Senator Curtis S. Bramble proposes the following substitute bill:


1     
FINANCIAL INSTITUTION AND CONSUMER NOTIFICATION

2     
AMENDMENTS

3     
2024 GENERAL SESSION

4     
STATE OF UTAH

5     
Chief Sponsor: Curtis S. Bramble

6     
House Sponsor: A. Cory Maloy

7     

8     LONG TITLE
9     General Description:
10          This bill modifies provisions relating to commercial financing transactions and
11     consumer lender notifications.
12     Highlighted Provisions:
13          This bill:
14          ▸     repeals provisions relating to disclosures for commercial financing transactions;
15          ▸     requires a consumer lender to submit to the commissioner of financial institutions
16     evidence of registration through the Nationwide Multistate Licensing System and
17     Registry; and
18          ▸     defines terms; and
19          ▸     makes technical changes.
20     Money Appropriated in this Bill:
21          None
22     Other Special Clauses:
23          None
24     Utah Code Sections Affected:
25     AMENDS:
26          7-27-101, as enacted by Laws of Utah 2022, Chapter 449
27          7-27-202, as enacted by Laws of Utah 2022, Chapter 449
28          70C-1-302, as last amended by Laws of Utah 2009, Chapter 72
29          70C-8-202, as last amended by Laws of Utah 2013, Chapter 73
30          70C-8-203, as last amended by Laws of Utah 2014, Chapter 97
31     

