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Lawmakers split over APR disclosure for commercial financing; one member warns it could confuse borrowers
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Summary
HB5211, concerning commercial financing and APR disclosure for unconventional revenue-based loans, prompted extended debate. One member argued APR could mislead borrowers because these loans are not structured like traditional loans; the chair defended the incremental regulatory approach and said Connecticut would monitor practice in New York and California.
HB5211, a commercial financing bill aimed at adding data-security and disclosure protections for certain financial products, drew an extended exchange on whether requiring APR disclosure is helpful or misleading for revenue-based, nonconventional loans.
A committee member (Representative Ochsah, S3) said that while most of the bill contains useful consumer protections, forcing an APR disclosure on unconventional revenue-based financing could be arbitrary and confuse borrowers: "I think the APR would not mean anything because it's not based on a conventional interest rate ... it makes it very difficult." He said the APR could deter borrowers who might otherwise use nontraditional financing to save businesses.
The chair (S1) responded that Connecticut took an incremental approach in 2023 and negotiated a compromise with industry; she said the committee and industry had time to work on implementation and that other states (New York and California) had adopted related rules. The cochair (S2) echoed the need to revisit and sharpen the law annually.
Outcome: The committee called a roll call on HB5211 and advanced the item to the floor (JFS) while leaving further refinement to proponents and staff ahead of floor consideration.
