Sales-based financing disclosure requirements

§ 803. Sales-based financing disclosure requirements. A provider subject to this article shall provide the following disclosures to a recipient at the time of extending a specific offer of sales-based financing according to formatting prescribed by the superintendent: (a) The total amount of the commercial financing, and the disbursement amount, if different from the financing amount, after any fees deducted or withheld at disbursement. (b) The finance charge. (c) The estimated annual percentage rate, using the words annual percentage rate or the abbreviation "APR", expressed as a yearly rate, inclusive of any fees and finance charges, and calculated in accordance with the federal Truth in Lending Act, Regulation Z, 12 C.F.R. § 1026.22, based on the estimated term of repayment and the projected periodic payment amounts, regardless of whether such act or such regulation would require such a calculation. The estimated term of repayment and the projected periodic payment amounts shall be calculated based on the projection of the recipient's sales, called the projected sales volume. The projected sales volume may be calculated using the historical method or the opt-in method. The provider shall provide notice to the superintendent on which method they intend to use across all instances of sales-based financing offered in calculating estimated annual percentage rate pursuant to this section. (i) The provider using the historical method shall use an average historical volume of sales or revenue by which the financing's payment amounts are based and the estimated annual percentage rate is calculated. The provider shall fix the historical time period used to calculate the average historical volume and use such period for all disclosure purposes for all sales-based financing products offered. The fixed historical time period shall either be the preceding time period from the specific offer or, alternatively, the provider may use average sales for the same number of months with the highest sales volume within the past twelve months. The fixed historical time period shall be no less than one month and not exceed twelve months. (ii) The provider using the opt-in method shall determine the estimated annual percentage rate, the estimated term, and the projected payments, using a projected sales volume that the provider elects for each disclosure, provided, that they participate in a review process prescribed by the superintendent. A provider shall, on an annual basis, report data to the superintendent of estimated annual percentage rates disclosed to the recipient and actual retrospective annual percentage rates of completed transactions. The report shall contain such information as the superintendent, by rule or regulation, may prescribe as necessary or appropriate for the purpose of making a determination of whether the deviation between the estimated annual percentage rate and actual retrospective annual percentage rates of completed transactions was reasonable. The superintendent shall establish the method of reporting and may, upon a finding that the use of projected sales volume by the provider has resulted in an unacceptable deviation between estimated and actual annual percentage rate, require the provider to use the historical method. The superintendent may consider unusual and extraordinary circumstances impacting the provider's deviation between estimated and actual annual percentage rate in the determination of such finding. (d) The total repayment amount, which is the disbursement amount plus the finance charge. (e) The estimated term is the period of time required for the periodic payments, based on the projected sales volume, to equal the total amount required to be repaid. (f) The payment amounts, based on the projected sales volume: (i) for payment amounts that are fixed, the payment amounts and frequency (e.g., daily, weekly, monthly), and, if the payment frequency is other than monthly, the amount of the average projected payments per month; or (ii) for payment amounts that are variable, a payment schedule or a description of the method used to calculate the amounts and frequency of payments, and the amount of the average projected payments per month. (g) A description of all other potential fees and charges not included in the finance charge, including, but not limited to, draw fees, late payment fees, and returned payment fees. (h) Were the recipient to elect to pay off or refinance the commercial financing prior to full repayment, the provider must disclose: (i) whether the recipient would be required to pay any finance charges other than interest accrued since their last payment. If so, disclosure of the percentage of any unpaid portion of the finance charge and maximum dollar amount the recipient could be required to pay; and (ii) whether the recipient would be required to pay any additional fees not already included in the finance charge. (i) A description of collateral requirements or security interests, if any.