Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) This section shall apply only to
sales-based financing.
(b) With
respect to any assumptions about a recipient's future monthly sales, income, or
receipts necessary to calculate the disclosures required by this subchapter, a
provider shall use the "estimated monthly sales, income, or receipts
projection" described below.
(1) The estimated
monthly sales, income, or receipts projection shall be calculated as the
recipient's historical average of:
(A) The
monthly sales, income or receipts volume received through the particular
payment channel or mechanism; and
(B) The monthly sales, income, or receipts
received through any other payment channel or mechanism that the financing
contract would have required recipients to redirect to the particular payment
channel or mechanism had the financing contract been operative
previously.
(2) For all
transactions, or by recipient industry or financing amount (or both), a
provider shall fix the number of months used to calculate the recipient's
average monthly historical sales, income, or receipts, provided that the period
of historical data used by the provider shall not be less than four (4) months
or more than twelve (12) months.
(3) When a recipient has not been in
operation for the number of months set by the provider as described in
subdivision (b)(2) of this section, the provider may calculate the recipient's
historical average sales volume, income, or receipts using an average from the
months the recipient has been in operation.
(4) Notwithstanding subdivision (b)(2), a
provider may exclude from the average calculation required by subdivision
(b)(1):
(A) the monthly sales, income, or
receipts from any month that is less than the average monthly sales, income, or
receipts of the months required to be considered under paragraphs (2) and (3),
if the provider determines that the decreased monthly sales, income or receipts
volume in that month arose from a cause, such as a natural disaster or uncommon
business interruption, that is unlikely to recur during performance of the
contract. A provider shall have no liability for failing to exercise the option
permitted under this subparagraph.
(B) the monthly sales, income, or receipts
from any month for which the recipient failed to provide documentation of
average monthly sales, income, or receipts following the provider's
request.
(C) the monthly sales,
income, or receipts from any number of months at the beginning of the period
(starting with the oldest month) set by the provider under paragraph (2), if
the provider does not require and receive monthly sales, income, or receipts
documentation from those months from the recipient.
(5) In addition to the months considered
pursuant to subdivision (b)(2) of this section, a provider may include in its
average calculation all or none of the additional months for which the
recipient has provided sales, income or receipts documentation, excluding any
months in which the recipient was not in operation.
(6) When a provider fixes the number of
months it will consider pursuant to subdivision (b)(2), the provider shall
record this decision in an internal document that includes the effective date
of the provider's decision. If the provider modifies the months fixed pursuant
to subdivision (b)(2), the provider shall create a new version of the document
required by this paragraph. The provider shall maintain a copy of every version
of the document while it is in effect and for a period of four years
thereafter.
(c) If a
provider must make additional estimates or assumptions other than a recipient's
estimated monthly sales, income, or receipts projection to provide disclosures
required by this subchapter, the provider shall:
(1) Base those estimates or assumptions on
the best information reasonably available to the provider at the time of the
disclosure;
(2) State clearly that
any disclosure based upon an estimate or assumption is an estimate by adding
the word "estimate" to the descriptive language of any required disclosure
under this chapter.
(3) State
clearly any assumptions or estimates used as the basis for the disclosure in
any description associated with the disclosure.
1. New section
filed 6-9-2022; operative 12-9-2022 pursuant to Government Code section
11343.4(b)(2)
(Register 2022, No. 23). Transmission deadline specified in Government Code
section
11346.4(b)
extended 60 calendar days pursuant to Executive Order N-40-20 and an additional
60 calendar days pursuant to Executive Order N-71-20. Filing deadline specified
in Government Code section
11349.3(a)
extended 60 calendar days pursuant to Executive Order N-40-20 and an additional
60 calendar days pursuant to Executive Order N-71-20.
Note: Authority cited: Sections
321 and
22804,
Financial Code. Reference: Sections
22800,
22802,
22803 and
22804,
Financial Code.
