,i #aafth ,,congress #b;d ,session ,h4 ,r4 #ghhi ,,in ,,the ,,house ,,of ,,representatives ,july #cj1 #bjbj,ms4 ,velzquez introduced the following bill2 which was referred to the ,committee on ,financial ,services ,a ,,bill ,to apply the ,truth in ,lending ,act to small business financing1 to regulate brokers and require the licensing of brokers1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,small ,business ,lending ,disclosure and ,broker ,regulation ,act of #bjbj4 ,i ,small ,business ,financing #aja4 ,application of the ,truth in ,lending to small business financing 7a7 ,in general ,the ,truth in ,lending ,act 7#ae ,u4,s4,c4 #afja et seq47 is amended by adding at the end the following3 #f ,small ,business ,financing #aia4 ,definitions4 #aib4 ,application of this title to small business financing4 #aic4 ,additional disclosures4 #aid4 ,restrictions on double-dipping4 #aie4 ,additional provisions4 #aia4 ,definitions ,in this chapter3 7#a7 ,closed-end commercial credit ,the term closed-end commercial credit-- 7,a7 means a closed-end extension of credit1 secured or unsecured1 including financing with an established principal amount and including equipment financing that does not meet the definition of a lease under the ,uniform ,commercial ,code 7,u4,c4,c4-- #b;,a-#ajc7;j77 the proceeds of which the recipient does not intend to use primarily for personal1 family or household purposes2 and 7,b7 includes financing with an established principal amount and duration4 7#b7 ,consumer financial product or service ,the term consumer financial product or service has the meaning given that term under section #ajjb of the ,consumer ,financial ,protection ,act of #bjaj4 7#c7 ,director ,the term ,director means the ,director of the ,bureau4 7#d7 ,factoring ,the term factoring means a transaction that includes an agreement to purchase1 transfer1 or sell a legally enforceable claim for payment held by a recipient for goods the recipient has supplied or services the recipient has rendered that have been ordered but for which payment has not yet been made4 7#e7 ,finance charge 7,a7 ,in general ,the term finance charge means the cost of financing as a dollar amount1 and includes any charge payable directly or indirectly by the recipient of the financing and imposed directly or indirectly by the provider of the financing as an incident to or a condition of the extension of financing4 7,b7 ,calculation in open-end commercial credit plans ,in any open-end commercial credit plan1 the finance charge shall be computed assuming the maximum amount of credit available to the recipient1 in each case1 is drawn and repaid at the minimum rate4 7,c7 ,calculation in factoring transactions ,in any factoring transaction1 the finance charge shall include the discount taken on the face value of the accounts receivable4 7,d7 ,calculation in lease financing transactions ,in any lease financing transaction1 the finance charge shall include the sum of the lease payments and1 if there is a fixed-price purchase option or a purchase option with a price that can be calculated at the time of disclosure1 the purchase price listed in the contract that the lessee may pay to acquire the leased goods at the end of the lease1 minus-- 7i7 if the finance company selects1 manufactures1 or supplies the goods to be leased1 the price that the finance company would sell the goods in a cash transaction2 or 7ii7 if the finance company does not select1 manufacture1 or supply the goods to be leased1 the price the finance company will pay to acquire the property to be leased4 7,e7 ,inclusion of certain prepayment charges 7i7 ,in general ,if1 as a condition of obtaining the offered commercial financing the provider requires the recipient to pay off the balance of an existing loan or advance from the same provider1 any prepayment charge or penalty required to be paid on the existing financing shall be included as a financing charge4 7ii7 ,treatment when repayment amount is calculated as a fixed amount ,for purposes of clause 7i71 for financing for which the total repayment amount is calculated as a fixed amount1 the prepayment charge is equal to the original finance charge multiplied by the required prepayment amount as a percentage of the total repayment amount1 minus any portion of the total repayment amount forgiven by the provider at the time of prepayment4 7#f7 ,open-end commercial credit plan ,the term open-end commercial credit plan means any small business financing provided by a person under a plan in which the person reasonably contemplates repeat transactions1 which prescribes the terms of such transactions1 and which provides for a finance charge which may be computed from time to time on the outstanding unpaid balance4 7#g7 ,provider ,the term provider mean a person who offers or provides small business financing4 7#h7 ,recipient ,the term recipient means a person who is presented an offer of small business financing4 7#i7 ,sales-based financing ,the term sales-based financing-- 7,a7 means a transaction where there is an extension of