Analysis: New York Commercial Finance Disclosure Law, Effective August 1, 2023

Tuesday, June 13, 2023


New York’s Commercial Finance Disclosure Law (“CFDL”) and the related regulations (the “CFDL Regulations”) adopted by the New York Department of Financial Services (the “DFS”), which will take effect on August 1, 2023, will require most unregulated financial institutions to include certain standardized disclosures in specific offers of commercial financing for amounts of up to $2,500,000 made to New York residents and entities managed or directed principally from New York.


The new disclosure requirements will not apply to:

     1.  Regulated financial institutions and their subsidiaries

     2.  Credit providers that make no more than five commercial financing transactions in New York State
          in a twelve-month period

     3.  Technology services providers to exempt entities (provided that they have no interest in the commercial
          financing provided by those entities)

     4.  True leases

     5.  Financing transactions that exceed $2.5MM


          For open-end financings (such as lines of credit), the approved credit limit must exceed $2.5MM

          For asset-based lending transactions,

               - The approved credit limit must exceed $2.5MM;

               - The parties must agree in writing before the execution of the financing agreement that an amount
                 exceeding $2.5MM is reasonably expected to be advanced and outstanding at some point during
                 the term of the agreement.

               - The transaction must be governed by a financing agreement; and

          For factoring transactions,

               - The approved advance limit must exceed $2.5MM;

               - The parties must agree in writing before the execution of the factoring agreement that an amount
                 exceeding $2.5MM is reasonably expected to be advanced and outstanding for unpaid receivables
                 at some point during the term of the agreement.

               - The transaction must be governed by a factoring agreement; and

          For all other transactions the amount financed must exceed $2.5MM.


     6.  Financings secured by real property

     7.  Financings of car dealers or car rental companies of at least fifty thousand dollars

     8.  Financings offered to recipients who intend to use the proceeds primarily for personal,
          family or household purposes

     9.  Financings offered to individuals who are not New York State residents or businesses that
          are not principally directed or managed from New York State.

Disclosure Requirements


The credit provider must submit the disclosures to the recipient at the time it makes a specific offer of financing (namely, an offer that contains specific financing terms which, if accepted, would be binding on the provider, subject to any specific requirements stated in the offer). The provider must obtain the recipient’s signature on the disclosures before proceeding with the application. If the disclosures are provided to the recipient through a broker, then the broker must transmit the disclosures to the recipient (and provide evidence that it has done so) before communicating the specific offer of financing to the recipient.


The CFDL Regulations specify the format of the disclosures in minute detail, down to document title (Offer Summary), font type and size and expression of numerical values.


The CFDL Regulations identify 7 types of commercial financing…

  1. Sales-based financing (where repayments are based on sales or revenue)
  2. Closed-end financing (such as term loans)
  3. Open-end financing (such as revolving lines of credit)
  4. Factoring transactions (accounts receivable purchase arrangements)
  5. Lease financing (leases of goods that are not true leases under the UCC)
  6. Asset-based lending transactions
  7. Other commercial financing transactions

…and prescribe slightly different formatting and content requirements for each, though they all require disclosure of the following items, in some form:

  • Total amount financed
  • Total amount disbursed to the recipient, if less than total amount financed
  • Finance charge
  • Annual percentage rate
  • Other potential fees and charges, if any
  • Total repayment amount
  • Term of facility
  • Amount and schedule or frequency of repayments
  • Prepayment fees and charges, if any
  • Collateral requirements

If the total amount disbursed to the recipient is less than the amount financed, the credit provider must provide, in addition to the Offer Summary, a disclosure entitled “Itemization of Amount Financed”, which itemizes the payments made by the provider out of the financing proceeds. The Itemization must be substantially in the form of the example provided in the CFDL Regulations, must appear immediately following the Offer Summary, and need not be signed by the recipient.

Retention and Reporting Requirements

  • Providers must maintain copies of disclosures provided to recipients through brokers, and evidence of the brokers’ transmission of the disclosure to the recipient, for a period of at least 4 years following presentation of the disclosures to the recipient or the broker.
  • Providers of sales-based financing that calculate estimated APRs based on recipients’ projected sales volumes must submit to the DFS on or before April 30th of each year, commencing with April 30, 2025, a report that includes certain information prescribed by the DFS as necessary or appropriate to determine whether the deviation between the estimated APRs and actual retrospective APRs of completed transactions was reasonable.

Liability for Violations

  • $2,000 penalty for each violation that is not found to be willful
  • $10,000 civil penalty for each violation that is found to be willful
  • Other relief (including restitution and preliminary or permanent injunction) may be ordered upon
    finding that provider knowingly violated the CFDL
  • The CFDL does not appear to provide for a private right of action


  • APRs are considered accurate for disclosure purposes if the difference between the actual rate and the rate set forth in the disclosures does not exceed certain allowed tolerances
  • Providers have no liability for a bona fide error in a disclosure if within 60 days after discovering the error it notifies the recipient of the error and makes any necessary adjustments to ensure that the recipient is not charged more than the amount disclosed
  • Providers are shielded from liability for inadvertently disclosing certain rates or charges that exceed the amount the provider is required to disclose under the CFDL Regulations



If you would like to discuss the New York Commercial Finance Disclosure Law and your company’s compliance with it, please contact Michael Clain, Nelson Nedlin, or your Windels Marx relationship partner.


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