Commercial financing: disclosures.

Senator Grayson grounds his bill in the aim of clearer pricing signals for small-business financing, weaving a focus on truthful labeling of costs into a framework that tightens APR disclosure and curbs deceptive use of the terms “interest” or “rate” in marketing.

The measure replaces a portion of existing practice by prohibiting the deceptive use of the terms “interest” or “rate,” and by requiring that, after presenting a specific financing offer, providers state the annual percentage rate for that offer using the full term “annual percentage rate” or the acronym APR. It also shifts enforcement paths by repealing a prior liability construct and directing violations to be addressed under the California Financing Law for CFL-subject transactions, or under the California Consumer Financial Protection Law for non-CFL transactions. The bill preserves the existing APR disclosure framework but strengthens the per-offer clarity requirement and anchors enforcement to the applicable statutory regime.

Key mechanisms specify that a provider may not mislead about financing costs, and that the APR must accompany a given offer during the application process. A limited exception allows use of the terms “interest” or “rate” when the cost metric is an annual rate (fixed or floating) expressed as a margin over an index rate. The proposal also creates a defined enforcement structure: violations tied to CFL-covered transactions are treated as CFL violations, while violations not subject to the CFL fall under the California Consumer Financial Protection Law. Additionally, the act notes no reimbursement is required to local agencies for costs arising from the legislation.

Contextual findings accompanying the bill frame transparency as essential to efficient markets and acknowledge past APR disclosures while recognizing how marketing practices can obscure true costs. The changes align with a broader oversight framework administered by the Department of Financial Protection and Innovation and would expand the statutory reach of pricing disclosures to require per-offer APR labeling, with enforcement via the CFL or the California Consumer Financial Protection Law depending on the transaction’s regulatory category. If enacted, the measure would alter how licensed providers address pricing representations and how violations are categorized and pursued, situating small-business financing disclosures within an expanded, regime-based enforcement structure.