The New York Department of Financial Services has issued a letter announcing that it has concluded that the obligation of providers of commercial financing under the Commercial Finance Disclosure Law (CFDL) to provide consumer-like disclosures does not arise “until the Department issues final implementing regulations and those regulations take effect.”

The CFDL was enacted by S 5740-B and requires consumer-like disclosures for “commercial financing” transactions of $2.5 million or less.  By its terms, the CFDL became effective on January 1, 2022.  While it requires disclosures to be provided “according to formatting prescribed by” the DFS and authorizes the DFS to promulgate implementing regulations, it does not delay the effective date until regulations are adopted.

In September 2021, the DFS published a draft regulation on its website to solicit comment from small businesses that might be affected.  After making edits in response to comments, the DFS published a formal proposed regulation in October 2021 which provides that the compliance date for the final regulation will be six months after the date that a notice of adoption is published in the NYS Register.  The comment period on the proposal ended on December 20, 2021.

In the letter, the DFS acknowledges that, by its terms, the CFDL became effective on January 1, 2022.  Nevertheless, according to the DFS, its conclusion that the obligation to provide disclosures under the CFDL does not arise until final regulations take effect is supported by the CFDL’s statutory text and purposes as well as the requirements of New York’s State Administrative Procedure Act.  It states: “Given the complexity of the disclosures required by the CFDL, we believe the Legislature intended that the Department first provide regulatory guidance regarding the standardized disclosures required to be provided under the CFDL.”