Commercial Financing - Small Business Truth in Lending Act
HB693 creates a new subtitle in the Financial Institutions Article regulating commercial financing transactions offered to businesses and other non-consumer recipients. The bill covers open-end financing, closed-end financing, sales-based financing, factoring transactions, and other commercial financing products, and it defines key terms such as provider, recipient, finance charge, specific offer, and estimated annual percentage rate. It is modeled as a “small business truth in lending” framework, requiring standardized disclosures before a recipient can proceed with an application or accept an offer.
The bill requires providers to disclose, depending on the product type, the amount financed, disbursement amount, finance charge, APR, total repayment amount, repayment term, payment frequency and amounts, collateral or security interests, and certain prepayment or refinancing consequences. It also sets special rules for calculating APR and projected repayment terms, especially for sales-based financing and factoring transactions, and it restricts how financing costs may be described during the application process. The Commissioner of Financial Regulation is directed to adopt implementing regulations, approve substantially similar disclosure forms from other states, and enforce the subtitle through civil penalties and other remedies.
HB693 would add a new regulatory disclosure regime to Maryland law for commercial financing offered to small businesses and other non-consumer borrowers, placing these products under the Financial Institutions Article. It would not generally apply to banks, credit unions, savings associations, farm credit lenders, real-property-secured transactions, leases, premium finance agreements, or certain limited-volume or large-dollar transactions, but it would impose detailed disclosure and calculation requirements on covered providers. The bill also authorizes enforcement by the Commissioner, including penalties of up to $2,000 per violation and $10,000 per willful violation, along with restitution and injunctive relief.
No committee transcript or vote record was provided, so there is no documented floor or committee sentiment to summarize from the available materials. Based on the bill text alone, the measure appears consumer-protection oriented but aimed at commercial borrowers, with a focus on transparency and standardization rather than restricting access to financing. The overall framing suggests support for clearer disclosures in small business lending, though the absence of recorded discussion means no formal sentiment can be inferred from legislative debate.
The main points of potential contention are the breadth and complexity of the disclosure requirements, the treatment of sales-based financing and factoring, and the bill’s mandate that APR be calculated and presented in specified ways even where federal law might not require it. Providers of commercial financing may view the opt-in/historical sales-volume methodology, annual reporting to the Commissioner, and penalties as burdensome or difficult to administer, while supporters are likely to emphasize transparency and comparability for small business borrowers. Another possible issue is the bill’s broad definition of commercial financing and the extent to which it reaches nontraditional financing products, although several exemptions narrow its scope.