KS
Kansas Senate Bill SB345

Kansas 2023-2024 Regular Session

Kansas Senate Bill SB345 Compare Versions

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1+Session of 2024
12 SENATE BILL No. 345
2-AN ACT concerning financial institutions; enacting the commercial financing disclosure
3-act; requiring the disclosure of certain commercial financing product transaction
4-information; providing for civil penalties; authorizing enforcement of such act by the
5-attorney general.
3+By Committee on Federal and State Affairs
4+1-12
5+AN ACT concerning financial institutions; enacting the commercial
6+financing disclosure act; requiring the disclosure of certain commercial
7+financing product transaction information; providing for civil penalties;
8+authorizing enforcement of such act by the attorney general.
69 Be it enacted by the Legislature of the State of Kansas:
710 Section 1. (a) The provisions of sections 1 through 5, and
8-amendments thereto, shall be known and may be cited as the
9-commercial financing disclosure act.
11+amendments thereto, shall be known and may be cited as the commercial
12+financing disclosure act.
1013 (b) As used in the commercial financing disclosure act:
1114 (1) (A) "Account" includes:
1215 (i) A right to payment of a monetary obligation, whether or not
1316 earned by performance, for:
14-(a) Property that has been or is to be sold, leased, licensed,
15-assigned or otherwise disposed of;
17+(a) Property that has been or is to be sold, leased, licensed, assigned
18+or otherwise disposed of;
1619 (b) services rendered or to be rendered;
1720 (c) a policy of insurance issued or to be issued;
1821 (d) a secondary obligation incurred or to be incurred;
1922 (e) energy provided or to be provided;
2023 (f) the use or hire of a vessel under a charter or other contract;
2124 (g) arising out of the use of a credit card or charge card or
2225 information contained on or for the use with such card; or
2326 (h) winnings in a lottery or other game of chance operated or
2427 sponsored by a state, governmental unit of a state or person licensed or
25-authorized to operate such lottery or game by a state or governmental
26-unit of a state; and
28+authorized to operate such lottery or game by a state or governmental unit
29+of a state; and
2730 (ii) healthcare insurance receivables.
2831 (B) "Account" does not include:
2932 (i) Rights to payment evidenced by chattel paper or an instrument;
3033 (ii) commercial tort claims;
3134 (iii) deposit accounts;
3235 (iv) investment property;
3336 (v) letter-of-credit rights or letters of credit; or
34-(vi) rights to payment for moneys advanced or sold other than
35-rights arising out of the use of a credit card or charge card or
36-information contained on or for use with such card.
37-(2) "Accounts receivable purchase transaction" means any
38-transaction in which a business forwards or otherwise sells to a
39-provider all or a portion of accounts of such business, cash receipts or
40-payment intangibles at a discount to the expected value of such
41-accounts or payment intangibles. The provider's characterization of an
42-accounts receivable purchase transaction as a purchase shall be
43-conclusive that such accounts receivable purchase transaction is not a
44-loan or a transaction for the use, forbearance or detention of money.
37+(vi) rights to payment for moneys advanced or sold other than rights
38+arising out of the use of a credit card or charge card or information
39+contained on or for use with such card.
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76+(2) "Accounts receivable purchase transaction" means any transaction
77+in which a business forwards or otherwise sells to a provider all or a
78+portion of accounts of such business, cash receipts or payment intangibles
79+at a discount to the expected value of such accounts or payment
80+intangibles. The provider's characterization of an accounts receivable
81+purchase transaction as a purchase shall be conclusive that such accounts
82+receivable purchase transaction is not a loan or a transaction for the use,
83+forbearance or detention of money.
4584 (3) "Act" means the commercial financing disclosure act.
4685 (4) "Advance fee" means any consideration that is assessed or
4786 collected prior to the closing of a commercial financing transaction by a
4887 broker.
4988 (5) (A) "Broker" means any person who, for compensation or the
5089 expectation of compensation:
51-(i) Arranges a commercial financing product transaction between
52-a third party that, if executed, such transaction would be binding upon
53-such third party; and
90+(i) Arranges a commercial financing product transaction between a
91+third party that, if executed, such transaction would be binding upon such
92+third party; and
5493 (ii) communicates such transaction to a business in this state.
55-(iii) "Broker" does not include a provider or any individual or
56-entity whose compensation is not based or dependent upon the terms of
57-the specific commercial financing product obtained or offered.
94+(iii) "Broker" does not include a provider or any individual or entity
95+whose compensation is not based or dependent upon the terms of the
96+specific commercial financing product obtained or offered.
5897 (6) "Business" means an individual, group of individuals, sole
5998 proprietorship, corporation, limited liability company, trust, estate,
60-cooperative, association, limited partnership or general partnership SENATE BILL No. 345—page 2
99+cooperative, association, limited partnership or general partnership
61100 engaged in a business activity.
