On April 12, 2024, Kansas Governor Laura Kelly signed SB 345, which establishes disclosure requirements for commercial lending. The new law will take effect on July 1, 2024, and applies to commercial lending transactions of $500,000 or less. The law defines “commercial lending transactions” to include sales-based lending, factoring, and commercial loan transactions.
The new law will require commercial loan providers to provide the following disclosures for each commercial loan:
The total amount of funds provided to the business under the terms of the commercial financing agreement; The total amount of funds disbursed under the terms of the commercial financing agreement, if less than the total amount of funds provided; The total amount paid to the provider under the commercial financing agreement; The total dollar cost of the commercial financing agreement, calculated as the total amount of funds provided minus the total amount paid to the provider; The method, frequency, and amount of each payment; A description of whether there are any charges or discounts associated with prepayments of the commercial financing agreement, including a reference to any provisions in the commercial financing agreement that create a contractual right to prepayment.
Notably, the required disclosures do not include annual percentage rates.
The new law also prohibits brokers from charging upfront fees or making false or misleading statements in their brokerage activities.
The new law does not apply to banks, credit unions, real estate secured transactions, purchase payment transactions or leases. The law also does not apply to businesses that enter into five or fewer commercial loan transactions in Kansas in any 12-month period.
Businesses that violate the new law face civil penalties of up to $500 per violation and $20,000 for aggregate violations. If a violation occurs after the Attorney General notifies a business of a previous violation, the maximum penalty increases to $1,000 per violation and $50,000 for aggregate violations. The Attorney General has exclusive authority to enforce the law. The new law does not provide any right of civil action against individuals who fail to comply.