From the AFA: Taking Regulatory Concerns to Congress

As the American Factoring Association continues to grapple with the shifting regulatory landscape, members of the organization met with members of Congress in July to discuss Section 1071 of the Dodd-Frank Act and California’s SB 1235 and other important issues.

BY PALMER HAMILTON, ESQ., PARTNER, JONES WALKER LLP

The AFA has been on top of several hot regulatory and compliance issues. These issues include the CFPB's draft regulation, which would implement Section 1071 of the Dodd-Frank Act, and various pending state interest rate disclosure regulations such as the implementation of California’s SB 1235. Most recently, the AFA has been working on the SBA’s subordination documentation.

In July, the AFA had in-person meetings in Washington D.C., meeting with senior members of Congress, including Congressman Ed Perlmutter, who is the chairman of the Consumer Protection and Financial Institutions Subcommittee of the House Financial Services Committee. We discussed with the chairman the CFPB staff's outline of their preliminary thoughts regarding the correct extent of 1071's coverage in terms of products covered and of those engaged in providing those products. The CFPB had preliminarily concluded that factoring should not be deemed a product for which records would be required to be kept. We told the congressman that we hoped the new leadership at the CFPB would not reverse the staff's preliminary approach. Since our meeting, Congressman Perlmutter’s staff reached out to the CFPB regarding our specific concerns. Having our concerns expressed by the senior Democrat on the House subcommittee of jurisdiction will hopefully bolster the staff in the bureau's internal discussions.

In the July Washington meetings, the AFA also met with Congressman French Hill, who is on the leadership team for the Republican Members of House Financial Services Committee. We discussed with him the need for preemption of various state disclosure standards such as California’s SB 1235 and the problem faced by factors, particularly small factors, with the fragmentation of state disclosure requirements. He totally understood the problem but expressed the difficulty of obtaining preemption. He observed that we would need to find a vehicle that was moving, such as a large banking bill.

Certain of the SBA’s regions have promulgated subordination agreements that present factors with several very problematic provisions and increase our risk and make it harder for IFA/AFA members to fund small businesses. We are currently working to address this situation and urge the SBA to provide uniform acceptable subordination documentation. We intend to inform key members of Congress of the problems so they might express their concern to the SBA.