia CFDL disclosure requirements:
- A provider that completes five (5) or fewer commercial financing transactions in the state within a 12 month period.
- A provider subject to the Federal Agricultural Loan Act.
- Any money transmitter licensed under Title 7, Georgia Code Annotated, Chapter 1, Article 4.
[GA Code Ann. § 10-1-393.19(b).]
Required disclosure items similar to Federal Lending Act; Mandatory compliance begins in 2023.
While the early disclosure obligation required by SB 90 applies to “any commercial financing transaction entered into on or after January 1, 2024,” Section 10-1-393.19(e)(1) requires disclosure to the potential Borrower must be served “prior to completion of commercial financing transaction.” This may result in mandatory SB 90 compliance in 2023.
The required disclosure items are similar to the federal truth in lending law for consumer lending. They are:
- The total amount of funds made available to the business borrower (funds made available).
- The total amount of funds paid to the company if less than the amount of funds provided (funded amount).
- The total amount to be paid to the provider (financing fees).
- The total dollar cost of the commercial financing transaction (annual percentage).
- Type, frequency and amount of each payment (payment plan).
- When the amount of each payment may vary, consider the nature, frequency, and estimated amount of the first payment. Also, consider the method of calculating a variable payment amount and the circumstances that may cause a payment amount to vary.
- A statement of whether there is a cost or rebate associated with the upfront payment, including a reference to the paragraph in the commercial financing transaction agreement that gives rise to each cost or rebate (upfront payment).
[GA Code Ann. § 10-1-393.19(e)(3).]
Enforcement; Penalties for Violations of Georgia CFDL
The Attorney General of Georgia will have exclusive authority to enforce the CFDL, subject to criminal penalties provided by law [GA Code Ann. § 10-1-393.19(g)]; The CFDL does not create a private right of action for alleged violations [GA Code Ann. § 10-1-393.19(j)] and a violation of the Georgia CFDL will not affect the enforceability of any underlying commercial financing transaction agreement [GA Code Ann. § 10-1-393.19(k)]. For each first-time violation, the statutory penalty is $500 (maximum total fine is $20,000); The statutory penalty for each repeat violation is $1,000 (maximum total fine is $50,000). [GA Code Ann. §§ 10-1-393.19(h), (i)]. The Attorney General has no further statute mandated by law to implement the Georgia CFDL.