Utah Requires Commercial Lenders and Factors to Register as a Commercial Finance Provider | Buchalter

[Co-Author:  Jck Darrington]

Under a new Utah law, most commercial finance providers or factors that are located in Utah or lend to a Utah resident are required to register as a commercial financing with the Utah Department of Financial Institutions. Additionally, certain information is required before engaging in most transactions. To some extent, the law mirrors Truth in Lending-type acts enacted in New York and California. Utah, however, added a recording element in addition to a disclosure requirement.

Although the law does not go into effect until January 1, 2023, Utah began accepting applications from new commercial finance providers on September 1, 2022. The new law applies to entities that enter into a transaction for business, including granting a business loan to a business. , extend an open-ended commercial credit plan, or complete an accounts receivable purchase transaction.

Registration under the new law will be through the National Multistate Licensing System and Registry (NMLS). Here is the link to register. Since most NMLS renewals begin November 1, the state recommends that new commercial funding enrollees submit their applications as soon as possible, so these new enrollees don’t get stuck in a bogged down system through November and December. .

Disclosures required by law include:

  • the total amount of funds provided to the company under the terms of the transaction;
  • the total amount of funds paid to the business under the transaction, if less than the amount described in paragraph (2)(a);
  • the total amount to be paid to the supplier under the terms of the transaction;
  • the total dollar cost of the trade finance transaction, calculated by finding the difference between (i) the total amount of funds provided to the business under the transaction, and (ii) the total amount payable to the lender under the transaction agreement;
  • the method, frequency and amount of each payment; Where
  • a statement of whether there are any costs or discounts associated with the prepayment as part of the transaction; and
  • the amount of funds provided to a broker in connection with the trade finance transaction.

Some requirements also depend on the type of transaction. For example, an open-ended commercial credit plan requires the provider to make disclosures after any disbursement of funds and no later than 15 days after the last day of the calendar month in which the disbursement of funds occurs.

Under the new law, commercial finance providers must both register with the Utah Department of Financial Institutions and maintain a valid registration or face penalties of up to $500 per violation and up to $20,000 if violated in a single transaction, and up to $50,000 if a party continues to violate after receiving a notice of violation.

The penalties and requirements associated with this new law underscore the need for expert legal advice when navigating the complexities of commercial finance.

Michael J. Birnbaum