June 12, 2024

Connecticut Releases Sales-Based Financing Disclosure Form

On June 10, 2024, the Connecticut Department of Banking ("DOB") issued guidance relating to the state's new Commercial Financing Disclosure Act, Conn. Gen. Stat. Ann. ยงยง 36a-861 et seq. (the "Act"). The guidance includes a template sales-based financing disclosure form. The template disclosure form appears to be based on Virginia's commercial financing disclosure form.

The Act applies to a sales-based financing transaction in Connecticut with an amount financed of $250,000 or less, beginning on July 1, 2024. However, the DOB's guidance states that it will not enforce the disclosure requirements, including the requirement to obtain a recipient's signature on the disclosures, before October 1, 2024. This no-action position does not apply to certain provisions of the Act, effective July 1, 2024, that prohibit the following conduct:

  • Obtaining a contractual waiver of the recipient's right to notice, judicial hearing, or prior court order in connection with certain prejudgment remedies; and
  • Revoking, withdrawing, or modifying a specific offer of financing until midnight of the third calendar day after the date of the specific offer, except that a specific offer may be revoked, withdrawn, or modified based on information obtained in the underwriting process, including, but not limited to, verification of any information provided by the recipient or at the request of the recipient.

The Act also requires sales-based financing providers and brokers to register with the DOB beginning on October 1, 2024. Additional information regarding the registration process of such brokers and providers will soon be made available on the DOB's website and the NMLS Resource Center available here.