financing to a recipient that is repaid by the recipient1 over time1 as a percentage of sales or revenue1 in which the payment amount may increase or decrease according to the volume of sales made or revenue received by the recipient2 and 7,b7 includes transactions with a true-up mechanism4 7#aj7 ,small business ,the term small business has the meaning given the term small-business concern under section #c of the ,small ,business ,act 7#ae ,u4,s4,c4 #fcb74 7#aa7 ,small business financing ,the term small business financing-- 7,a7 means any line of credit1 closed-end commercial credit1 sales-based financing1 or other non-equity obligation or alleged obligation of a partnership1 corporation1 cooperative1 association1 or other entity that is #b1ejj1jjj or less2 and 7,b7 does not include any obligation or alleged obligation of an individual that is primarily for personal1 family1 or household purposes4 7#ab7 ,specific offer ,the term specific offer means the specific terms of small business financing1 including price or amount1 that is quoted to a recipient1 based on information obtained from1 or about the recipient1 which1 if accepted by a recipient1 shall be binding on the provider1 as applicable1 subject to any specific requirements stated in such terms4 #aib4 ,application of this title to small business financing 7a7 ,in general ,this title shall apply to small business financing made to a small business to the same extent as this title applies to extensions of credit made to a consumer4 7b7 ,rulemaking ,the ,director shall issue such rules as may be required to carry out this chapter4 7c7 ,bureau authority ,for purposes of carrying out this chapter and other ,federal laws1 including the ,consumer ,financial ,protection ,act of #bjaj1 the ,bureau shall have the same authority with respect to small business financing as the ,bureau has with respect to consumer financial products and services4 #aic4 ,additional disclosures 7a7 ,in general ,any provider offering small business financing to a small business shall disclose the following pieces of information to a recipient at the time of extending a specific offer for small business financing3 7#a7 ,financing amount ,the total amount to be paid to the small business1 taking into account all fees and charges to be withheld at disbursement4 7#b7 ,annual percentage rate 7,a7 ,closed-end commercial credit ,with respect to closed-end commercial credit1 the annual percentage rate1 using only the words annual percentage rate or the abbreviation ,,apr1 expressed as a yearly rate1 inclusive of any fees and finance charges that cannot be avoided by a recipient4 7,b7 ,open-end commercial credit plans ,with respect to open-end commercial credit plans1 the annual percentage rate1 using only the words annual percentage rate or the abbreviation ,,apr1 expressed as a nominal yearly rate1 inclusive of any fees and finance charges that cannot be avoided by a recipient1 based on the maximum amount of credit available to the recipient and the term resulting from making the minimum required payments term as disclosed4 7,c7 ,sales-based financing 7i7 ,in general ,with respect to sales-based financing1 the estimated annual percentage rate1 using the words annual percentage rate or the abbreviation ,,apr1 expressed as a yearly rate1 inclusive of any fees and finance charges1 based on the estimated term of repayment and the projected periodic payment amounts4 7ii7 ,calculation of certain payment amounts ,the estimated term of repayment and the projected periodic payment amounts shall be calculated based on the projection of the recipient's sales1 called the projected sales volume4 7iii7 ,calculation of projected sales volumes ,for purposes of clause 7ii71 the projected sales volume may be calculated-- 7,i7 according to a method defined by the ,director based on the recipient's historical sales volume over a defined period of time that is used for all sales-based financing transactions by that provider2 or 7,,ii7 by another method defined by the provider and approved by the ,director1 with ongoing monitoring by the ,director for accuracy based on a comparison of the annual percentage rate as disclosed to the recipient and as calculated retrospectively upon repayment of the financing4 7,d7 ,factoring 7i7 ,in general ,with respect to factoring1 the estimated annual percentage rate1 using that term4 7ii7 ,calculation ,to calculate the estimated annual percentage rate under clause 7i7-- 7,i7 the purchase amount shall be considered the financing amount2 7,,ii7 the purchase amount minus the total cost of financing shall be considered the payment amount2 and 7,,iii7 the term is established by the payment due date of the receivables4 7iii7 ,alternate method to estimate term ,notwithstanding clause 7ii77,,iii71 a provider may estimate the term for a factoring transaction as the average payment period1 its historical data over a period not to exceed the previous twelve months1 concerning payment invoices paid by the party owing the accounts receivable in question4 7#c7 ,payment