Section 427.300

Title XXVII DEBTOR-CREDITOR RELATIONS

Chapter 427

Effective - 28 Aug 2024   

  427.300.  Citation of law — definitions — commercial financing transaction disclosures, requirements — inapplicability — registration requirements — violations — effective date — rules. — 1.  This section shall be known and may be cited as the "Commercial Financing Disclosure Law".

  2.  For purposes of this section, the following terms mean:

  (1)  "Account";

  (a)  Includes:

  a.  A right to payment of a monetary obligation, regardless of whether earned by performance, for one of the following:

  (i)  Property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of;

  (ii)  Services rendered or to be rendered;

  (iii)  A policy of insurance issued or to be issued;

  (iv)  A secondary obligation incurred or to be incurred;

  (v)  Energy provided or to be provided;

  (vi)  The use or hire of a vessel under a charter or other contract;

  (vii)  Arising out of the use of a credit or charge card or information contained on or for use with the card; or

  (viii)  As winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state; and

  b.  Health-care-insurance receivables; and

  (b)  Does not include:

  a.  Rights to payment evidenced by chattel paper or an instrument;

  b.  Commercial tort claims;

  c.  Deposit accounts;

  d.  Investment property;

  e.  Letter-of-credit rights or letters of credit; or

  f.  Rights to payment for moneys or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card;

  (2)  "Accounts receivable purchase transaction", any transaction in which the business forwards or otherwise sells to the provider all or a portion of the business's accounts or payment intangibles at a discount to their expected value.  The provider's characterization of an accounts receivable purchase transaction as a purchase is conclusive that the accounts receivable purchase transaction is not a loan or a transaction for the use, forbearance, or detention of money;

  (3)  "Broker", any person who, for compensation or the expectation of compensation, obtains a commercial financing transaction or an offer for a commercial financing transaction from a third party that would, if executed, be binding upon that third party and communicates that offer to a business located in this state.  The term broker excludes a provider, or any individual or entity whose compensation is not based or dependent on the terms of the specific commercial financing transaction obtained or offered;

  (4)  "Business", an individual or group of individuals, sole proprietorship, corporation, limited liability company, trust, estate, cooperative, association, or limited or general partnership engaged in a business activity;

  (5)  "Business purpose transaction", any transaction where the proceeds are provided to a business or are intended to be used to carry on a business and not for personal, family, or household purposes.  For purposes of determining whether a transaction is a business purpose transaction, the provider may rely on any written statement of intended purpose signed by the business.  The statement may be a separate statement or may be contained in an application, agreement, or other document signed by the business or the business owner or owners;

  (6)  "Commercial financing facility", a provider's plan for purchasing multiple accounts receivable from the recipient over a period of time pursuant to an agreement that sets forth the terms and conditions governing the use of the facility;

  (7)  "Commercial financing transaction", any commercial loan, accounts receivable purchase transaction, commercial open-end credit plan or each to the extent the transaction is a business purpose transaction;

  (8)  "Commercial loan", a loan to a business, whether secured or unsecured;

  (9)  "Commercial open-end credit plan", commercial financing extended by any provider under a plan in which:

  (a)  The provider reasonably contemplates repeat transactions; and

  (b)  The amount of financing that may be extended to the business during the term of the plan, up to any limit set by the provider, is generally made available to the extent that any outstanding balance is repaid;

  (10)  "Depository institution", any of the following:

  (a)  A bank, trust company, or industrial loan company doing business under the authority of, or in accordance with, a license, certificate, or charter issued by the United States, this state, or any other state, district, territory, or commonwealth of the United States that is authorized to transact business in this state;

  (b)  A federally chartered savings and loan association, federal savings bank, or federal credit union that is authorized to transact business in this state; or

  (c)  A savings and loan association, savings bank, or credit union organized under the laws of this or any other state that is authorized to transact business in this state;

  (11)  "General intangible", any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction.  General intangible also includes payment intangibles and software;

  (12)  "Payment intangible", a general intangible under which the account debtor's principal obligation is a monetary obligation;

  (13)  "Provider", a person who consummates more than five commercial financing transactions to a business located in this state in any calendar year.  Provider also includes a person that enters into a written agreement with a depository institution to arrange for the extension of a commercial financing transaction by the depository institution to a business via an online lending platform administered by the person.  The fact that a provider extends a specific offer for a commercial financing transaction on behalf of a depository institution shall not be construed to mean that the provider engaged in lending or financing or originated that loan or financing.

