II 

117TH CONGRESS 

1ST SESSION S. 3235 

To apply the Truth in Lending Act to small business financing, and for 

other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 18, 2021 

Mr. MENENDEZ (for himself, Mr. BROWN, and Mr. CARDIN) introduced the 

following bill; which was read twice and referred to the Committee on 

Banking, Housing, and Urban Affairs 

A BILL 

To apply the Truth in Lending Act to small business 

financing, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Lend5 ing Disclosure Act of 2021’’. 

6 SEC. 2. APPLICATION OF THE TRUTH IN LENDING TO 

7 SMALL BUSINESS FINANCING. 

8 (a) IN GENERAL.—The Truth in Lending Act (15 

9 U.S.C. 1601 et seq.) is amended by adding at the end 

10 the following: 


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1 ‘‘CHAPTER 6—SMALL BUSINESS 

2 FINANCING 

‘‘191. Definitions. 

‘‘192. Application of this title to small business financing. 

‘‘193. Additional disclosures. 

‘‘194. Restrictions on double-dipping. 

‘‘195. Additional provisions. 

3 ‘‘§ 191. Definitions 

4 ‘‘In this chapter: 

5 ‘‘(1) CLOSED-END COMMERCIAL CREDIT.—The 

6 term ‘closed-end commercial credit’— 

7 ‘‘(A) means a closed-end extension of cred8 it, secured or unsecured, including financing 

9 with an established principal amount and in10 cluding equipment financing that does not meet 

11 the definition of a lease under the Uniform 

12 Commercial Code (U.C.C.—§ 2A–103(j)) the 

13 proceeds of which the recipient does not intend 

14 to use primarily for personal, family or house15 hold purposes; and 

16 ‘‘(B) includes financing with an established 

17 principal amount and duration. 

18 ‘‘(2) CONSUMER FINANCIAL PRODUCT OR SERV19 ICE.—The term ‘consumer financial product or serv20 ice’ has the meaning given that term under section 

21 1002 of the Consumer Financial Protection Act of 

22 2010. 


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1 ‘‘(3) DIRECTOR.—The term ‘Director’ means 

2 the Director of the Bureau. 

3 ‘‘(4) FACTORING.—The term ‘factoring’ means 

4 a transaction that includes an agreement to pur5 chase, transfer, or sell a legally enforceable claim for 

6 payment held by a recipient for goods the recipient 

7 has supplied or services the recipient has rendered 

8 that have been ordered but for which payment has 

9 not yet been made. 

10 ‘‘(5) FINANCE CHARGE.— 

11 ‘‘(A) IN GENERAL.—The term ‘finance 

12 charge’ means the cost of financing as a dollar 

13 amount, and includes any charge payable di14 rectly or indirectly by the recipient of the fi15 nancing and imposed directly or indirectly by 

16 the provider of the financing as an incident to 

17 or a condition of the extension of financing. 

18 ‘‘(B) CALCULATION IN OPEN-END COM19 MERCIAL CREDIT PLANS.—In any open-end 

20 commercial credit plan, the finance charge shall 

21 be computed assuming the maximum amount of 

22 credit available to the recipient, in each case, is 

23 drawn and repaid at the minimum rate. 

24 ‘‘(C) CALCULATION IN FACTORING TRANS25 ACTIONS.—In any factoring transaction, the fiVerDate Sep 11 2014 05:43 Nov 19, 2021 Jkt 029200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3235.IS S3235

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1 nance charge shall include the discount taken 

2 on the face value of the accounts receivable. 

3 ‘‘(D) CALCULATION IN LEASE FINANCING

4 TRANSACTIONS.—In any lease financing trans5 action, the finance charge shall include the sum 

6 of the lease payments and, if there is a fixed7 price purchase option or a purchase option with 

8 a price that can be calculated at the time of 

9 disclosure, the purchase price listed in the con10 tract that the lessee may pay to acquire the 

11 leased goods at the end of the lease, minus— 

12 ‘‘(i) if the finance company selects, 

13 manufactures, or supplies the goods to be 

14 leased, the price that the finance company 

15 would sell the goods in a cash transaction; 

16 or 

17 ‘‘(ii) if the finance company does not 

18 select, manufacture, or supply the goods to 

19 be leased, the price the finance company 

20 will pay to acquire the property to be 

21 leased. 