amount ,with respect to small business financing other than factoring-- 7,a7 for payment amounts that are fixed-- 7i7 the payment amounts and frequency 7e4g41 daily1 weekly1 monthly72 and 7ii7 if the term is longer than one month and payment frequency is other than monthly1 the average total monthly payment amount2 or 7,b7 for payment amounts that are variable-- 7i7 a full payment schedule or a description of the method used to calculate the amounts and frequency of payments2 and 7ii7 if the term is longer than one month1 the estimated average total monthly payment amount4 7#d7 ,term ,for financing other than factoring1 the term of the small business financing1 either in months or in years1 or1 if the term is not fixed1 the estimated term1 calculated using the same assumptions used to calculate the estimated annual percentage rate4 7#e7 ,finance charge ,the finance charge of the small business financing1 broken down to show what expenses and fees are included in the finance charge4 7#f7 ,prepayment cost or savings ,in the event that a recipient elects to pay off or refinance the small business financing prior to full repayment1 the provider must disclose-- 7,a7 whether the recipient would be required to pay any finance charges other than interest accrued since the recipient's last payment2 and 7,b7 if the recipient is required to pay the finance charges described under subparagraph 7,a71 the percentage of any unpaid portion of the finance charge and maximum dollar amount the recipient could be required to pay2 and 7,c7 whether the recipient would be required to pay any additional fees not already included in the finance charge4 7#g7 ,collateral requirements ,any collateral requirement that will be imposed on the small business in connection with the small business financing4 7b7 ,form of disclosures 7#a7 ,in general ,disclosures made pursuant to this section shall be in writing1 at the time a specific offer is made1 and in a manner that is clear1 conspicuous1 complete1 and allows the small business to compare the range of small business financing options that the small business may be considering4 7#b7 ,prominence of disclosures ,in making any disclosure pursuant to this section1 the disclosures required under paragraphs 7#a71 7#b71 and 7#c7 of subsection 7a7 shall be displayed most prominently4 #aid4 ,restrictions on double-dipping ,when a lender of small business financing refinances or modifies an existing loan with a fixed fee as the primary financing charge1 the lender may not charge a fee on the small business's outstanding principal unless there is a tangible benefit to the small business4 #aie4 ,additional provisions 7a7 ,rule of construction ,nothing in this chapter may be construed to prevent a provider from providing or disclosing additional information on a small business financing being offered to a recipient1 provided however1 that such additional information may not be disclosed as part of the disclosure required by this chapter4 7b7 ,use of terms 7#a7 ,rate ,if other metrics of financing cost are disclosed or used in the application process of a small business financing1 these metrics shall not be presented as a rate if they are not the annual interest rate or the annual percentage rate4 7#b7 ,interest ,the term interest1 when used to describe a percentage rate to a recipient or potential recipient1 shall only be used to describe annualized percentage rates1 such as the annual interest rate4 7c7 ,requirement ,to state ,,apr ,when a provider states in writing a rate of finance charge or a financing amount to a recipient during an application process for small business financing1 the provider shall also state the annual percentage rate or1 in the case of sales-based financing or factoring1 the estimated annual percentage rate1 with equal or greater prominence1 using the term annual percentage rate or the abbreviation ,,apr4 4 7b7 ,clerical amendment ,the table of chapters for the ,truth in ,lending ,act is amended by adding at the end the following3 #f4 ,small ,business ,financing 444 #aia 4 7c7 ,rulemaking deadline ,not later than the end of the #bd-month period beginning on the date of enactment of this ,act1 the ,director of the ,bureau of ,consumer ,financial ,protection shall issue final rules to carry out the amendments made by this section4 7d7 ,effective date ,chapter #f of the ,truth in ,lending ,act1 as added by subsection 7a71 shall take effect after the end of the #cf-month period beginning on the date of enactment of this ,act4 ,,ii ,regulation of ,brokers #bja4 ,office of ,broker ,regulation ,section #ajac of the ,consumer ,financial ,protection ,act of #bjaj 7#ab ,u4,s4,c4 #edic7 is amended by adding at the end the following3 7i7 ,office of ,broker ,regulation ,there is established in the ,bureau an ,office of ,broker ,regulation1 which shall be responsible for carrying out section #ajah4 4 #bjb4 ,regulation of brokers 7a7 ,in general ,the ,consumer ,financial ,protection ,act of #bjaj 7#ab ,u4,s4,c4 #edha et seq47 is amended-- 7#a7 by redesignating section #ajah as section #ajai2 and 7#b7 by inserting after section #ajag the following3 #ajah4 ,regulation of brokers 7a7 ,definitions ,in this section3 7#a7 ,broker ,the term broker means a natural person who-- 7,a7 is not a creditor or purchaser2 and 7,b7 solicits and presents offers of commercial financing on behalf of a third party4 7#b7 ,director ,the term ,director means the ,director of the ,bureau of ,consumer ,financial ,protection4 7#c7 ,state ,the term ,state means each of the several ,states1 the ,district of ,columbia1 and the territories and possessions of the ,united ,states4 7#d7 ,other terms ,the terms small business and small business financing have the meaning given those terms under section #aic of the ,truth in ,lending ,act4 7b7 ,regulations 7#a7 ,in general ,a broker shall1 in facilitating financing offered by a third-party lender for a small business-- 7,a7 provide the small business with a disclosure containing the information described under paragraph 7#b72 and 7,b7 educate the small business on each small business financing option and ensure that the small business reasonably understands the cost and terms of the small business financing as well as the pros and cons of the small business financing decision before the small business enters into a contract for such small business financing4 7#b7 ,contents of disclosure ,each disclosure required under paragraph 7#a7 shall include3 7,a7 ,a list of all small business financing options for which the small business qualifies through the broker's services and1 with respect to each such small business financing option1 the disclosures described under section #aic of the ,truth in ,lending ,act4 7,b7 ,the lowest annual percentage rate option4 7,c7 ,all the lenders to which the broker has sent or will send small business financing applications on the small business's behalf4 7,d7 ,all compensation that will be paid to the broker1 including-- 7i7 all charges that will be paid directly or indirectly by the small business2 and 7ii7 whether such compensation paid to the broker will be paid up front or financed through the life of the small business financing4 7,e7 ,all conflicts of interest the broker may have4 7,f7 ,a break down and explanation of the broker's fee structure1 including-- 7i7 any financial or economic interest the broker has in offering a product to the small business2 and 7ii7 whether the broker will receive a higher fee for brokering a certain small business financing over another small business financing4 7#c7 ,public disclosure of previous borrower results 7,a7 ,website disclosure ,each broker shall post clearly and prominently on the website of the broker the anonymous and aggregated results of previous small business borrowers who have obtained small business financing through the broker's services1 in terms of annual percentage rate and financing product4 7,b7 ,brokers without websites ,notwithstanding subparagraph 7,a71 if a broker does not have a website1 the broker shall disclose the information described in subparagraph 7,a7 in a paper format1 upon request by any small business borrower4 7#d7 ,small business complaints with respect to brokers ,the ,director shall-- 7,a7 collect complaints from small businesses with respect to their experiences with brokers2 and 7,b7 make such complaints available to the public on the website of the ,bureau of ,consumer ,financial ,protection4 7#e7 ,restriction on best interest claims ,a broker that is paid higher fees with certain lenders1 small business financing types1 or through terms other than the size of the small business financing may not state that the broker is acting in the best interest of the potential small business borrower4 7#f7 ,prohibition on steering ,a loan originator or broker may not steer a small business to small business financing that is not in the small business's best interest4 7#g7 ,restrictions on certain fees 7,a7 ,no fee if parties do not come to an agreement ,a broker may not charge a small business any fee if-- 7i7 the broker is unable to find the small business financing2 or 7ii7 the small business chooses not to accept financing through the broker's services4 7,b7 ,replacement of existing financing ,if a broker or third-party lender offers an existing small business customer new financing1 neither the broker nor the third-party lender may charge the small business a new financing charge for the financing being replaced4 7c7 ,broker licensing and enforcement 7#a7 ,state broker licensing ,a person may only perform the function of a broker in a ,state if the person is licensed as a broker-- 7,a7 with respect to a ,state that has a covered broker licensing law1 by the ,state2 or 7,b7 with respect to a ,state that does not have a covered broker licensing law1 by the ,bureau4 7#b7 ,covered broker licensing law ,with respect to a ,state1 the term covered broker licensing law means a ,state law that the ,director determines meets the following requirements3 7,a7 ,licensing ,the law provides for a process to license brokers operating in the ,state4 