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This entry was published on 2021-02-19
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SECTION 801
Definitions
Financial Services Law (FIS) CHAPTER 18-A, ARTICLE 8
* § 801. Definitions. For the purposes of this article:

(a) "Factoring transaction" means an accounts receivable purchase
transaction that includes an agreement to purchase, transfer, 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 made.

(b) "Commercial financing" means open-end financing, closed-end
financing, sales-based financing, factoring transaction, or other form
of financing, the proceeds of which the recipient does not intend to use
primarily for personal, family or household purposes. For purposes of
determining whether a financing is a commercial financing, the provider
may rely on any statement of intended purposes by the recipient. The
statement may be a separate statement signed by the recipient; may be
contained in the financing application, financing agreement, or other
document signed or consented to by the recipient; or may be provided
orally by the recipient so long as it is documented in the recipient's
application file by the provider. Electronic signatures and consents are
valid for purposes of the foregoing sentence. The provider shall not be
required to ascertain that the proceeds of a commercial financing are
used in accordance with the recipient's statement of intended purposes.

(c) "Open-end financing" means an agreement for one or more extensions
of open-end credit, secured or unsecured, the proceeds of which the
recipient does not intend to use primarily for personal, family or
household purposes. "Open-end financing" includes credit extended by a
provider under a plan in which: (i) the provider reasonably contemplates
repeated transactions; (ii) the provider may impose a finance charge
from time to time on an outstanding unpaid balance; and (iii) the amount
of credit that may be extended to the recipient during the term of the
plan (up to any limit set by the provider) is generally made available
to the extent that any outstanding balance is repaid.

(d) "Closed-end financing" means a closed-end extension of credit,
secured or unsecured, including equipment financing that does not meet
the definition of a lease under section 2-A-103 of the uniform
commercial code, the proceeds of which the recipient does not intend to
use primarily for personal, family or household purposes. "Closed-end
financing" includes financing with an established principal amount and
duration.

(e) "Finance charge" means the cost of financing as a dollar amount.
It includes any charge payable directly or indirectly by the recipient
and imposed directly or indirectly by the provider as an incident to or
a condition of the extension of financing. It includes all charges that
would be included under 12 C.F.R. part 1026.4 as if the transaction were
subject to 12 C.F.R. part 1026.4. In addition, the finance charge shall
include any charges as determined by the superintendent. For the
purposes of an open-end financing, the finance charge shall assume the
maximum amount of credit available to the recipient, in each case, is
drawn and held for the duration of the term or draw period. For the
purposes of a factoring transaction, the finance charge includes the
discount taken on the face value of the accounts receivable.

(f) "Financial institution" means any of the following: (i) a bank,
trust company, or industrial loan company doing business under the
authority of, or in accordance with, a license, certificate or charter
issued by the United States, this state or any other state, district,
territory, or commonwealth of the United States that is authorized to
transact business in this state; (ii) a federally chartered savings and
loan association, federal savings bank or federal credit union that is
authorized to transact business in this state; or (iii) a savings and
loan association, savings bank or credit union organized under the laws
of this or any other state that is authorized to transact business in
this state.

(g) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company,
trust or unincorporated organization including, but not limited to, a
sole proprietorship.

(h) "Provider" means a person who extends a specific offer of
commercial financing to a recipient. Unless otherwise exempt, "provider"
also includes a person who solicits and presents specific offers of
commercial financing on behalf of a third party. For the avoidance of
doubt, the extension of a specific offer or provision of disclosures for
a commercial financing, in and of itself, shall not be construed to mean
that a provider is originating, making, funding or providing commercial
financing.

(i) "Recipient" means a person who applies for commercial financing
and is made a specific offer of commercial financing by a provider. A
recipient may also be an authorized representative of such person. A
person acting as a broker cannot be a recipient.

(j) "Sales-based financing" means a transaction that is repaid by the
recipient to the provider, over time, as a percentage of sales or
revenue, in which the payment amount may increase or decrease according
to the volume of sales made or revenue received by the recipient.
Sales-based financing also includes a true-up mechanism where the
financing is repaid as a fixed payment but provides for a reconciliation
process that adjusts the payment to an amount that is a percentage of
sales or revenue.

(k) "Specific offer" means the specific terms of commercial financing,
including price or amount, that is quoted to a recipient, based on
information obtained from, or about the recipient, which, if accepted by
a recipient, shall be binding on the provider, as applicable, subject to
any specific requirements stated in such terms.

* NB Effective January 1, 2022