CA DFPI UDAAP Rules Regarding Commercial Financial Products Now Effective

The California Department of Financial Protection and Innovation’s (DFPI) regulations (the Regulations) regarding new unfair, deceptive, and abusive acts and practices (UDAAP) rules for certain commercial financing activities became effective on October 1, 2023. 

The Regulations make it “unlawful for a covered provider to engage or have engaged in any unfair, deceptive, or abusive act or practice in connection with the offering or provision of commercial financing or another financial product or service to a covered entity.”  A “covered entity” only includes any “small business, nonprofit, or family farm whose activities are principally directed or managed from California.”  A “covered provider” is a person that provides or offers to covered entities commercial financing or other financial products or services, but “covered provider” does not include, in part, any person licensed as an escrow agent, finance lender, residential mortgage lender, mortgage servicer, or mortgage loan originator under California law. 

The Regulations further define what unfair, deceptive, and abusive acts and practices include, and create a requirement that covered providers (with a de minimis exception) provide annual reports on their commercial financing in the state.  For those required to report, the first annual report will be due on or before March 15, 2025.