In March, the Federal Trade Commission released an Advance Notice of Proposed Rulemaking concerning the Rule Concerning the Use of Prenotification Negative Option Plans. This is commonly known as the “Negative Option Rule.” Negative options are a form of marketing in which the absence of affirmative consumer action constitutes “consent” to be charged for goods or services. The FTC seeks public comment to determine whether and how it should use its authority to address negative option marketing, including whether the FTC should amend the current rule to address deceptive or unfair acts or practices. The FTC uses the term “consumer” to apply not only to individuals but also business entities and, therefore, applies to commercial financial services providers.
California and New York. We reported on bills in California and New York that, if passed, would effectively impose a licensing requirement on commercial financial services providers. In our alert about California’s Assembly Bill 2116, we reported that the bill would require providers of commercial financing not already covered under the California Financing Law to register with the California Department of Financial Protection and Innovation. The bill would also add other restrictions on the provision of commercial financing in California.
In our alert about New York’s licensing bill, Senate Bill 3177, we describe how the bill would require a provider of commercial financing to obtain a license from the New York Department of Financial Services and the bill’s restrictions on commercial financing offered in New York.
Maryland and New Jersey. We issued an alert about the bills in Maryland and New Jersey that propose to establish commercial financing disclosure laws with provisions very similar to the disclosure rules established in California and New York.
The Maryland bill, Senate Bill 881, would also require licensing for commercial financing providers, add criminal penalties for non-compliance, and apply to a wide range of commercial financing products in amounts of $2.5 million or less. The Maryland legislature adjourned on April 13, 2026, without passing S.B. 881. The New Jersey bill, Senate Bill 1760, would apply to the same commercial financing products but in amounts of $500,000 or less. The New Jersey bill also features more stringent broker fee disclosure requirements than those found in other commercial financing disclosure laws.
Out of several interesting cases that were decided last quarter, one particularly notable decision came from a state court in Michigan. In EBF Holdings, LLC, v. European Imports, LLC, 2026 WL 330532 (Mich. Cir. Ct. January 23, 2026), the court considered, and dismissed, a motion made by European Imports that revenue-based financing provided to it by EBF Holdings was a usurious loan. Applying New York law, the court found that the transaction was not a usurious loan and appeared to rely solely on the fact that the contract gave European Imports the ability to “alter” its repayment obligations pursuant to reconciliation. This is a rare instance of a Michigan court considering a revenue-based financing transaction and an affirmation that the ability to adjust a payment is sufficient to avoid recharacterization (and usury).