§ 803 — Sales-based financing disclosure requirements

§ 803. Sales-based financing disclosure requirements. A provider\nsubject to this article shall provide the following disclosures to a\nrecipient at the time of extending a specific offer of sales-based\nfinancing according to formatting prescribed by the superintendent:\n (a) The total amount of the commercial financing, and the disbursement\namount, if different from the financing amount, after any fees deducted\nor withheld at disbursement.\n (b) The finance charge.\n (c) The estimated annual percentage rate, using the words annual\npercentage rate or the abbreviation "APR", expressed as a yearly rate,\ninclusive of any fees and finance charges, and calculated in accordance\nwith the federal Truth in Lending Act, Regulation Z, 12 C.F.R. §\n1026.22, based on the estimated term of repayment and the projected\nperiodic payment amounts, regardless of whether such act or such\nregulation would require such a calculation. The estimated term of\nrepayment and the projected periodic payment amounts shall be calculated\nbased on the projection of the recipient's sales, called the projected\nsales volume. The projected sales volume may be calculated using the\nhistorical method or the opt-in method. The provider shall provide\nnotice to the superintendent on which method they intend to use across\nall instances of sales-based financing offered in calculating estimated\nannual percentage rate pursuant to this section.\n (i) The provider using the historical method shall use an average\nhistorical volume of sales or revenue by which the financing's payment\namounts are based and the estimated annual percentage rate is\ncalculated. The provider shall fix the historical time period used to\ncalculate the average historical volume and use such period for all\ndisclosure purposes for all sales-based financing products offered. The\nfixed historical time period shall either be the preceding time period\nfrom the specific offer or, alternatively, the provider may use average\nsales for the same number of months with the highest sales volume within\nthe past twelve months. The fixed historical time period shall be no\nless than one month and not exceed twelve months.\n (ii) The provider using the opt-in method shall determine the\nestimated annual percentage rate, the estimated term, and the projected\npayments, using a projected sales volume that the provider elects for\neach disclosure, provided, that they participate in a review process\nprescribed by the superintendent. A provider shall, on an annual basis,\nreport data to the superintendent of estimated annual percentage rates\ndisclosed to the recipient and actual retrospective annual percentage\nrates of completed transactions. The report shall contain such\ninformation as the superintendent, by rule or regulation, may prescribe\nas necessary or appropriate for the purpose of making a determination of\nwhether the deviation between the estimated annual percentage rate and\nactual retrospective annual percentage rates of completed transactions\nwas reasonable. The superintendent shall establish the method of\nreporting and may, upon a finding that the use of projected sales volume\nby the provider has resulted in an unacceptable deviation between\nestimated and actual annual percentage rate, require the provider to use\nthe historical method. The superintendent may consider unusual and\nextraordinary circumstances impacting the provider's deviation between\nestimated and actual annual percentage rate in the determination of such\nfinding.\n (d) The total repayment amount, which is the disbursement amount plus\nthe finance charge.\n (e) The estimated term is the period of time required for the periodic\npayments, based on the projected sales volume, to equal the total amount\nrequired to be repaid.\n (f) The payment amounts, based on the projected sales volume:\n (i) for payment amounts that are fixed, the payment amounts and\nfrequency (e.g., daily, weekly, monthly), and, if the payment frequency\nis other than monthly, the amount of the average projected payments per\nmonth; or\n (ii) for payment amounts that are variable, a payment schedule or a\ndescription of the method used to calculate the amounts and frequency of\npayments, and the amount of the average projected payments per month.\n (g) A description of all other potential fees and charges not included\nin the finance charge, including, but not limited to, draw fees, late\npayment fees, and returned payment fees.\n (h) Were the recipient to elect to pay off or refinance the commercial\nfinancing prior to full repayment, the provider must disclose:\n (i) whether the recipient would be required to pay any finance charges\nother than interest accrued since their last payment. If so, disclosure\nof the percentage of any unpaid portion of the finance charge and\nmaximum dollar amount the recipient could be required to pay; and\n (ii) whether the recipient would be required to pay any additional\nfees not already included in the finance charge.\n (i) A description of collateral requirements or security interests, if\nany.\n