In January 2025, we reported that the Massachusetts attorney general launched a new portal for filing usury notices. This is a potentially significant development for lenders that rely on the filing exemption for loans that exceed the 20% limit imposed by Massachusetts’ criminal usury law. See our alert for more details.
The first quarter of 2025 was, predictably, a very active period for state legislation aimed at the regulation of commercial finance. In February 2025, we issued an alert identifying four states where bills had been introduced:
- In Illinois, we saw the introduction of House Bill 2595 (the "Small Business Financing Transparency Act"), which is a proposed disclosure law largely patterned on commercial financing disclosure laws passed in California and New York. Like those other laws, the Illinois bill would require providers of commercial financing (which includes loans, factoring, and sales-based financing) to provide the cost of capital disclosures, including an annual percentage rate of the kind required for consumer lending. The disclosure requirements would not apply to transactions with an amount financed greater than $500,000.
- Maryland introduced House Bill 693 (the "Small Business Truth in Lending Act"), which proposes requirements similar to the Illinois bill but with a higher dollar threshold exemption, making it inapplicable to transactions with an amount financed greater than $2,500,000.
- Pennsylvania introduced House Bill 639, which would create disclosure requirements for providers of commercial financing to small businesses, including a requirement to disclose a transaction's APR. Instead of using a dollar threshold, the bill defines the term "small business" to mean a business with fewer than 500 employees.
- New York introduced Senate Bill 1726, a bill designed to expand the scope of New York’s usury laws to apply to a wide range of consumer and commercial financing products not previously subject to cost controls. This expanded scope includes retail installment contracts, merchant cash advances, invoice financing, revenue-based financing, earned wage access or similar wage advance transactions, lease- or rent-to-own arrangements, rental-purchase agreements, buy-now pay-later transactions, financing for litigation or legal settlements, and income-sharing agreements. New York’s usury law limits the rate of "interest" on these transactions based on their size. Rates can be capped as low as 16% per annum.
In March 2025, the Texas legislature introduced Senate Bill 2677, which would impose disclosure requirements and cap the cost of funding. In our alert, we noted that the scope of the bill is limited to sales-based financing. Under this bill, the fees and charges paid on a sales-based financing transaction would be considered "interest" under Texas usury law. Currently, the highest rate that may be charged for non-bank commercial loans in Texas is 18%.
March 15, 2025, was the deadline for filing a new annual APR report required by regulations created pursuant to the California Consumer Financial Protection Law. We provided an alert noting that the California Department of Financial Protection and Innovation had acknowledged multiple claims of technical difficulties by companies attempting to file their reports and extended the deadline for reporting through April 1.
In February 2025, a magistrate judge in the U.S. District Court for the Southern District of Florida filed a report and recommendation that the court grant summary judgment in favor of the Consumer Financial Protection Bureau in a lawsuit brought by the Revenue Based Finance Coalition ("RBFC") challenging the CFPB's small business lending data collection final rule (the "Data Collection Rule"). Specifically, the RBFC challenged the fact that the final rule treats merchant cash advances as "credit" subject to the Data Collection Rule. We provided a case summary outlining the report.
In January 2025, New York Attorney General Letitia James announced a settlement with 25 companies that are alleged to be controlled by Yellowstone Capital. The settlement includes a $1.065 billion judgment against Yellowstone, with over $534 million in debt cancellation and payments to small businesses in the amount of $16.1 million. We first reported on case in March 5, 2024, when it was filed.
Please also note the litigation discussed above in "Federal Developments."