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This entry was published on 2021-02-19
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SECTION 803
Sales-based financing disclosure requirements
Financial Services Law (FIS) CHAPTER 18-A, ARTICLE 8
* § 803. Sales-based financing disclosure requirements. A provider
subject to this article shall provide the following disclosures to a
recipient at the time of extending a specific offer of sales-based
financing according to formatting prescribed by the superintendent:

(a) The total amount of the commercial financing, and the disbursement
amount, if different from the financing amount, after any fees deducted
or withheld at disbursement.

(b) The finance charge.

(c) The estimated annual percentage rate, using the words annual
percentage rate or the abbreviation "APR", expressed as a yearly rate,
inclusive of any fees and finance charges, and calculated in accordance
with the federal Truth in Lending Act, Regulation Z, 12 C.F.R. §
1026.22, based on the estimated term of repayment and the projected
periodic payment amounts, regardless of whether such act or such
regulation would require such a calculation. The estimated term of
repayment and the projected periodic payment amounts shall be calculated
based on the projection of the recipient's sales, called the projected
sales volume. The projected sales volume may be calculated using the
historical method or the opt-in method. The provider shall provide
notice to the superintendent on which method they intend to use across
all instances of sales-based financing offered in calculating estimated
annual percentage rate pursuant to this section.

(i) The provider using the historical method shall use an average
historical volume of sales or revenue by which the financing's payment
amounts are based and the estimated annual percentage rate is
calculated. The provider shall fix the historical time period used to
calculate the average historical volume and use such period for all
disclosure purposes for all sales-based financing products offered. The
fixed historical time period shall either be the preceding time period
from the specific offer or, alternatively, the provider may use average
sales for the same number of months with the highest sales volume within
the past twelve months. The fixed historical time period shall be no
less than one month and not exceed twelve months.

(ii) The provider using the opt-in method shall determine the
estimated annual percentage rate, the estimated term, and the projected
payments, using a projected sales volume that the provider elects for
each disclosure, provided, that they participate in a review process
prescribed by the superintendent. A provider shall, on an annual basis,
report data to the superintendent of estimated annual percentage rates
disclosed to the recipient and actual retrospective annual percentage
rates of completed transactions. The report shall contain such
information as the superintendent, by rule or regulation, may prescribe
as necessary or appropriate for the purpose of making a determination of
whether the deviation between the estimated annual percentage rate and
actual retrospective annual percentage rates of completed transactions
was reasonable. The superintendent shall establish the method of
reporting and may, upon a finding that the use of projected sales volume
by the provider has resulted in an unacceptable deviation between
estimated and actual annual percentage rate, require the provider to use
the historical method. The superintendent may consider unusual and
extraordinary circumstances impacting the provider's deviation between
estimated and actual annual percentage rate in the determination of such
finding.

(d) The total repayment amount, which is the disbursement amount plus
the finance charge.

(e) The estimated term is the period of time required for the periodic
payments, based on the projected sales volume, to equal the total amount
required to be repaid.

(f) The payment amounts, based on the projected sales volume:

(i) for payment amounts that are fixed, the payment amounts and
frequency (e.g., daily, weekly, monthly), and, if the payment frequency
is other than monthly, the amount of the average projected payments per
month; or

(ii) for payment amounts that are variable, a payment schedule or a
description of the method used to calculate the amounts and frequency of
payments, and the amount of the average projected payments per month.

(g) A description of all other potential fees and charges not included
in the finance charge, including, but not limited to, draw fees, late
payment fees, and returned payment fees.

(h) Were the recipient to elect to pay off or refinance the commercial
financing prior to full repayment, the provider must disclose:

(i) whether the recipient would be required to pay any finance charges
other than interest accrued since their last payment. If so, disclosure
of the percentage of any unpaid portion of the finance charge and
maximum dollar amount the recipient could be required to pay; and

(ii) whether the recipient would be required to pay any additional
fees not already included in the finance charge.

(i) A description of collateral requirements or security interests, if
any.

* NB Effective January 1, 2022