62101 (7) "Business purpose transaction" means any transaction in which
63-the proceeds resulting therefrom are provided to a business or are
64-intended to be used to carry on a business and are not for personal,
65-family or household purposes. A provider may rely on any written
66-statement of intended purpose signed by a business to determine
67-whether such transaction is a "business purpose transaction". Such
68-written statement may be a separate statement or may be contained in
69-an application, agreement or other document signed by such business
70-or the owner of such business.
102+the proceeds resulting therefrom are provided to a business or are intended
103+to be used to carry on a business and are not for personal, family or
104+household purposes. A provider may rely on any written statement of
105+intended purpose signed by a business to determine whether such
106+transaction is a "business purpose transaction". Such written statement
107+may be a separate statement or may be contained in an application,
108+agreement or other document signed by such business or the owner of such
109+business.
71110 (8) "Commercial financing facility" means a provider's plan for
72-purchasing multiple accounts receivable from the recipient over a
73-period of time pursuant to an agreement that sets forth the terms and
74-conditions governing the use of the facility.
75-(9) "Commercial financing transaction" means any commercial
76-loan, accounts receivable purchase transaction and commercial open-
77-end credit plan when the transaction is a business purpose transaction.
78-(10) "Commercial loan" means a loan to a business, whether
79-secured or unsecured.
80-(11) "Commercial open-end credit plan" means commercial
81-financing extended by a provider under a plan in which:
111+purchasing multiple accounts receivable from the recipient over a period
112+of time pursuant to an agreement that sets forth the terms and conditions
113+governing the use of the facility.
114+(9) "Commercial financing transaction" means any commercial loan,
115+accounts receivable purchase transaction and commercial open-end credit
116+plan when the transaction is a business purpose transaction.
117+(10) "Commercial loan" means a loan to a business, whether secured
118+or unsecured.
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162+(11) "Commercial open-end credit plan" means commercial financing
163+extended by a provider under a plan in which:
82164 (A) The provider reasonably contemplates repeat transactions; and
83-(B) subject to any limit set by the provider, the amount of
84-financing that such provider may extend to the business during the term
85-of the plan is made available to the extent that any outstanding balance
86-is repaid.
87-(12) "Depository institution" means a bank, trust company,
88-industrial loan company, savings and loan association, savings bank or
89-credit union doing business under the authority of a license, certificate
90-or charter issued by the United States, this state or any other state and
91-that is authorized to transact business in this state.
165+(B) subject to any limit set by the provider, the amount of financing
166+that such provider may extend to the business during the term of the plan
167+is made available to the extent that any outstanding balance is repaid.
168+(12) "Depository institution" means a bank, trust company, industrial
169+loan company, savings and loan association, savings bank or credit union
170+doing business under the authority of a license, certificate or charter issued
171+by the United States, this state or any other state and that is authorized to
172+transact business in this state.
92173 (13) "General intangible" means any personal property, including
93-things in action, other than accounts, chattel paper, commercial tort
94-claims, deposit accounts, documents, goods, instruments, investment
95-property, letter-of-credit rights, letters of credit, money and oil, gas or
96-other minerals before extraction. "General intangible" includes
97-payment intangibles and software.
174+things in action, other than accounts, chattel paper, commercial tort claims,
175+deposit accounts, documents, goods, instruments, investment property,
176+letter-of-credit rights, letters of credit, money and oil, gas or other minerals
177+before extraction. "General intangible" includes payment intangibles and
178+software.
98179 (14) "Payment intangible" means a general intangible under which
99180 the account debtor's principal obligation is a monetary obligation.
100181 (15) "Person" means any individual, firm, company, partnership,
101182 corporation or association.
102183 (16) "Provider" means a person who consummates more than five
103184 commercial financing transactions to a business located in this state in a
104185 calendar year. "Provider" includes a person that enters into a written
105186 agreement with a depository institution to arrange for the extension of a
106187 commercial financing transaction by such depository institution to a
107-business through an online lending platform administered by such
108-person.
188+business through an online lending platform administered by such person.
109189 Sec. 2. (a) Before, or at the time of, consummating a commercial
110-financing transaction, a provider shall disclose to the business the terms
111-of such commercial financing transaction in accordance with the
112-provisions of this section. Only one disclosure shall be required for
113-each commercial financing transaction and disclosure shall not be
114-required when modification, forbearance or change to a consummated
115-commercial financing transaction occurs.
190+financing transaction, a provider shall disclose to the business the terms of
191+such commercial financing transaction in accordance with the provisions
192+of this section. Only one disclosure shall be required for each commercial
193+financing transaction and disclosure shall not be required when
194+modification, forbearance or change to a consummated commercial
195+financing transaction occurs.