22 ‘‘(E) INCLUSION OF CERTAIN PREPAY23 MENT CHARGES.— 

24 ‘‘(i) IN GENERAL.—If, as a condition 

25 of obtaining the offered commercial financVerDate Sep 11 2014 05:43 Nov 19, 2021 Jkt 029200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3235.IS S3235

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1 ing the provider requires the recipient to 

2 pay off the balance of an existing loan or 

3 advance from the same provider, any pre4 payment charge or penalty required to be 

5 paid on the existing financing shall be in6 cluded as a financing charge. 

7 ‘‘(ii) TREATMENT WHEN REPAYMENT

8 AMOUNT IS CALCULATED AS A FIXED

9 AMOUNT.—For purposes of clause (i), for 

10 financing for which the total repayment 

11 amount is calculated as a fixed amount, 

12 the prepayment charge is equal to the 

13 original finance charge multiplied by the 

14 required prepayment amount as a percent15 age of the total repayment amount, minus 

16 any portion of the total repayment amount 

17 forgiven by the provider at the time of pre18 payment. 

19 ‘‘(6) OPEN-END COMMERCIAL CREDIT PLAN.— 

20 The term ‘open-end commercial credit plan’ means 

21 any small business financing provided by a person 

22 under a plan in which the person reasonably con23 templates repeat transactions, which prescribes the 

24 terms of such transactions, and which provides for 


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1 a finance charge which may be computed from time 

2 to time on the outstanding unpaid balance. 

3 ‘‘(7) PROVIDER.—The term ‘provider’ mean a 

4 person who offers or provides small business financ5 ing. 

6 ‘‘(8) RECIPIENT.—The term ‘recipient’ means a 

7 person who is presented an offer of small business 

8 financing. 

9 ‘‘(9) SALES-BASED FINANCING.—The term 

10 ‘sales-based financing’— 

11 ‘‘(A) means a transaction where there is 

12 an extension of financing to a recipient that is 

13 repaid by the recipient, over time, as a percent14 age of sales or revenue, in which the payment 

15 amount may increase or decrease according to 

16 the volume of sales made or revenue received by 

17 the recipient; and 

18 ‘‘(B) includes transactions with a ‘true-up 

19 mechanism’. 

20 ‘‘(10) SMALL BUSINESS.—The term ‘small busi21 ness’ has the meaning given the term ‘small-business 

22 concern’ under section 3 of the Small Business Act 

23 (15 U.S.C. 632). 

24 ‘‘(11) SMALL BUSINESS FINANCING.—The term 

25 ‘small business financing’— 


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1 ‘‘(A) means any line of credit, closed-end 

2 commercial credit, sales-based financing, or 

3 other non-equity obligation or alleged obligation 

4 of a partnership, corporation, cooperative, asso5 ciation, sole proprietorship, or other entity that 

6 is $2,500,000 or less; and 

7 ‘‘(B) does not include any obligation or al8 leged obligation of an individual that is pri9 marily for personal, family, or household pur10 poses. 

11 ‘‘(12) SPECIFIC OFFER.—The term ‘specific 

12 offer’ means the specific terms of small business fi13 nancing, including price or amount, that is quoted to 

14 a recipient, based on information obtained from, or 

15 about the recipient, which, if accepted by a recipient, 

16 shall be binding on the provider, as applicable, sub17 ject to any specific requirements stated in such 

18 terms. 

19 ‘‘§ 192. Application of this title to small business fi20 nancing 

21 ‘‘(a) IN GENERAL.—This title shall apply to small 

22 business financing made to a small business to the same 

23 extent as this title applies to extensions of credit made 

24 to a consumer. 


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1 ‘‘(b) RULEMAKING.—The Director shall issue such 

2 rules as may be required to carry out this chapter. 

3 ‘‘(c) BUREAU AUTHORITY.—For purposes of carrying 

4 out this chapter and other Federal laws, including the 

5 Consumer Financial Protection Act of 2010, the Bureau 

6 shall have the same authority with respect to small busi7 ness financing as the Bureau has with respect to consumer 

8 financial products and services. 

9 ‘‘§ 193. Additional disclosures 

10 ‘‘(a) IN GENERAL.—Any provider offering small busi11 ness financing to a small business shall disclose the fol12 lowing pieces of information to a recipient at the time of 

13 extending a specific offer for small business financing: 

14 ‘‘(1) FINANCING AMOUNT.—The total amount 

15 to be paid to the small business, taking into account 

16 all fees and charges to be withheld at disbursement. 

