California Consumer Financial Protection Law: commercial financing.

Senator Padilla's legislation to expand California's consumer financial protection framework would establish new oversight of commercial financing providers and enhance safeguards for small businesses seeking capital. The bill requires companies offering commercial financing products to register with the Department of Financial Protection and Innovation by January 2027 and prohibits specific practices in commercial lending agreements.

Under the measure, commercial financing providers and brokers would be barred from including confession of judgment clauses or garnishment authorizations in contracts before a default occurs. The bill also prevents these entities from restricting recipients' ability to disclose information about their business dealings with the provider. Commercial financing brokers must publicly display on their websites the average and maximum annual percentage rates for transactions they facilitated in the previous calendar year.

The Department of Financial Protection and Innovation would gain broader authority to regulate commercial financing through new rulemaking powers. The bill expands the department's oversight to include private postsecondary educational institutions when they act as providers of financial products or services. These changes align with the bill's stated aim of protecting small businesses from practices the authors describe as abusive while promoting fair competition in commercial lending markets.