CFPB Issues Notice of Intent to Make Determination that State Commercial Finance Laws Are Not Preempted by TILA

On December 7th, 2022, the Consumer Financial Protection Bureau (“CFPB”) published a notice of intent to make a determination that New York State commercial financing laws and similar laws in other states are not preempted by the Truth in Lending Act (“TILA”).  

Trade groups requested that the CFPB review and make a determination that TILA is in conflict with and preempts certain provisions of New York State’s Commercial Financing Law. The request for determination alleges that both TILA and the New York Law use the terms “finance charge” and “annual percentage rate” but those terms have material differences in their meaning under each respective law. The request further states that the New York Law requires less precise estimates for certain transactions than are required under TILA, and requires certain assumptions about payment amounts and payment frequencies when calculating APR and estimated APR.   

The request asserted that the differences in law would lead to variances in disclosures and would therefore impede or interfere with the intent of TILA, even though the law does not expressly contradict TILA. In evaluating the request for preemption determination, the CFPB also noted similar laws in California, Utah, and Virginia and decided to examine those laws as well. 

The CFPB has made the preliminary determination that TILA does not preempt the laws at issue here.  Mainly, the Bureau found distinction between the laws because TILA is focused on consumer transactions while the New York Law and other laws all regard commercial financing. The Bureau noted that consumers applying for consumer credit should and will continue to receive accurate consumer disclosures and therefore the commercial law does not frustrate TILA’s purpose in providing clear consumer credit terms to consumers.  

Accordingly, the CFPB has published a notice of intent to make the preemption determination that the state laws are not preempted by TILA and will receive public comment. After the comment period closes the CFPB will consider and comments and make a notice of final determination.  

To view the notice, please click this link.