On April 10, 2023, Georgia’s new Commercial Financing Disclosures Act neared the finish line when Senate Bill 90 landed on Gov. Brian Kemp’s desk with strong bipartisan support, just two months after it was introduced. If the bill is passed as expected, Georgia will become the fifth state with disclosure laws and the 15th to consider or pass such laws. Yes, there is a pattern here.
Here is a link to the invoice.
Legislation in Georgia would go into effect on January 1, 2024. It applies to business loans of $500,000 or less, as in California.
Which transactions are tax-exempt?
- real leases;
- Federally insured Custodian Financial Institutions;
- Subsidiaries, affiliates, or holding companies of federally insured custodians (unlike California)
- providers under the Farm Credit Act;
- real estate collateralised commercial transactions;
- purchase money obligations;
- vehicle floor plan financing;
- Credit granted in connection with the sale of goods or services by the creditor or its parent company;
- Lenders conducting 5 or fewer commercial transactions in Georgia within 12 months [N.B. The definition of “provider” refers to someone who does more than 5 transactions in a calendar year. This will need to be reconciled]; And
- Factoring: Cash advances from merchants to a healthcare provider as a result of a patient’s personal injury being treated by the healthcare provider.
What needs to be disclosed?
- Total amount funded;
- Amount to be paid to Borrower if less than Funded Amount (ie after payment to Seller);
- Amount that the borrower must repay to the lender;
- total cost to the borrower in dollars;
- the nature, frequency and amount of each payment, or an estimate if the amount of payment may vary;
- Settlement of early repayment costs with reference to the section of the contract that establishes these obligations; And
- Description of the method used to calculate a variable payment amount, including circumstances that could lead to the discrepancy.
What’s missing from Georgia’s bill?
- interest calculation;
- APR calculation (a welcome relief for many);
- disclosure formats;
- There is no private right of action in the event of violations of these laws. Only the Attorney General can pursue these claims.
What about brokers?
- Prohibits prepayments, with certain exceptions for hard costs, e.g. B. Credit Checks; And
- Prohibits brokers from making false or misleading representations or omitting material facts.
What else do you need to know?
- A violation of the disclosure obligations has no impact on the enforceability of the underlying legal transaction; And
- The penalty is $500 per violation and cannot exceed $20,000.
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