17 ‘‘(2) ANNUAL PERCENTAGE RATE.— 

18 ‘‘(A) CLOSED-END COMMERCIAL CREDIT.— 

19 With respect to closed-end commercial credit, 

20 the annual percentage rate, using only the 

21 words ‘annual percentage rate’ or the abbrevia22 tion ‘APR’, expressed as a yearly rate, inclusive 

23 of any fees and finance charges that cannot be 

24 avoided by a recipient. 


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1 ‘‘(B) OPEN-END COMMERCIAL CREDIT

2 PLANS.—With respect to open-end commercial 

3 credit plans, the annual percentage rate, using 

4 only the words ‘annual percentage rate’ or the 

5 abbreviation ‘APR’, expressed as a nominal 

6 yearly rate, inclusive of any fees and finance 

7 charges that cannot be avoided by a recipient, 

8 based on the maximum amount of credit avail9 able to the recipient and the term resulting 

10 from making the minimum required payments 

11 term as disclosed. 

12 ‘‘(C) SALES-BASED FINANCING.— 

13 ‘‘(i) IN GENERAL.—With respect to 

14 sales-based financing, the estimated annual 

15 percentage rate, using the words ‘annual 

16 percentage rate’ or the abbreviation ‘APR’, 

17 expressed as a yearly rate, inclusive of any 

18 fees and finance charges, based on the esti19 mated term of repayment and the pro20 jected periodic payment amounts. 

21 ‘‘(ii) CALCULATION OF CERTAIN PAY22 MENT AMOUNTS.—The estimated term of 

23 repayment and the projected periodic pay24 ment amounts shall be calculated based on 


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1 the projection of the recipient’s sales, 

2 called the projected sales volume. 

3 ‘‘(iii) CALCULATION OF PROJECTED

4 SALES VOLUMES.—For purposes of clause 

5 (ii), the projected sales volume may be cal6 culated— 

7 ‘‘(I) according to a method de8 fined by the Director based on the re9 cipient’s historical sales volume over a 

10 defined period of time that is used for 

11 all sales-based financing transactions 

12 by that provider; or 

13 ‘‘(II) by another method defined 

14 by the provider and approved by the 

15 Director, with ongoing monitoring by 

16 the Director for accuracy based on a 

17 comparison of the annual percentage 

18 rate as disclosed to the recipient and 

19 as calculated retrospectively upon re20 payment of the financing. 

21 ‘‘(D) FACTORING.— 

22 ‘‘(i) IN GENERAL.—With respect to 

23 factoring, the estimated annual percentage 

24 rate, using that term. 


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1 ‘‘(ii) CALCULATION.—To calculate the 

2 estimated annual percentage rate under 

3 clause (i)— 

4 ‘‘(I) the purchase amount shall 

5 be considered the financing amount; 

6 ‘‘(II) the purchase amount minus 

7 the total cost of financing shall be 

8 considered the payment amount; and 

9 ‘‘(III) the term is established by 

10 the payment due date of the receiv11 ables. 

12 ‘‘(iii) ALTERNATE METHOD TO ESTI13 MATE TERM.—Notwithstanding clause 

14 (ii)(III), a provider may estimate the term 

15 for a factoring transaction as the average 

16 payment period, its historical data over a 

17 period not to exceed the previous twelve 

18 months, concerning payment invoices paid 

19 by the party owing the accounts receivable 

20 in question. 

21 ‘‘(3) PAYMENT AMOUNT.—With respect to 

22 small business financing other than factoring— 

23 ‘‘(A) for payment amounts that are fixed— 

24 ‘‘(i) the payment amounts and fre25 quency (e.g., daily, weekly, monthly); and 


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1 ‘‘(ii) if the term is longer than one 

2 month and payment frequency is other 

3 than monthly, the average total monthly 

4 payment amount; or 

5 ‘‘(B) for payment amounts that are vari6 able— 

7 ‘‘(i) a full payment schedule or a de8 scription of the method used to calculate 

9 the amounts and frequency of payments; 

10 and 

11 ‘‘(ii) if the term is longer than one 

12 month, the estimated average total month13 ly payment amount. 