7,b7 ,prohibition on unlicensed brokers ,the law prohibits any person from acting as a broker in the ,state unless such person is licensed by the ,state as a broker4 7,c7 ,prohibition on licensing certain individuals ,the law prohibits licensing an individual as a broker if such individual-- 7i7 has had a ,state license revoked for cause in any ,state2 7ii7 has had a ,federal license revoked for cause2 or 7iii7 has been convicted of any crime involving lying1 deceit1 or misappropriation of the truth4 7,d7 ,limitation on broker employees ,the law prohibits a broker from employing any individual1 other than a clerical employee1 who is described under clause 7i71 7ii71 or 7iii7 of subparagraph 7,c74 7,e7 ,examination ,the law requires a licensed broker to undergo ,state audits and provides for examination of the broker by ,state regulators4 7,f7 ,enforcement ,with respect to any violation of a ,state law or regulation in connection with performing the duties of a broker1 the law provides for-- 7i7 an initial warning being given to the broker2 7ii7 a cure period offered to the broker during which the broker can cure the violation2 and 7iii7 if the broker fails to cure the violation1 civil or criminal penalties which include-- 7,i7 the revocation of any broker license granted to the violator2 and 7,,ii7 a ban on the violator being granted any other professional license for a period of not less than #e years4 7,g7 ,public availability of disciplinary actions ,the law requires the ,state agency in charge of licensing brokers to maintain a website that lists all disciplinary actions taken against brokers4 7#c7 ,bureau broker licensing ,not later than the end of the #ab-month period beginning on the date of enactment of this section1 the ,director shall establish a ,federal broker licensing program that1 to the extent practicable1 meets the requirements for a covered broker licensing law described under paragraph 7#b74 7#d7 ,effective date 7,a7 ,in general ,subsection 7a7 shall take effect after the end of the #b-year period beginning on the date of enactment of this section4 7,b7 ,safe harbor ,notwithstanding subsection 7a71 a person acting as broker in a ,state on the date of enactment of this section who has applied for a broker license under a ,state covered broker licensing law 7or1 with respect to a ,state that does not have a covered broker licensing law1 with the ,federal broker licensing program established under paragraph 7#c77 may continue to act as a broker in such ,state while the application is pending4 7d7 ,rulemaking ,the ,director may issue such rules as may be necessary to carry out this section4 7e7 ,penalties 7#a7 ,civil penalties ,any person who violates a provision of this section shall-- 7,a7 be fined not less than #e1jjj and not more than #gb1jjj2 7,b7 disgorge any funds or other property obtained in connection with such violation2 7,c7 in the case of an individual licensed as a broker by the ,bureau1 have such license suspended for #a year2 and 7,d7 in the case of an individual licensed as a broker by the ,bureau who has violated a provision of this section previously1 have such license permanently revoked4 7#b7 ,criminal penalty ,any person who violates a provision of this section in an egregious manner shall be fined not more than #e1jjj1jjj or imprisoned not more than #bj years1 or both4 7#c7 ,liability for employer ,any person employing a broker at the time the broker violates a provision of this section shall-- 7,a7 be fined not more than #hec1jfb2 7,b7 disgorge any funds or other property obtained in connection with such violation2 7,c7 be prohibited from taking any action involving small business lending or the brokerage industry for not more than #cj business days2 and 7,d7 in the case of a violation that was in an egregious manner1 be prohibited from taking any action involving small business lending or the brokerage industry for more than #cj business days1 which may include a permanent prohibition on the person taking any action involving small business lending or the brokerage industry4 7#d7 ,federal bar for ,state violators ,if an individual has their ,state broker license revoked by reason of violating a ,state law or regulation in connection with performing the duties of a broker-- 7,a7 any professional license granted to the individual by the ,federal ,government shall be terminated2 and 7,b7 the individual may not receive a professional license from the ,federal ,government before the end of the #e-year period beginning on the date of such revocation4 7#e7 ,state enforcement authority ,an action to enforce a violation of this section may also be brought by a ,state attorney general in any appropriate ,united ,states district court1 or any other court of competent jurisdiction4 4 7b7 ,clerical amendment ,the table of contents in section #a7;b7 of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act is amended by striking the item relating to section #ajag and inserting the following3 ,sec4 #ajag4 ,regulation of brokers4 ,sec4 #ajah4 ,effective date4 4