32     Be it enacted by the Legislature of the state of Utah:
33          Section 1. Section 7-27-101 is amended to read:
34          7-27-101. Definitions.
35          As used in this chapter:
36          (1) "Accounts receivable purchase transaction" means a transaction in which a business
37     forwards or otherwise sells to a person all or a portion of the business's accounts, as defined in
38     Section 70A-9a-102, or payment intangibles, as defined in Section 70A-9a-102, at a discount to
39     the accounts' or payment intangibles' expected value.
40          (2) (a) "Broker" means [a person who, for compensation or the expectation of
41     compensation, arranges a commercial financing transaction between a third party and a
42     business in the state] a person who:
43          (i) for compensation or the expectation of compensation, obtains a commercial
44     financing product or an offer for a commercial financing product from a third party that, if
45     executed, would bind the third party; and
46          (ii) communicates the offer described in Subsection (2)(a)(i) to a business located in
47     the state.
48          (b) "Broker" does not include:
49          (i) a provider; or
50          (ii) a person whose compensation is not based or dependent on the terms of a specific
51     commercial financing product that the person obtains or offers.
52          (3) "Business" means a private enterprise carried on for the purpose of gain or
53     economic profit.
54          (4) (a) "Business purpose transaction" means a transaction from which the resulting
55     proceeds that a business receives are:
56          (i) provided to the business; or
57          (ii) intended to be used to carry on the business.
58          (b) "Business purpose transaction" does not include a transaction from which the
59     resulting proceeds are intended to be used for personal, family, or household purposes.
60          (c) For purposes of determining whether a transaction is a business purpose
61     transaction, a provider may rely on a written statement of intended purpose, signed by an
62     individual authorized to sign on behalf of the business. The written statement may be contained
63     in an application, agreement, or other document signed by an individual authorized to sign on
64     behalf of the business.
65          (5) "Commercial financing transaction" means a business purpose transaction:
66          (a) under which a person extends a business a commercial loan or a commercial
67     open-end credit plan; or
68          (b) that is an accounts receivable purchase transaction.
69          (6) "Commercial loan" means a loan to a business, regardless of whether the loan is
70     secured.
71          (7) "Commercial open-end credit plan" means commercial financing extended to a
72     business on terms under which:
73          (a) the creditor reasonably contemplates repeat transactions; and
74          (b) subject to any limit set by the creditor, the amount of financing that the creditor
75     may extend to the business during the term of the plan is made available to the extent that any
76     outstanding balance is repaid.
77          (8) "Motor vehicle dealer" means a dealer as defined in Section 41-3-102.
78          (9) (a) "Provider" means a person who consummates more than five commercial
79     financing transactions in the state during any calendar year.
80          (b) "Provider" includes a person who, under a written agreement with a depository
81     institution, offers one or more commercial financing products provided by the depository
82     institution via an online platform that the person administers.
83          Section 2. Section 7-27-202 is amended to read:
84          7-27-202. Disclosures for commercial financing transactions.
85          (1) [(a)] Before consummating a commercial financing transaction, a provider shall
86     disclose the terms of the commercial financing transaction in accordance with this section and
87     rules made by the commissioner.
88          [(b) In addition to the requirements of Subsection (1)(a), for a commercial open-end
89     credit plan, the provider shall make the disclosures described in this section:]
90          [(i) after any disbursement of funds that occurs after the parties consummate the
91     commercial financing transaction; and]
92          [(ii) no later than 15 days after the last day of the calendar month in which the
93     disbursement of funds occurs.]
94          (2) A provider shall disclose the following information in connection with each
95     commercial financing transaction:
96          (a) the total amount of funds provided to the business under the terms of the
97     commercial financing transaction;
98          (b) the total amount of funds disbursed to the business under the terms of the
99     commercial financing transaction, if less than the amount described in Subsection (2)(a);
100          (c) the total amount to be paid to the provider under the terms of the commercial
101     financing transaction;
102          (d) the total dollar cost of the commercial financing transaction, calculated by finding
103     the difference between:
104          (i) the amount described in Subsection (2)(a); and
105          (ii) the amount described in Subsection (2)(c);
106          (e) (i) the manner, frequency, and amount of each payment; or
107          (ii) if the amount of each payment may vary, the manner, frequency, and estimated
108     amount of the initial payment; and
109          (f) a statement of whether there are any costs or discounts associated with prepayment
110     under the commercial financing transaction, including a reference to the paragraph in the
111     commercial financing transaction agreement that creates each cost or discount[; and].
112          [(g) any amount of the funds described in Subsection (2)(a) that the provider pays to a
113     broker in connection with the commercial financing transaction.]
114          (3) The commercial financing transaction agreement shall include a description of the
115     methodology for calculating any variable payment amount and the circumstances that may
116     cause a payment amount to vary.
117          (4) The provisions of this section apply to a commercial financing transaction
118     consummated on or after January 1, 2023.
119          Section 3. Section 70C-1-302 is amended to read:
120          70C-1-302. Definitions.
121          As used in this title:
122          (1) "Agreement" means the bargain of the parties in fact as stated in a written contract
123     or otherwise as found in the parties' language or by implication from other circumstances,
124     including:
125          (a) course of dealing;
126          (b) usage of trade; or