  3.  (1)  A provider that consummates a commercial financing transaction shall disclose the terms of the commercial financing transaction as required by this section.  The disclosures shall be provided at or before consummation of the transaction.  Only one disclosure is required for each commercial financing transaction, and a disclosure is not required as a result of the modification, forbearance, or change to a consummated commercial financing transaction.

  (2)  A provider shall disclose the following in connection with each commercial financing transaction:

  (a)  The total amount of funds provided to the business under the terms of the commercial financing transaction agreement.  This disclosure shall be labeled "Total Amount of Funds Provided";

  (b)  The total amount of funds disbursed to the business under the terms of the commercial financing transaction, if less than the total amount of funds provided, as a result of any fees deducted or withheld at disbursement and any amount paid to a third party on behalf of the business.  This disclosure shall be labeled "Total Amount of Funds Disbursed";

  (c)  The total amount to be paid to the provider pursuant to the commercial financing transaction agreement.  This disclosure shall be labeled "Total of Payments";

  (d)  The total dollar cost of the commercial financing transaction under the terms of the agreement, derived by subtracting the total amount of funds provided from the total of payments.  This calculation shall include any fees or charges deducted by the provider from the "Total Amount of Funds Provided".  This disclosure shall be labeled "Total Dollar Cost of Financing";

  (e)  The manner, frequency, and amount of each payment.  This disclosure shall be labeled "Payments".  If the payments may vary, the provider shall instead disclose the manner, frequency, and the estimated amount of the initial payment labeled "Estimated Payments" and the commercial financing transaction agreement shall include a description of the methodology for calculating any variable payment and the circumstances when payments may vary;

  (f)  A statement of whether there are any costs or discounts associated with prepayment of the commercial financing product including a reference to the paragraph in the agreement that creates the contractual rights of the parties related to prepayment.  This disclosure shall be labeled "Prepayment"; and

  (3)  A provider that consummates a commercial financing facility may provide disclosures of this subsection which are based on an example of a transaction that could occur under the agreement.  The example shall be based on an accounts receivable total face amount owed of ten thousand dollars.  Only one disclosure is required for each commercial financing facility, and a disclosure is not required as result of a modification, forbearance, or change to the facility.  A new disclosure is not required each time accounts receivable are purchased under the facility.

  4.  The provisions of this section shall not apply to the following:

  (1)  A provider that is a depository institution or a subsidiary or affiliate;

  (2)  A provider that is a service corporation to a depository institution that is:

  (a)  Owned and controlled by a depository institution; and

  (b)  Regulated by a federal banking agency;

  (3)  A provider that is a lender regulated under the federal Farm Credit Act, 12 U.S.C. Section 2001, et seq.;

  (4)  A commercial financing transaction that is:

  (a)  Secured by real property;

  (b)  A lease; or

  (c)  A purchase money obligation that is incurred as all or part of the price of the collateral or for value given to enable the business to acquire rights in or the use of the collateral if the value is in fact so used;

  (5)  A commercial financing transaction in which the recipient is a motor vehicle dealer or an affiliate of such a dealer, or a vehicle rental company, or an affiliate of such a company, pursuant to a commercial loan or commercial open-end credit plan of at least fifty thousand dollars or a commercial financing transaction offered by a person in connection with the sale or lease of products or services that such person manufactures, licenses, or distributes, or whose parent company or any of its directly or indirectly owned and controlled subsidiaries manufactures, licenses, or distributes;

  (6)  A commercial financing transaction that is a factoring transaction, purchase, sale, advance, or similar of accounts receivable owed to a health care provider because of a patient's personal injury treated by the health care provider;

  (7)  A provider that is licensed as a money transmitter in accordance with a license, certificate, or charter issued by this state or any other state, district, territory, or commonwealth of the United States;

  (8)  A provider that consummates no more than five commercial financing transactions in this state in a twelve-month period; or

  (9)  A commercial financing transaction of more than five hundred thousand dollars.

