An Act Concerning Commercial Financing.
HB 5211 revises Connecticut’s commercial financing disclosure and contract rules, with a particular focus on sales-based financing. The bill expands and clarifies definitions for commercial financing, providers, recipients, brokers, and sales-based financing, and it removes the prior dollar cap from the definition of commercial financing. It requires providers making specific offers of sales-based financing to give standardized disclosures, including the total amount financed, disbursement amount, finance charge, estimated APR, repayment amount, payment schedule, additional fees, prepayment/refinance costs, collateral requirements, and broker compensation if applicable.
The bill also changes how the estimated APR is calculated and reported. Providers may use either a safe harbor method based on historical sales or revenue or an underwriting method based on projected sales or revenue used in underwriting, but providers using the underwriting method must report data to the Banking Commissioner and may be required to switch to the safe harbor method if the estimated APRs deviate too much from actual results. The bill further requires that if a provider discloses pricing terms after making a specific offer, it must also disclose APR, and it prohibits deceptive use of the terms “interest” or “rate” in communications with recipients.
The bill amends sections 36a-861 through 36a-868 of the general statutes, effective October 1, 2026, and expands the state’s commercial financing regulatory framework. It broadens the scope of covered transactions, imposes more detailed disclosure obligations on providers and brokers, adds reporting duties for certain underwriting-based APR calculations, and makes certain contract provisions unenforceable. In particular, it bars waiver provisions related to notice, judicial hearing, or prior court order for prejudgment remedies, and for contracts entered into on or after October 1, 2026, it also prohibits nondisclosure clauses that require confidentiality of the financing contract or its terms.
The bill appears to have broad support overall, as reflected by strong favorable votes in both the Banking and Judiciary committees and a large House majority on the amended bill. The final House vote on the bill itself was 141-5, indicating substantial bipartisan approval. However, the House also rejected a separate House amendment by a wide margin, suggesting some disagreement over specific changes even though the underlying bill was well received.
The main points of contention appear to be the scope and mechanics of disclosure and contract restrictions in commercial financing, especially for sales-based financing products. Lenders and brokers may be concerned about the new APR calculation and reporting requirements, the potential for regulatory intervention if estimated APRs diverge from actual outcomes, and the prohibition on confidentiality clauses. On the other side, the bill’s consumer- and small-business-protection features—more transparent pricing, limits on deceptive terminology, and restrictions on waiver provisions in contracts—are likely the central goals supported by proponents.