California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 3 - Commercial Financing Disclosures › Section 914 - Sales-Based Financing Disclosure Formatting and Contents

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Disclosures for all sales-based financing
				provided in accordance with section
				22802 of the code, except for
				asset-based lending that meets the definition of sales-based financing, shall
				comply with the following requirements.
(1)
				The provider shall present the required disclosures in a table consisting of
				nine rows and three columns.
(2)
				The first row of the table shall include only the following information:
(A) In the first column: "Funding
				Provided".
(B) In the second
				column, the amount financed.
(C) In
				the third column, in the order listed and in one paragraph:
(i) "This is how much funding [name of
				financer] will provide."
(ii) If
				the amount financed is greater than the recipient funds: "Due to deductions or
				payments to others, the total funds that will be provided to you directly is
				[recipient funds]. For more information on what amounts will be deducted,
				please review the attached document "Itemization of Amount
				Financed.""
(iii) If any portion of
				the amount financed will be used to pay down or pay off other amounts owed by
				the recipient that may change over time, and the amounts owed are known to the
				provider, the provider shall include a short explanation that the amount paid
				directly to the recipient may change if the amount owed for the recipient's
				other obligations changes.
(iv) If,
				as a condition of the financing, a recipient's amounts owed to third parties
				must be paid down or paid off using funds from the amount financed, and an
				amount owed is not known to the provider, the provider shall also include a
				short explanation that the amount paid directly to the recipient may change
				based upon the required disbursements to satisfy other
				obligations.
(3) The second row of the table shall include
				only the following information:
(A) In the
				first column: "Estimated Annual Percentage Rate (APR)".
(B) In the second column, the annual
				percentage rate calculated in accordance with section
				940.
(C) In the third column:
"APR is the estimated cost of your financing expressed as a
				  yearly rate. APR incorporates the amount and timing of the funding you receive,
				  fees you pay, and the periodic payments you make. This calculation assumes your
				  estimated average monthly income through [description of particular payment
				  channel or mechanism] will be [average monthly income estimate determined in
				  accordance with sections
				  930 or
				  931] . Since your actual income
				  may vary from our estimate, your effective APR may also vary."
(D) If no part of the finance charge is based
				upon an interest rate, in addition to the language required by subdivision
				(a)(3)(C) of this section: "APR is not an interest rate. The cost of this
				financing is based upon fees charged by [financer] rather than interest that
				accrues over time."
(4)
				The third row of the table shall include only the following information:
(A) In the first column: "Finance
				Charge".
(B) In the second column,
				the finance charge calculated in accordance with section
				943.
(C) In the third column:
(i) "This is the dollar cost of your
				financing."
(ii) In addition, if
				the finance charge will not increase under any circumstance if repayment takes
				longer than estimated, the provider may include the following statement: "Your
				finance charge will not increase if you take longer to pay off what you
				owe."
(5) The
				fourth row of the table shall include only the following information:
(A) In the first column: "Estimated Total
				Payment Amount".
(B) In the second
				column, the total dollar amount of estimated payments the recipient will make
				during the term of the contract.
(C) In the third column: "This is the total
				dollar amount of payments we estimate you will make under the
				contract."
(6) The fifth
				row of the table shall include only the following information:
(A) In the first column: "Estimated
				Payment".
(B) The second and third
				columns shall be combined, and contain the following information:
(i) The average amount of estimated periodic
				payments calculated in accordance with section
				942, followed by a forward slash
				(/) and the frequency of periodic payments.
(ii) The date and amount of any irregular
				payments listed in chronological order.
(iii) The date and amount of any reasonably
				anticipated true-ups.
(7) The sixth row of the table shall include
				only the following information:
(A) In the
				first column: "Payment Terms".
(B)
				The second and third columns shall be combined, and contain the following
				information:
(i) If the contract provides for
				daily periodic payments, a short explanation of when daily payments will be
				required. For example, on weekdays or every calendar day.
(ii) If applicable, a short explanation of
				how the financer will use the split rate to calculate the recipient's required
				payments and/or that the financing does not have a fixed payment schedule or
				minimum payments. For example: "Each business day, your credit card processer
				will remit 15% of your gross receipts to us, and send any remaining amounts to
				you. This financing does not have a fixed payment schedule and there is no
				minimum payment amount."
(iii) If
				the contract contains a true-up mechanism,
(a) A short explanation of how the provider
				calculated the pre-set periodic payment(s) described in section
				900, subdivision (a)(34)(A). For
				example: "We based your preset daily payment of $75 upon our estimate of 15% of
				your total income, based upon average monthly income of $15,000 for the last
				three months."
(b) A short
				explanation of the true-up mechanism, and a reference to the part of the
				contract that describes the terms of the true-up mechanism, if available. For
				example: "You have the right to receive refunds of all or part of your payments
				if you demonstrate that your payments have exceeded 15% of your total income
				during any given month. For more details on your rights, see paragraph 5 of
				your contract."
(iv) A
				short explanation of any minimum payment terms under the contract. For example:
				"You must pay us a minimum of $2,000 per month under the
				contract."
(8)
				The seventh row of the table shall include only the following information:
(A) In the first column: "Estimated
				Term".
(B) In the second column,
				the estimated term of the transaction, calculated in accordance with section
				942.
(C) In the third column, a short explanation
				stating that the estimated term is based upon assumptions about the recipient's
				income. For example:
"This is our estimate of how long it will take to collect
				  amounts due to us under the contract based upon the assumption that you will
				  receive $6,000 in monthly income through your BrownPay
				  account."
(9) In
				the first column, the eighth and ninth rows shall be combined and shall include
				the following language: "Prepayment."
(10) In the eighth row, the second and third
				columns shall be combined and shall include only:
(A) If, at any time during the term of the
				transaction, prepayment of the outstanding balance due will require the
				recipient to pay finance charges other than interest accrued since the
				recipient's last payment, the following statement: "If you pay off the
				financing faster than required, you still must pay all or a portion of the
				finance charge, up to $[maximum non-interest finance charge] based upon our
				estimates."
(B) In all other cases,
				the following statement: "If you pay off the financing faster than required,
				you will not be required to pay any portion of the finance charge other than
				unpaid interest accrued."
(11) In the ninth row, the second and third
				columns shall be combined and shall include:
(A) If, at any time during the term of the
				transaction, prepayment of the outstanding balance due will require the
				recipient to pay additional fees and charges not included in the finance
				charge, the following statement: "If you pay off the financing faster than
				required, you must pay additional fees of [amount and description of
				fees]."
(B) In all other cases, the
				following statement: "If you pay off the financing faster than required, you
				will not be required to pay additional fees."
(12) If the contract provides for periodic
				payments that are not monthly, the provider shall insert one additional row
				below the fourth row, and the additional row shall include only the following
				information:
(A) In the first column:
				"Estimated Monthly Cost".
(B) In
				the second column, the estimated monthly cost that the recipient will pay over
				the term of the transaction calculated in accordance with section
				942 of these rules. If the
				provider anticipates that the estimated monthly cost will vary over the term of
				the transaction, either due to changes in the recipient's income through the
				particular payment channel, a change in the split rate, or some other reason
				provided for in the contract, the provider shall list the estimated monthly
				costs and the time periods when those estimates apply. For example:
Months 1-2:
$600/month
Months 3-6:
$1200/month
Month 7:
$1000/month
(C) In the third column, a short explanation
				of how the provider calculated the estimated monthly cost. For example:
				"Although you do not make payments on a monthly basis, this is our calculation
				of your average monthly cost based upon the payment amounts disclosed
				below."