SFNet Wins Safe Harbor Fight in California

Pictured: SFNet CEO Rich Gumbrecht and Chris Nommensen of Camel Financial

Last Tuesday, the California Assembly Judiciary Committee voted in favor of a measure that will amend the CA SB 1235 disclosure law to provide an explicit safe harbor protecting asset-based lenders and factors who provide a good faith estimate of APR in compliance with the regulations from any liability should that estimate differ from the actual APR.  The measure now moves to a vote in the Assembly and is expected to be signed by the governor by mid-July. This was a critically important concession given the fundamental challenges SFNet has contended exist in using APR as a basis of comparison for secured finance products.  A recent poll of SFNet members found 40% unwilling to lend under the $500k deal threshold in CA lest they face potential civil and criminal penalties for non-compliance.  The amendment relieves our members of this risk and has opened the door to further discussions on challenges with the underlying APR construct. SFNet retained one of Sacramento’s top lobbying firms, Capitol Advocacy, to assist in this effort.
 
Speaking for SFNet, CEO Rich Gumbrecht commented, “This is an important win in a long-term effort to positively influence and mitigate the unintended impacts of state disclosure laws that are proliferating at a time when access to capital is critical to our economy.”  The victory comes on the heels of other successful state outcomes that either exclude SFNet members or offer a more practical disclosure methodology.  Said Gumbrecht: “The advocacy work we are doing is an essential benefit of SFNet membership and a dimension we continue to invest in significantly.  I want to thank our volunteers for playing such a meaningful role in driving the positive outcome in California, particularly Chris Nommensen of Camel Financial and Mark Hafner of Celtic Capital.”   Advocacy Committee Chair Hamid Namazie of Holland and Knight and SFNet Co-General Counsel Jon Helfat of Otterbourg were also instrumental in securing this result.
 
SFNet will release a Guide for Complying with impending New York regulations in addition to the current CA Guide shortly, in advance of new regulations effective August 1st.  For more information please contact Mocejo@sfnet.com.