On April 12, Kansas enacted the Commercial Lending Disclosure Act (the “Act”) with SB 345. The Act requires disclosure of certain commercial lending product transaction information, provides civil penalties for violations, and allows for enforcement by the Attorney General. The Act applies to all commercial loans, accounts receivable purchase transactions, and commercial open-end credit plans (if the transaction amount is $500,000 or less).
According to this law, providers must disclose the total amount of funds provided and the total amount paid if the amount is less than the amount provided. In addition, providers must disclose the total amount that the borrower owes to the provider under the agreement, the borrower's total expenses, and the method, frequency and amount of each payment. Only one disclosure is required for each commercial loan agreement. If there are any changes to the loan agreement, a new disclosure is not required. In addition, providers are not required to issue a new disclosure for each purchase of accounts receivable under the agreement. In addition, brokers in such transactions are prohibited from collecting advance payments from companies, making false representations, or omitting material facts during the sale of their services.
The law exempts certain depository institutions, commercial lending transactions secured by real estate or leases, and providers that have conducted five or fewer commercial lending transactions in Kansas in a given year, among others.
Violation of this Act is subject to a civil penalty of $500 per violation, with the aggregate penalty not to exceed $20,000 for multiple violations. If you continue to violate this Act after receiving a written warning from the Attorney General, the penalty increases to $1,000 per violation, with the aggregate penalty for multiple violations being a maximum of $50,000. This Act does not confer a right of action on any individual based on compliance or noncompliance with its provisions, and there is no private right of action. A violation of this Act does not affect the enforceability or validity of any underlying agreement. The power to enforce this Act is not vested solely in the Attorney General.