Commercial financing: disclosures.

A new Section 1 (Legislature finds and declares) was added, stating that some commercial financing markets allocate capital inefficiently due to lack of transparency, referencing California's 2018 first-in-the-nation APR disclosure law, listing examples of confusing representations (such as 'simple interest' for nonannual rates, 'interest rate' for daily/weekly/monthly rates, and 'fee rate' or 'factor rate' that diverge from APR), and declaring the act seeks to provide clarity to market participants and DFPI on deceptive marketing enforcement.

The prohibition on using the term 'rate' was broadened. The old version only restricted use of 'rate' during an application process for commercial financing (could not describe a non-annual metric as a 'rate'). The new version prohibits using 'rate' in a deceptive manner generally, not limited to the application process context, with one specific example being describing a metric other than an annual interest rate or APR.

The prohibition on using the term 'interest' changed from a bright-line rule (could not use 'interest' to describe any percentage rate unless it was an annual percentage rate calculated under Section 940) to a 'deceptive manner' standard. Providers now cannot use 'interest' to refer to a percentage rate in a deceptive manner that could reasonably result in the recipient being misled, with examples including using 'simple interest' to mislead.

The standard for what constitutes a violation shifted from a categorical prohibition (specific terms could not be used in specific contexts) to a conduct-based standard ('deceptive manner' that 'could reasonably result in the recipient being misled'), giving DFPI more interpretive flexibility in enforcement while potentially covering a wider range of misleading practices.

The document was reformatted from a printed chapter layout (with page numbers, headers like 'STATE OF CALIFORNIA AUTHENTICATED ELECTRONIC LEGICAL MATERIAL') to a web page format with navigation elements (skip to content, home, FAQ, sitemap, login, Quick Search, etc.).

A 'Digest Key' section was added showing metadata: Vote: MAJORITY, Appropriation: NO, Fiscal Committee: YES, Local Program: YES.

The bill was assigned Chapter 352 and received the Governor's approval on October 6, 2025, replacing the previously blank signature and date fields.

Senate and Assembly passage certifications, Secretary of the Senate and Chief Clerk signatures, and the blank Governor receipt date line were removed as part of the standard chaptering process.

A 'STATE OF CALIFORNIA AUTHENTICATED ELECTRONIC LEGAL MATERIAL' header was added to identify the document as an official enrolled law.

The entire requirement prohibiting providers from using a specific underwriting method (Section 931 of Title 10 CCR) unless they participated in an annual review process with data reporting to the commissioner is deleted. This removed both the underwriting restriction and the associated annual reporting obligation.

The prohibition on using the term 'interest' is changed from an absolute ban (unless the rate is an APR) to a ban only when used 'in a deceptive manner,' with three specific examples: misleading the recipient, likely to materially mislead, or violating the Unfair Competition Law.

The prohibition on using the term 'rate' is restructured from an absolute requirement that it must be an APR to a ban on using it 'in a deceptive manner,' with four specific examples listed, including one that preserves the original intent by making it deceptive to use 'rate' for a non-APR metric during an application process.

A new exemption (subdivision (d)) provides that using 'interest' or 'rate' is not deceptive if the financing cost metric is an annual interest rate or APR that is fixed or floating for the period and expressed as a margin over an index rate. This carves out common pricing structures like SOFR plus a margin.

Section 22808 (which was empty in the Senate version) is removed entirely, so the bill now only adds Sections 22806 and 22807 to the Financial Code rather than three sections.

The entire amendment to Section 90009.5 of the Financial Code was removed. This section had required the Department of Financial Protection and Innovation to promulgate registration rules for covered persons within three years of a second enforcement action, included a four-year sunset date for those registration regulations unless the Legislature acted, required a legislative report before the sunset date, and changed the commissioner's annual report deadline from March 15 to June 1.

The bill no longer amends the California Consumer Financial Protection Law (CCFPL) at all. The title, digest, and operative text were updated to reflect that the bill now relates solely to commercial financing rather than both consumer protection and commercial financing.

The state-mandated local program finding changed from 'no' to 'yes.' This means the bill is now recognized as imposing costs on local agencies or school districts through expanding the scope of a crime, which has implications under Article XIII B of the California Constitution.

Section numbering was renumbered throughout: what was previously SECTION 1 (amending 90009.5) is gone, and the former SEC. 2 through SEC. 6 are now SEC. 1 through SEC. 5. The core commercial financing provisions (repeal of 22805, renumbering of old 22806 to new 22805, new sections 22806-22808, and the no-reimbursement clause) remain substantively unchanged.

New Section 22806 prohibits providers from using a specific underwriting method (projected sales volume method under Title 10 CCR Section 931) unless they participate in an annual review process that includes reporting estimated vs. actual APR data to the commissioner. The commissioner can force a provider to switch to the historical method if deviations are unacceptable.

New Section 22807 prohibits providers from using the terms 'interest' or 'rate' unless referring to an annual percentage rate calculated per regulations, and requires providers to state the APR whenever they present a charge, pricing metric, or financing amount during an application process.

Section 22805 is repealed. It had provided that providers licensed under the California Financing Law would be subject to examination and enforcement by the commissioner for violations of the commercial financing division.

New Section 22808 creates a dual-track enforcement mechanism: violations relating to transactions subject to the CFL are deemed CFL violations (which can be crimes), while violations relating to transactions NOT subject to the CFL are deemed unfair, deceptive, or abusive acts under the CCFPL. This expands criminal liability to cover more commercial financing transactions.

The bill's scope expanded from a single-section date change in Section 90009.5 to a multi-section overhaul of the commercial financing division (Sections 22805-22808) plus the original date change. The state-mandated local program designation changed from 'no' to 'yes' because the bill now expands the scope of a crime.

The annual CCFPL report deadline for the commissioner was changed from March 15 to June 1 (this was the only change in the original introduced version and is retained in the amended version).