127          (c) course of performance.
128          (2) "Commissioner" means the commissioner of financial institutions appointed under
129     Section 7-1-202.
130          [(2)] (3) "Contract" means a document containing written terms and conditions of a
131     credit agreement.
132          [(3)] (4) (a) "Creditor" means:
133          (i) a party:
134          (A) who regularly extends consumer credit that is subject to a finance charge or is
135     payable by written agreement in more than four installments, not including a down payment;
136     and
137          (B) to whom the obligation is initially payable, either on the face of the note or
138     contract, or by agreement when there is no note or contract;
139          (ii) an issuer of a credit card that extends either open-end credit or credit that:
140          (A) is not subject to a finance charge; and
141          (B) is not payable by written agreement in more than four installments; and
142          (iii) an issuer of a credit card that extends closed-end credit that:
143          (A) is subject to a finance charge; or
144          (B) is payable by written agreement in more than four installments.
145          (b) (i) For purposes of this Subsection [(3),] (4), a party is considered to extend
146     consumer credit regularly only if the party extends credit in the preceding calendar year:
147          (A) more than 25 times; or
148          (B) more than five times for a transaction secured by a dwelling.
149          (ii) If a person does not meet the numerical standards described in Subsection
150     [(3)(b)(i)] (4)(b)(i) in the preceding calendar year, the numerical standards shall be applied to
151     the current calendar year.
152          [(4)] (5) "Dwelling" means a residential structure attached to real property that contains
153     one to four units including any of the following if used as a residence:
154          (a) a condominium unit;
155          (b) a cooperative unit;
156          (c) a manufactured home; or
157          (d) a house.
158          [(5)] (6) "Earnings" means compensation paid or payable to an individual or for the
159     individual's account for personal services rendered or to be rendered by the individual whether
160     denominated as wages, salary, commission, bonus, or otherwise, and includes periodic
161     payments pursuant to a pension, retirement, or disability program.
162          [(6)] (7) "Installment" means a payment upon a debt that is part of a series of
163     payments, each of which is less than the original amount of the debt and scheduled as to a
164     specific amount and due date by agreement of the parties for the purpose of repaying the debt.
165          (8) "Nationwide database" means the Nationwide Multistate Licensing System and
166     Registry, described in 12 U.S.C. Sec. 5101.
167          [(7)] (9) "Party" means an individual and any other entity legally capable of entering
168     into a binding contract.
169          Section 4. Section 70C-8-202 is amended to read:
170          70C-8-202. Notification.
171          (1) (a) A party who is subject to this part shall file notification with the department at
172     least 30 days before commencing business in this state.
173          (b) After filing the notification required by Subsection (1)(a), a party shall file a
174     notification on or before [January] December 31 of each year.
175          (c) A notification required by this Subsection (1) shall:
176          (i) state the name of the party;
177          (ii) state the name in which the business is transacted if different from that required in
178     Subsection (1)(c)(i);
179          (iii) state the address of the party's principal office, which may be outside this state;
180          (iv) state the address of:
181          (A) each office or retail store, if any, in this state at which credit is offered or extended
182     to a consumer; or
183          (B) in the case of a party taking an assignment of an obligation, each office or place of
184     business within this state at which business is transacted;
185          (v) if credit is extended to a consumer other than at an office or retail store in this state,
186     state a brief description of the manner in which the credit transaction occurs;
187          (vi) state the name and address in this state of a designated agent upon whom service of
188     process may be made;
189          (vii) [submit] include evidence satisfactory to the commissioner that the [person] party
190     is authorized to conduct business in this state as a domestic or foreign entity pursuant to filings
191     with the Division of Corporations and Commercial Code under Title 16, Corporations, or Title
192     48, Unincorporated Business Entity Act; [and]
193          (viii) include evidence satisfactory to the commissioner that the party is registered with
194     the nationwide database; and
195          [(viii) provide] (ix) include any other information considered pertinent by the
196     department.
197          (2) If information in a notification becomes inaccurate after filing, a party is not
198     required to file further notification until required to renew the party's notification.
199          (3) (a) A party who fails to file a notification or pay a fee required by this part may not
200     extend credit to a consumer in this state until the party fully complies with this part.
201          (b) A party who willfully violates this Subsection (3) is guilty of a class B
202     misdemeanor.
203          Section 5. Section 70C-8-203 is amended to read:
204          70C-8-203. Fees -- Examinations.
205          (1) A party required to file notification under Section 70C-8-202 shall, on or before
206     [January 31] December 31 of each year, pay to the department an annual fee of $100.
207          (2) In addition to filing notification, a party subject to this part, and a depository
208     institution subject to this title:
209          (a) may be required to make a book or record relating to a consumer credit transaction
210     available to the department or its authorized representative for examination; and
211          (b) shall pay to the department a fee to be set by the department based on an hourly rate
212     per each examiner.
213          (3) No portion of a fee paid or owed to the department under this part is refundable
214     because a party voluntarily or involuntarily ceases to extend credit to consumers:
215          (a) during the period covered by the fee; or
216          (b) before the time of an examination by the department of a book or record pertaining
217     to a preceding consumer credit transaction.
218          Section 6. Effective date.
219          This bill takes effect on May 1, 2024.