California Government Fights Fee Collection

With the signing of Senate Bill 666 by Governor Gavin Newsom last October, the state is tightening the reins on commercial financing providers. Intended to help the Golden State’s small businesses, this legislation attempts to curb some practices that can burden small businesses with unnecessary costs.

Overview of S.B. 666

Senate Bill 666 brings significant changes to the California Financing Law, specifically targeting the fees that can be charged in commercial financing transactions. It defines small businesses in a way that encompasses a wide range of entities within the state—those independently owned and operated, with a principal office and officers in California, having no more than 100 employees, and with average annual gross receipts of $15 million or less over the past three years.

For these businesses, the bill outlines a list of prohibited fees. These include fees for required payments made to a lender by automated clearinghouse transfer (except for insufficient funds fees), fees for statements the lender prepares to document the remaining debt, and unspecified origination fees that lack a clear service correspondence. This legislation also restricts fees related to collateral monitoring and the cost associated with filing or terminating liens, setting a cap at 150% of the actual cost.

Compliance Costs

This new law provides for actual and statutory damages for violations, including fees paid by the recipient and additional penalties ranging from $500 to $2,500, along with possible injunctive relief, attorneys’ fees, costs, and other court-deemed appropriate relief. 

What This Means for You

Senate Bill 666 represents a significant move by California to safeguard small businesses from certain financial practices that wind up burdening business owners with unnecessary or hidden fees. In light of the protections and opportunities presented by Senate Bill 666, we encourage all small business owners in California to familiarize themselves with the new regulations. Understanding your rights and the limitations placed on commercial financing fees might significantly impact your business’s financial health. Take action by reviewing your current and future financing agreements against the standards set by this legislation. Got questions? Give Integrated General Counsel, P.C. a call at (925) 399-1529.

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