14 ‘‘(4) TERM.—For financing other than fac15 toring, the term of the small business financing, ei16 ther in months or in years, or, if the term is not 

17 fixed, the estimated term, calculated using the same 

18 assumptions used to calculate the estimated annual 

19 percentage rate. 

20 ‘‘(5) FINANCE CHARGE.—The finance charge of 

21 the small business financing, broken down to show 

22 what expenses and fees are included in the finance 

23 charge. 

24 ‘‘(6) PREPAYMENT COST OR SAVINGS.—In the 

25 event that a recipient elects to pay off or refinance 


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1 the small business financing prior to full repayment, 

2 the provider must disclose— 

3 ‘‘(A) whether the recipient would be re4 quired to pay any finance charges other than 

5 interest accrued since the recipient’s last pay6 ment; 

7 ‘‘(B) if the recipient is required to pay the 

8 finance charges described under subparagraph 

9 (A), the percentage of any unpaid portion of 

10 the finance charge and maximum dollar amount 

11 the recipient could be required to pay; and 

12 ‘‘(C) whether the recipient would be re13 quired to pay any additional fees not already in14 cluded in the finance charge. 

15 ‘‘(7) COLLATERAL REQUIREMENTS.—Any col16 lateral requirement that will be imposed on the small 

17 business in connection with the small business fi18 nancing. 

19 ‘‘(b) FORM OF DISCLOSURES.— 

20 ‘‘(1) IN GENERAL.—Disclosures made pursuant 

21 to this section shall be in writing, at the time a spe22 cific offer is made, and in a manner that is clear, 

23 conspicuous, complete, and allows the small business 

24 to compare the range of small business financing op25 tions that the small business may be considering. 


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1 ‘‘(2) PROMINENCE OF DISCLOSURES.—In mak2 ing any disclosure pursuant to this section, the dis3 closures required under paragraphs (1), (2), and (3) 

4 of subsection (a) shall be displayed most promi5 nently. 

6 ‘‘§ 194. Restrictions on double-dipping 

7 ‘‘When a lender of small business financing refi8 nances or modifies an existing loan with a fixed fee as 

9 the primary financing charge, the lender may not charge 

10 a fee on the small business’s outstanding principal unless 

11 there is a tangible benefit to the small business. 

12 ‘‘§ 195. Additional provisions 

13 ‘‘(a) RULE OF CONSTRUCTION.—Nothing in this 

14 chapter may be construed to prevent a provider from pro15 viding or disclosing additional information on a small busi16 ness financing being offered to a recipient, provided how17 ever, that such additional information may not be dis18 closed as part of the disclosure required by this chapter. 

19 ‘‘(b) USE OF TERMS.— 

20 ‘‘(1) RATE.—If other metrics of financing cost 

21 are disclosed or used in the application process of a 

22 small business financing, these metrics shall not be 

23 presented as a ‘rate’ if they are not the annual in24 terest rate or the annual percentage rate. 


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1 ‘‘(2) INTEREST.—The term ‘interest’, when 

2 used to describe a percentage rate to a recipient or 

3 potential recipient, shall only be used to describe 

4 annualized percentage rates, such as the annual in5 terest rate. 

6 ‘‘(c) REQUIREMENT TO STATE APR.—When a pro7 vider states in writing a rate of finance charge or a financ8 ing amount to a recipient during an application process 

9 for small business financing, the provider shall also state 

10 the annual percentage rate or, in the case of sales-based 

11 financing or factoring, the estimated annual percentage 

12 rate, with equal or greater prominence, using the term ‘an13 nual percentage rate’ or the abbreviation ‘APR’.’’. 

14 (b) CLERICAL AMENDMENT.—The table of chapters 

15 for the Truth in Lending Act is amended by adding at 

16 the end the following: 

‘‘6. SMALL BUSINESS FINANCING ... 191’’. 

17 (c) RULEMAKING DEADLINE.—Not later than the 

18 end of the 24-month period beginning on the date of en19 actment of this Act, the Director of the Bureau of Con20 sumer Financial Protection shall issue final rules to carry 

21 out the amendments made by this section. 

22 (d) EFFECTIVE DATE.—Chapter 6 of the Truth in 

23 Lending Act, as added by subsection (a), shall take effect 


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1 after the end of the 36-month period beginning on the date 

2 of enactment of this Act. 

Æ 


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