California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 3 - Commercial Financing Disclosures › Section 912 - Factoring Disclosure Formatting and Contents

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Disclosures for factoring transactions
				provided in accordance with section
				22802 of the code shall comply
				with the following requirements.
(1) The
				provider shall present the required disclosures in a table consisting of six
				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 [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.
(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 estimated
				annual percentage rate calculated in accordance with sections
				940 and
				941.
(C) In the third column:
(i) "APR 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]."
(ii) A short
				explanation of the assumptions relating to payment timing that the provider
				used to calculate the estimate. For example: "This estimate assumes the account
				debtor will pay the invoice on the invoice due date."
(iii) If no part of the finance charge is
				based upon an interest rate, in addition to the language required by
				subdivision (a)(3)(C)(i): "APR it is not an interest rate and the amount of the
				factoring fee we charge is not based upon an interest
				rate."
(4) The
				third 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 description of each
				expense that is included in the finance charge.
(5) The fourth row of the table shall include
				only the following information:
(A) In the
				first column: "Payment".
(B) In the
				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."
(6) The fifth 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: "The invoice is
				due for payment 30 days from today, so we have estimated a term of 1 month. The
				invoice may be paid sooner or later than the due date."
(7) The sixth row of the table shall include
				only the following information:
(A) In the
				first column: "Repurchase Costs".
(B) The second and third columns shall be
				combined, and:
(i) 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:
a. 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]."
b. 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."
c. 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 that are not part of the finance
				charge, including [amount and description of fees]."
d. 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."
(ii) 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:
a. "You are not permitted to pay the amount
				due on the [description of legally enforceable claim] before your customer's
				due date."
b. If applicable: "The
				finance charge will not decrease if your customer pays the [description of
				legally enforceable claim] before the due
				date."