ALBANY – Assemblyman Ken Zebrowski (D, Rockland) and Senator Kevin Thomas (D, Long Island) announced that their Small Business Truth in Lending Act has been signed into law by the governor.
The law institutes new transparency in the commercial financing industry by requiring basic, uniform disclosures for non-bank commercial lenders.
Currently, there are no disclosure requirements for commercial borrowers under state or federal law; unlike consumer borrowers who are protected under the federal Truth in Lending Act.
The Zebrowski/Thomas measure will require this disclosure on the terms and cost of financing which is necessary for business owners to compare different commercial loan products. As many small businesses continue to face enormous challenges amid the COVID-19 pandemic, these protections are necessary for those seeking financing moving forward.
This legislation is the culmination of nearly a year of input and constant conversation with various stakeholders including non-profit lenders, a diverse set of commercial lenders, small business advocacy groups and other groups dedicated to transparency in lending.
Under the bill, the uniform disclosure requirements will apply to all types of commercial financing and provide the small business borrowers with the: cost of financing, /actual/estimated Annual Percentage Rate, payments, prepayment penalties and any other potential fees. All required disclosures must be provided to the business owner prior to entering into a contract.
“Now more than ever, we must be supporting and providing our small businesses with every tool possible to succeed and recover from the COVID-19 pandemic,” said Zebrowski. “A lack of uniform disclosures has led to a confusing and complex environment for business owners accessing commercial financing. This legislation will provide clarity through a simple and easily understood disclosure that provides information on the true costs and hidden fees of an offer.”
The law goes into effect on January 1, 2021.