CFPB Rules Certain State Disclosure Laws Consistent With TILA

The Consumer Financial Protection Bureau (CFPB) has announced that it has determined that state disclosure laws covering lending to businesses in California, New York, Utah, and Virginia are not preempted by the federal Truth in Lending Act (TILA).

The CFPB examined California, New York, Utah, and Virginia disclosure laws to determine if they were inconsistent with and preempted by the Truth in Lending Act. After analyzing public comments on its preliminary determination, the CFPB affirmed that there was no conflict because the state laws extend disclosure protections to businesses and entrepreneurs that seek commercial financing.

TILA is intended to ensure that credit terms are disclosed in a meaningful way to consumers, so they can better compare lending options.

In recent years, California, New York, Utah, and Virginia have enacted laws that require lenders to include disclosures in their commercial financing transactions with businesses. Commercial financing transactions are not covered by TILA.

In 2022, the CFPB received a request from an industry trade association to determine whether New York’s commercial financing disclosure law is preempted by TILA. After considering the request, the CFPB’s preliminary determination was that the New York law is not preempted by TILA because the New York law regulates commercial financing transactions rather than consumer-purpose transactions. The CFPB requested comment on whether it should finalize its preliminary determination that the New York law–as well as similar laws in California, Utah, and Virginia–are not preempted.

States have broad authority to establish their own protections for their residents, both within and outside the scope of TILA. TILA only preempts state laws under what is known as conflict preemption. The state laws reviewed by the CFPB concern protections for businesses to ensure they can understand the credit terms available to them. This is beyond the scope of TILA’s statutory consumer credit purposes.

The CFPB’s decision affirms that the four states’ commercial financing disclosure laws do not conflict with TILA.