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CFPB determines certain state laws not preempted by TILA

The CFPB has announced 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. The CFPB examined the state 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 affirms there is no conflict because the state laws extend disclosure protections to businesses and entrepreneurs that seek commercial financing.

The Truth in Lending Act 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 the federal Truth in Lending Act.

The Truth in Lending Act 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 the Truth in Lending Act’s statutory consumer credit purposes. The CFPB’s decision affirms that the four states’ commercial financing disclosure laws do not conflict with the Truth in Lending Act.

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