116196 (b) A provider shall disclose with each commercial financing
117197 transaction:
118198 (1) The total amount of funds provided to the business under the
119-terms of such commercial financing transaction. Such disclosure shall SENATE BILL No. 345—page 3
120-be labeled "total amount of funds provided";
199+terms of such commercial financing transaction. Such disclosure shall be
200+labeled "total amount of funds provided";
121201 (2) the total amount of funds disbursed to such business under the
122202 terms of such commercial financing transaction if less than the total
123203 amount of funds provided under paragraph (1). Such disclosure shall be
124204 labeled "total amount of funds disbursed";
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125248 (3) the total amount to be paid to such provider pursuant to such
126249 commercial financing transaction agreement. Such disclosure shall be
127250 labeled "total of payments";
128251 (4) the total dollar cost of such commercial financing transaction
129252 under the terms of the agreement, which shall be determined by
130-subtracting the total amount of funds provided from the total of
131-payments. Such calculation shall include any fees or charges deducted
132-by the provider from the amount under paragraph (1). Such disclosure
133-shall be labeled "total dollar cost of financing";
253+subtracting the total amount of funds provided from the total of payments.
254+Such calculation shall include any fees or charges deducted by the
255+provider from the amount under paragraph (1). Such disclosure shall be
256+labeled "total dollar cost of financing";
134257 (5) the manner, frequency and amount of each payment. Such
135-disclosure shall be labeled "payments". If such payments vary, the
136-provider shall instead disclose the manner, frequency and the estimated
137-amount of the initial payment and shall label such disclosure as
138-"estimated payments." The commercial financing transaction
139-agreement shall include a description of the methodology for
140-calculating any variable payment and the circumstances for when
141-payments may vary; and
142-(6) a statement of whether there are any costs or discounts
143-associated with prepayment of such commercial financing transaction,
144-including a reference to the paragraph in such agreement that creates
145-the contractual right to prepayment. Such disclosure shall be labeled
146-"prepayment".
147-(c) A provider that consummates a commercial financing facility
148-may provide disclosures required by this act that are based on an
149-example of a transaction that could occur under the agreement. The
150-example shall be based on an account receivable total face amount
151-owed of $10,000. Only one disclosure is required for each commercial
152-financing facility, and a disclosure is not required as result of a
153-modification, forbearance or change to the facility. A new disclosure is
154-not required each time accounts receivables are purchased under the
155-facility.
258+disclosure shall be labeled "payments". If such payments vary, the provider
259+shall instead disclose the manner, frequency and the estimated amount of
260+the initial payment and shall label such disclosure as "estimated
261+payments." The commercial financing transaction agreement shall include
262+a description of the methodology for calculating any variable payment and
263+the circumstances for when payments may vary; and
264+(6) a statement of whether there are any costs or discounts associated
265+with prepayment of such commercial financing transaction, including a
266+reference to the paragraph in such agreement that creates the contractual
267+right to prepayment. Such disclosure shall be labeled "prepayment".
268+(c) A provider that consummates a commercial financing facility may
269+provide disclosures required by this act that are based on an example of a
270+transaction that could occur under the agreement. The example shall be
271+based on an account receivable total face amount owed of $10,000. Only
272+one disclosure is required for each commercial financing facility, and a
273+disclosure is not required as result of a modification, forbearance or
274+change to the facility. A new disclosure is not required each time accounts
275+receivables are purchased under the facility.
