Great news for CA small businesses! Governor Jerry Brown signed SB 1235, California (and the nation’s) first Truth in Lending bill for small businesses into law.
While the federal Truth in Lending Act protects consumers, it does not specifically protect small businesses.
SB 1235 is a significant step toward protecting small business owners from predatory lending practices. It will dramatically increase the transparency of financial products marketed to small firms (our research found unregulated lenders charging an average of 94% APR!).
SB 1235, authored by State Sen. Steve Glazer (D-East Bay), was supported by a coalition of more than sixty organizations, including Opportunity Fund, from the private sector and non-profit lenders and advocates. The new law provides a common-sense solution to the problem of high-price financing by requiring all lenders to clearly and consistently communicate their terms to small businesses seeking financing.
At the time financing is offered, the lender must disclose the following:
- Total amount of financing
• Total cost of financing
• Term length
• Frequency and amount of payments
• Pre-payment policies
• Annualized rate
SB 1235 provides the Department of Business Oversight the flexibility to set disclosure standards that provide small business owners the transparency they deserve, without restricting responsible business practices. Most importantly, this bill supports small businesses in their quest for access to capital, growth, and success.
Thank you, Governor Brown, for signing the bill and giving California’s small businesses the common-sense protections they deserve and leading the nation in responsible lending to support our entrepreneurs. Thank you to our community of supporters for calling Gov. Brown and supporting this bill!