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Committee advances Grayson measure to tighten small-business financing disclosures (SB 362)
Summary
SB 362 would expand California's commercial financing disclosure rules to require clearer price disclosures during marketing and preserve the DFPI's enforcement authority; the committee moved the bill to Judiciary after days of stakeholder negotiation.
The Assembly Banking and Finance Committee on Oct. 26 passed SB 362, a bill by Sen. Grayson designed to strengthen California's small-business financing disclosure framework and clarify enforcement authority for the Department of Financial Protection and Innovation (DFPI).
SB 362 builds on California's 2018 truth-in-lending rules for commercial financing and requires clearer disclosures throughout the marketing process so small businesses can compare offers. "SB 362 will strengthen our price disclosure law by ensuring that small businesses receive clear disclosures throughout the marketing process," the author told the committee.
Supporters included Heidi Pickman of CAMEO, who described an example of a small business that took a $75,000 merchant cash advance with a payment that nearly sank the business and later refinanced with a community development financial institution. "Not all small businesses are lucky enough to refinance," she said, arguing SB 362 would close disclosure gaps and make DFPI's enforcement authority clearer. Louis Kidditzpeck of the Responsible Business Lending Coalition and other trade and consumer groups also testified in support.
Opposition came from providers of revenue-based financing. Carolyn Deal Hunter, representing the Revenue Based Finance Coalition, said her members appreciate the author's changes but remain concerned about a provision (subsection C) that would require APR disclosure "as part of any communications." She warned that the requirement could prevent informal discussions between providers and applicants and cited New York's alternative approach as a workable model.
Mark Smith of the Secured Finance Network also urged continued negotiation on the subsection, saying the bill is modeled on New York but is not identical and still raises concerns for certain lenders.
After debate and amendments negotiated with stakeholders, the committee passed SB 362 and referred it to the Assembly Judiciary Committee.
