- 1The amended AB-1166 no longer applies to accounts receivable purchase transactions, including factoring.
- 2Asset-based lending and lease financing were also removed from the bill's scope.
- 3The bill extends Fair Debt Settlement Practices Act protections to commercial financing recipients.
A California bill regulating debt settlement companies has been narrowed so that it covers commercial loans only. The amendment removes merchant cash advances and other non-loan products from the bill's reach.
What changed
AB-1166 moves through the state legislature as an amendment to the Fair Debt Settlement Practices Act. The original text extended the act's protections to commercial financing recipients alongside consumer borrowers, and defined commercial financing broadly. It included accounts receivable purchase transactions, factoring, asset-based lending, commercial loans, commercial open-end credit plans and lease financing.
After coverage of the bill, a committee quickly revised it to apply to commercial loans only. The amendment carved out "accounts receivable purchase transactions," a category that also covers factoring, asset-based lending and lease financing. That language is the category of transaction that includes MCAs.
What remains
For loans, the bill's core approach is unchanged. As introduced, it would bar debt settlement providers from misleading practices and require specific disclosures. It would let a business owner cancel a settlement agreement at any time, and require monthly statements and an itemized account of the provider's compensation.
The bill had cleared the Senate Banking and Financial Institutions committee on July 2. The most recent version is posted on the legislature's site.
Source reporting: deBanked.