  5.  (1)  No person shall engage in business as a broker within this state for compensation, unless prior to conducting such business, the person has filed a registration with the division of finance within the department of commerce and insurance and has on file a good and sufficient bond as specified in this subsection.  The registration shall be effective upon receipt by the division of finance of a completed registration form and the required registration fee, and shall remain effective until the time of renewal.

  (2)  After filing an initial registration form, a broker shall file, on or before January thirty-first of each year, a renewal registration form along with the required renewal registration fee.

  (3)  The broker shall pay a one-hundred-dollar registration fee upon the filing of an initial registration and a fifty-dollar renewal registration fee upon the filing of a renewal registration.

  (4)  The registration form required by this subsection shall include the following:

  (a)  The name of the broker;

  (b)  The name in which the broker is transacted if different from that stated in paragraph (a) of this subdivision;

  (c)  The address of the broker's principal office, which may be outside this state;

  (d)  Whether any officer, director, manager, operator, or principal of the broker has been convicted of a felony involving an act of fraud, dishonesty, breach of trust, or money laundering; and

  (e)  The name and address in this state of a designated agent upon whom service of process may be made.

  (5)  If information in a registration form changes or otherwise becomes inaccurate after filing, the broker shall not be required to file a further registration form prior to the time of renewal.

  (6)  Every broker shall obtain a surety bond issued by a surety company authorized to do business in this state.  The amount of the bond shall be ten thousand dollars.  The bond shall be in favor of the state of Missouri.  Any person damaged by the broker's breach of contract or of any obligation arising therefrom, or by any violation of this section, may bring an action against the bond to recover damages suffered.  The aggregate liability of the surety shall be only for actual damages and in no event shall exceed the amount of the bond.

  (7)  Employees regularly employed by a broker who has complied with this subsection shall not be required to file a registration or obtain a surety bond when acting within the scope of their employment for the broker.

  6.  (1)  Any person who violates any provision of this section shall be punished by a fine of five hundred dollars per incident, not to exceed twenty thousand dollars, for all aggregated violations arising from the use of the transaction documentation or materials found to be in violation of this section.  Any person who violates any provision of this section after receiving written notice of a prior violation from the attorney general shall be punished by a fine of one thousand dollars per incident, not to exceed fifty thousand dollars, for all aggregated violations arising from the use of the transaction documentation or materials found to be in violation of this section.

  (2)  Violation of any provision of this section shall not affect the enforceability or validity of the underlying agreement.

  (3)  This section shall not create a private right of action against any person or other entity based upon compliance or noncompliance with its provisions.

  (4)  Authority to enforce compliance with this section is vested exclusively in the attorney general of this state.

  7.  The requirements of subsections 3 and 5 of this section shall take effect upon either:

  (1)  Six months after the division of finance finalizes promulgating rules, if the division intends to promulgate rules; or

  (2)  February 28, 2025, if the division does not intend to promulgate rules.

  8.  The division of finance may promulgate rules implementing this section.  If the division of finance intends to promulgate rules, it shall declare its intent to do so no later than February 28, 2025.  Any rule or portion of a rule, as that term is defined in section 536.010, that is created under the authority delegated in this section shall become effective only if it complies with and is subject to all of the provisions of chapter 536 and, if applicable, section 536.028.  This section and chapter 536 are nonseverable and if any of the powers vested with the general assembly pursuant to chapter 536 to review, to delay the effective date, or to disapprove and annul a rule are subsequently held unconstitutional, then the grant of rulemaking authority and any rule proposed or adopted after August 28, 2024, shall be invalid and void.

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(L. 2024 S.B. 1359)