On August 4, the DFPI entered into a consent order with a commercial finance provider concerning alleged violations of the California Financing Law and California’s commercial financing disclosure requirements, as well as alleged charges above the state constitutional interest-rate limit. The company neither admitted nor denied the DFPI’s findings.
The consent order arose while the DFPI was reviewing the company’s pending application for a California finance lender license. According to the DFPI, the company allegedly:
- Made loans before obtaining a license. The company entered into 18 equipment finance transactions and four other commercial loans with California businesses from at least 2022 through 2025 without a California finance lender license.
- Omitted required commercial financing disclosures. The DFPI alleged that the financing documents did not include disclosures required under California law, including the total cost of financing expressed as an annualized rate.
- Imposed charges above the applicable interest-rate limit. The DFPI alleged that charges associated with the 18 equipment finance transactions exceeded the 10 percent annual rate permitted by the California Constitution.
To resolve the matter, the company agreed to pay a $44,000 administrative penalty and $2,500 in investigative costs. It also agreed to provide approximately $88,959 in credits to 18 California businesses. Depending on account status, the company must either credit amounts collected above the 10 percent rate and re-amortize the account or apply those amounts against an outstanding balance. The DFPI also agreed to complete its review of the company’s pending license application.
Putting It Into Practice: The order highlights the compliance issues that can arise when commercial finance providers enter California before resolving applicable licensing, disclosure, and pricing requirements. California has continued to build out its regulatory framework for commercial financing, including requirements that apply independently of traditional consumer lending rules (previously discussed here). Providers offering business-purpose financing in the state should review product structures, licensing status, disclosures, and pricing before originating transactions and should monitor California requirements as they continue to develop.