California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 3 - Commercial Financing Disclosures › Section 913 - Factoring Disclosure Formatting and Contents for Example Transactions

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Disclosures for
				factoring transactions provided in accordance with section
				22803 of the code shall comply
				with the following requirements.
(1) The
				provider shall present the required disclosures in a table consisting of seven
				rows and three columns.
(2) All
				three columns of the first row of the table shall be combined, and within the
				cell created, the provider shall include only the following language, in
				italics:
(A) If the finance charge, annual
				percentage rate and term do not vary for different classes of legally
				enforceable claim: "The calculations below are based upon a hypothetical
				[description of legally enforceable claims to be assigned, e.g. "Invoice"] of
				[value calculated in accordance with section
				951], assigned to [insert name of
				financer] with a due date [term] from the date of assignment. Actual costs may
				differ substantially."
(B) If the
				finance charge, annual percentage rate or term will vary for different classes
				of legally enforceable claims with different characteristics, the following in
				the order listed:
(i) "The calculations below
				are based upon a hypothetical [description of legally enforceable claims to be
				assigned, e.g., "invoice"] of [insert value calculated in accordance with
				section 951], assigned to [name of
				financer] with a due date [term] from the date of assignment."
(ii) A short explanation of the class of the
				legally enforceable claim for which the disclosure applies. For example: "These
				calculations further assume that the account debtor on the invoice is [name of
				account debtor]."
(iii) "Actual
				costs may differ substantially."
(3) The second 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 [name of financer] will pay when you assign [description of
				legally enforceable claim, e.g. "the invoice"] to [name of
				financer]."
(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 also 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.
(4) The third row of the table shall include
				only the following information:
(A) In the
				first column: "Annual Percentage Rate (APR)".
(B) In the second column, the provider's
				calculation of the annual percentage rate of the transaction calculated in
				accordance with sections
				940 and
				941.
(C) In third column:
"This is the estimated cost of your financing expressed as a
				  yearly rate. APR includes the amount and timing of the funding you receive,
				  fees you pay, and payments made to [name of financer]. This estimate assumes
				  that you will assign the [description of legally enforceable claim assigned,
				  e.g. "invoice"] to [name of financer] today, the [description of legally
				  enforceable claim assigned] is due in [term] and your customer will pay the
				  [name of legally enforceable claim assigned, e.g. "invoice"] in full on the due
				  date."
(D) If no part of the
				finance charge is based upon an interest rate, in addition to the language
				required by subdivision (a)(4)(C) of this section: "APR is not an interest rate
				and the amount of the finance charge is not based upon an interest
				rate."
(5) The fourth row
				of the table shall include the following information:
(A) In the first column: "Finance
				Charge".
(B) In the second column,
				the total finance charge calculated in accordance with section
				943.
(C) In the third column, the provider's
				calculation of the finance charge, with the amount and a description of each
				expense (e.g., factoring fee, origination fee, etc.) that is included in the
				finance charge.
(6) The
				fifth row of the table shall include only the following information:
(A) In the first column: "Payment
				Amount".
(B) In second column: "NA"
				or "N/A" or "Not applicable".
(C)
				In the third column, a short explanation describing why the recipient is not
				ordinarily required to make payments under the contract. For example: "You are
				selling an invoice to us, so you will not be required to make any payments to
				us unless your customer fails to pay the invoice and we find that you breached
				your warranty to us by failing to deliver the invoiced goods to your
				customer."
(7) The sixth
				row of the table shall include only the following information:
(A) In the first column: "Estimated
				Term".
(B) In the second column,
				the term of the transaction.
(C) In
				the third column, a short explanation describing how the provider calculated
				the term. For example: "You are permitted to assign us invoices that are due a
				maximum of 60 days from the invoice date, so we have estimated a term of 2
				months. The invoice may be paid sooner or later than the due
				date."
(8) The seventh
				row of the table shall include only the following information:
(A) In the first column:
				"Prepayment".
(B) The second and
				third columns shall be combined, and:
(C) If the recipient is permitted to
				repurchase the legally enforceable claim for payment before the legally
				enforceable claim is due and payable, the resulting combined cell shall be
				divided vertically into two cells by a horizontal line, and:
(i) If at any time during the term of the
				transaction, repurchase of the legally enforceable claim will result in the
				recipient paying finance charges other than interest since the advance was
				made, the top cell shall include the following statement: "If you repurchase
				the [description of legally enforceable claim] before the due date, you still
				must pay all or a portion of the finance charge, which could be as high as
				$[maximum non-interest finance charge]."
(ii) In all other cases, the top cell shall
				include the following statement, "If you repurchase the [description of legally
				enforceable claim] before the due date, you will not pay any portion of the
				finance charge other than unpaid interest accrued since disbursement, if
				applicable."
(iii) If, at any time
				during the term of the transaction, repurchase of the legally enforceable claim
				will require the recipient to pay additional fees and charges not included in
				the finance charge, the bottom cell shall include the following statement: "If
				you repurchase the [description of legally enforceable claim] before the due
				date, you must pay additional fees and charges, including [amount and
				description of fees]."
(iv) In all
				other cases, the bottom cell shall state: "If you repurchase the [description
				of legally enforceable claim] before the due date, you will not be required to
				pay any additional fees and charges."
(D) If the recipient is not permitted to
				repurchase the legally enforceable claim for payment before the legally
				enforceable claim is due and payable, the resulting cell shall include the
				following statements:
(i) "You are not
				permitted to pay the amount due on the [description of legally enforceable
				claim] before your customer's due date."
(ii) If applicable: "The finance charge will
				not decrease if your customer pays the [description of legally enforceable
				claim] before the due date."