156276 Sec. 3. The provisions of this act shall not apply to a:
157-(a) Provider that is a depository institution or its parent company
158-or a subsidiary or service corporation that is:
277+(a) Provider that is a depository institution or its parent company or a
278+subsidiary or service corporation that is:
159279 (1) Owned and controlled by a depository institution; and
160280 (2) regulated by a federal banking agency;
161281 (b) provider that is a lender regulated under the federal farm credit
162282 act, 12 U.S.C. § 2001 et seq.;
163283 (c) commercial financing transaction that is:
164284 (1) Secured by real property;
165285 (2) a lease; or
166-(3) a purchase money obligation that is incurred as all or part of
167-the price of the collateral or for value given to enable the business to
168-acquire rights in or the use of such collateral if such value is so used;
169-(d) commercial financing transaction in which the recipient is a
170-motor vehicle dealer or a vehicle rental company, or an affiliate of a
171-motor vehicle dealer or vehicle rental company or an affiliate of such a
172-company pursuant to a commercial loan or commercial open-end credit
173-plan of at least $50,000 or a commercial financing transaction offered
174-by a person in connection with the sale or lease of products or services
175-that such person manufactures, licenses or distributes or whose parent
176-company or any of such parent company's directly or indirectly owned
177-and controlled subsidiaries manufactures, licenses or distributes;
178-(e) provider that is licensed as a money transmitter in accordance SENATE BILL No. 345—page 4
286+(3) a purchase money obligation that is incurred as all or part of the
287+price of the collateral or for value given to enable the business to acquire
288+rights in or the use of such collateral if such value is so used;
289+(d) commercial financing transaction in which the recipient is a motor
290+vehicle dealer or a vehicle rental company, or an affiliate of a motor
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334+vehicle dealer or vehicle rental company or an affiliate of such a company
335+pursuant to a commercial loan or commercial open-end credit plan of at
336+least $50,000 or a commercial financing transaction offered by a person in
337+connection with the sale or lease of products or services that such person
338+manufactures, licenses or distributes or whose parent company or any of
339+such parent company's directly or indirectly owned and controlled
340+subsidiaries manufactures, licenses or distributes;
341+(e) provider that is licensed as a money transmitter in accordance
179342 with the Kansas money transmitter act or the law of any other state,
180343 district, territory or commonwealth of the United States;
181344 (f) provider that consummates not more than five commercial
182345 financing transaction transactions in this state in a 12-month period; or
183346 (g) commercial financing transaction of more than $500,000.
184347 Sec. 4. No broker shall:
185348 (a) Assess, collect or solicit an advance fee from a business to
186-provide services as a broker. Nothing in this subsection shall be
187-construed to preclude a broker from soliciting a potential business to
188-pay for, or preclude a potential business from paying for, actual
189-services necessary to apply for a commercial financing transaction.
190-Such actual services may include, but not be limited to, a credit check
191-or an appraisal of security, where such payment is made by check or
192-money order payable to a party independent of the broker;
193-(b) make or use any false or misleading representations or omit
194-any material fact in the offer or sale of the services of a broker or
195-engage, directly or indirectly, in any act that operates or would operate
196-as fraud or deception upon any person in connection with the offer or
197-sale of the services of a broker, notwithstanding the absence of reliance
198-by the buyer; or
199-(c) make or use any false or deceptive representation in its
200-business dealings.
201-Sec. 5. (a) Violations of the provisions of this act shall be
202-punishable by a civil penalty of $500 per violation, but not to exceed
203-$20,000 for all aggregated violations. Any person who violates the
204-provisions of this act after receiving written notice of a prior violation
205-from the attorney general shall be punishable by a civil penalty of
206-$1,000 per violation, but not to exceed $50,000 for all aggregated
207-violations.
208-(b) Violations of this act shall not affect the enforceability or
209-validity of the underlying agreement.
349+provide services as a broker. Nothing in this subsection shall be construed
350+to preclude a broker from soliciting a potential business to pay for, or
351+preclude a potential business from paying for, actual services necessary to
352+apply for a commercial financing transaction. Such actual services may
353+include, but not be limited to, a credit check or an appraisal of security,
354+where such payment is made by check or money order payable to a party
355+independent of the broker;
356+(b) make or use any false or misleading representations or omit any
357+material fact in the offer or sale of the services of a broker or engage,
358+directly or indirectly, in any act that operates or would operate as fraud or
359+deception upon any person in connection with the offer or sale of the
360+services of a broker, notwithstanding the absence of reliance by the buyer;
361+or
362+(c) make or use any false or deceptive representation in its business
363+dealings.
364+Sec. 5. (a) Violations of the provisions of this act shall be punishable
365+by a civil penalty of $500 per violation, but not to exceed $20,000 for all
366+aggregated violations. Any person who violates the provisions of this act
367+after receiving written notice of a prior violation from the attorney general
368+shall be punishable by a civil penalty of $1,000 per violation, but not to
369+exceed $50,000 for all aggregated violations.
370+(b) Violations of this act shall not affect the enforceability or validity
371+of the underlying agreement.
210372 (c) This act shall not create a private right of action against any
211373 person based upon compliance or noncompliance with the provisions of
212374 this act.
213375 (d) Authority to enforce compliance with this act shall be vested
214-exclusively with the attorney general. SENATE BILL No. 345—page 5
376+exclusively with the attorney general.
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215420 Sec. 6. This act shall take effect and be in force from and after its
216421 publication in the statute book.
217-I hereby certify that the above BILL originated in the
218-SENATE, and passed that body
219-_________________________
220- _________________________
221-President of the Senate.
222-_________________________
223-Secretary of the Senate.
224-
225-Passed the HOUSE ________________________
226- _________________________
227-Speaker of the House.
228-_________________________
229-Chief Clerk of the House.
230-APPROVED ____________________________
231-_________________________
232-Governor.
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