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Missouri is now part of the growing list of states that have introduced commercial finance disclosure requirements.

By: Chris Friedman, Alexandra McFall, and Shelby Lomax

Missouri’s Commercial Financing Disclosure Law requires providers of commercial financing to disclose specific terms and conditions to businesses at or before the time of consummation. This initiative is designed to ensure that businesses fully understand the cost and obligations associated with their financing agreements. The disclosure obligations go into effect either six months after the Missouri Division of Finance promulgates rules implementing the new law, or on February 28, 2025, if the Division of Finance elects not to promulgate those rules.

Applicability

The new commercial disclosure law, signed into law by Governor Mike Parson in July 2024, applies to entities who originate more than five commercial financing transactions in Missouri in any calendar year, or who arrange those transactions through online platforms. Also included are nonbanks who partner with banks to arrange financing for customers. Exempt institutions include depository institutions and their affiliates, lenders regulated under the Farm Credit Act, motor vehicle dealers and dealer rental companies, and licensed money transmitters. Additionally, providers who originate five or fewer transactions in Missouri are also exempt.

Like other state regimes, the term “commercial financing transaction” is broad and includes commercial loans, accounts receivable purchase transactions, and commercial open-end credit plans; however, real estate secured loans, leases, purchase money obligations, and certain healthcare factoring transactions are exempt. Additionally, transactions exceeding $500,000 are exempt.

Mandatory disclosures

Lenders and finance companies must disclose the following information to businesses:

Total amount of funds provided: The total sum being financed.
Total amount of funds disbursed: The amount disbursed to the business after deducting any fees or withholdings.
Total of payments: The total amount the business will repay.
Total dollar cost of financing: The total cost of the financing in dollars.
Payments: The payment terms, frequency, and amounts.
Prepayment: Any costs or discounts associated with prepaying the financing.

Broker regulations

Brokers arranging commercial financing transactions are also regulated under this law. They must register with the Division of Finance and maintain a $10,000 surety bond. The registration process includes providing detailed business information and any felony convictions of principals. Brokers must also have a designated agent for service of process in Missouri.

Bottom line

In 2022, a financial services industry group requested that the Consumer Financial Protection Bureau (CFPB) determine whether state commercial financing disclosure laws—specifically in this case, the New York law— are preempted by the federal Truth in Lending Act (TILA). CFPB responded in March 2023 that state commercial financing disclosure laws were not preempted by TILA, finding that they are “beyond the scope of the Truth in Lending Act’s statutory consumer credit purposes.” While CFPB’s determination specifically related the New York law, it has given state lawmakers a green light to craft commercial financing disclosure laws, and we expect to see the number of states implementing such legislation to rise.

Already, many states have put into place consumer finance-style disclosure laws for certain commercial finance transactions, including California, Connecticut, Florida, Georgia, Kansas, Utah, and Virginia. Missouri’s Commercial Financing Disclosure Law represents yet another expansion in the regulation of commercial finance products at the state level. While Missouri’s law is broadly similar to other state regimes, we won’t know the true compliance scope until the Missouri Division of Finance announces whether it will elect to promulgate rules.

Chris Friedman, Alexandra McFall, and Shelby Lomax are attorneys at Husch Blackwell LLP and members of firm’s Financial Services & Capital Markets industry group and its Consumer Financial Services team.