Florida’s commercial financing sector is about to undergo significant changes with the introduction of a new disclosure law. This law, signed by the governor on June 23, 2023, aims to protect against predatory practices in the alternative business finance industry. As businesses prepare for the law to go into effect on July 1, 2023, it is essential to understand its main points and requirements.
The new disclosure law in Florida is set to take effect on July 1, 2023. However, it will only apply to transactions consummated on or after January 1, 2024. This gives businesses a six-month window to review and adjust their current disclosure practices to ensure compliance with the law.
The law specifically targets the alternative business finance industry, aiming to protect merchants from predatory practices. While typical entities like banks and subsidiaries are not subject to the law, alternative business finance companies must adhere to its requirements.
One of the key aspects of the new law is the requirement for comprehensive disclosure. Businesses in the alternative business finance industry must disclose details such as the total amount of funds provided, the total amount to be paid to the funder, the total dollar cost, the payment frequency, and any costs or discounts associated with prepayment. This level of transparency ensures that merchants have a clear understanding of the terms and costs associated with their financing arrangements.
Prohibited Actions for Brokers
The law also prohibits brokers from engaging in certain actions. Brokers are not allowed to collect advanced fees, ensuring that merchants are not burdened with unnecessary costs upfront. Additionally, brokers are prohibited from making false or misleading representations, protecting merchants from deceptive practices.
Enforcement and Penalties
The enforcement of the new disclosure law falls under the responsibility of the Attorney General. Violations of the law can result in fines of $500 per incident, with a maximum aggregate fine of $20,000. These penalties serve as a deterrent to ensure compliance with the law and protect merchants from potential harm.
Integration and Compliance
Businesses in the alternative business finance industry have six months to integrate the new law into their processes. This includes reviewing and adjusting their current disclosure practices to align with the requirements of the law. To ensure a smooth transition and compliance, it is recommended that businesses consult with their legal teams to navigate any complexities.
Benefits for the Industry
The new disclosure law in Florida is seen as a positive development for the alternative business finance industry. By protecting merchants from predatory practices and improving transparency, the law aims to enhance the industry’s reputation. This increased trust and confidence can lead to a stronger and more sustainable business environment for all stakeholders involved.
The introduction of Florida’s new disclosure law brings significant changes to the commercial financing sector, particularly for businesses in the alternative business finance industry. With a focus on protecting merchants and improving transparency, the law sets a higher standard for disclosure requirements. As businesses prepare for the law to go into effect, it is crucial to review and adjust their practices to ensure compliance. By doing so, they can contribute to the industry’s growth and reputation while providing merchants with the necessary transparency and protection they deserve.