Bureau makes it final: Business lending disclosure laws in four states not preempted by federal law

A final determination that business lending disclosure laws in up to four states are not preempted by federal law was issued Tuesday by the federal consumer financial protection bureau.

According to the Consumer Financial Protection Bureau (CFPB) the law in New York and similar statutes in California, Utah and Virginia are consistent with the federal Truth in Lending Act (TILA). The bureau said it examined the state disclosure laws, and analyzed public comments submitted after a December call for comments, after issuing a preliminary determination last year about the laws.

“States have broad authority to establish their own protections for their residents, both within and outside the scope of the Truth in Lending Act,” the bureau said in a release. “The Truth in Lending Act only preempts state laws under what is known as conflict preemption. The state laws reviewed by the CFPB concern protections for businesses to ensure they can understand the credit terms available to them. This is beyond the scope of the Truth in Lending Act’s statutory consumer credit purposes. The CFPB’s decision affirms that the four states’ commercial financing disclosure laws do not conflict with the Truth in Lending Act.”

In December, the bureau said it received a request from a business association asking that the agency determine if TILA preempts certain provisions of the New York commercial financing law.

Like TILA does, CFPB said then, the New York law requires financial disclosures before consummation of covered transactions, although it applies to “commercial financing” instead of consumer credit. It requires providers to issue disclosures when “extending a specific offer” for various types of commercial financing, the bureau said.

However, in December, CFPB determined that the New York and federal laws “do not appear ‘contradictory’ for preemption purposes. Additionally, the agency said it disagreed with the association’s request that the New York law significantly impedes the operation of TILA or interferes with the purposes of the federal scheme.

CFPB Issues Determination that State Disclosure Laws on Business Lending are Consistent with the Truth in Lending Act