On December 4, the U.S. District Court for the Central District of California
granted the California DFPI’s motion for summary judgment in
Small Business Finance Association v. Clothilde Hewlett, which challenged the DFPI’s commercial financing regulations. According to the DFPI’s
press release, the proposed regulations would require commercial financing providers to disclose key metrics to small businesses to help them understand their financing options, including the amount of funding provided, APR, finance charge, and payment amounts.
In their complaint, the plaintiffs argued that the regulations violated the First Amendment and were preempted by TILA. The court disagreed, holding that (1) the regulations do not violate the First Amendment under the test for compelled commercial speech since the required disclosures under the Regulations are “reasonably related” to substantial government interest and are not “unjustified or unduly burdensome”; and (2) because the CFPB made a “rational conclusion” that TILA does not preempt commercial financing regulations, the court would defer to the CFPB’s determination.
