Economic Growth and Disclosure Laws: Financial Insights From the Annual Factoring Conference

July 7, 2023

Thomas C. Wolff, Creditors' Rights Attorney

Ward and Smith, P.A.

View Full Article

Recently, I had the privilege to attend the 29th Annual Factoring Conference in New Orleans. This annual conference is a unique event presented by the International Factoring Association (IFA), which caters to lenders and financial institutions that offer financing through factoring and accounts receivable financing. It is the largest event of its kind, and this year, more so than in years past, there was a true feeling of growth and innovation within the lending space, and attendees appeared to revel in the annual gathering of colleagues and old friends. 

This article highlights two noteworthy points that were emphasized by speakers and education sessions.

Growth Continues in an Uncertain Economic Climate

One of this year's keynote speakers, Rich Karlgaard, publisher of Forbes magazine, made it evident that while the U.S. continues to experience political and economic uncertainty, there may be clear skies on the horizon. While most economists warn of an impending recession, Karlgaard remains cautiously optimistic that inflation is waning and that turbulence within the banking industry is beginning to slow. Coincidentally, as was the case at the 2022 Annual Factoring conference, the factoring industry continues to be one of progress and potential, as 64% of lenders within the space experienced growth in the past year. Not only that, but the factoring industry appears to be dominated by small start-ups and fledgling lenders, as 50% of IFA members are firms made up of between 1-5 individuals. With expansion and growth continuing to increase in the space, attendees were reassured that we are in a period of increased innovation and creativity as the factoring sector continues to grow. 

Enactment of Disclosure Laws

But not all news was positive. The Consumer Financial Protection Bureau (CFPB) recently issued a final rule to implement Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It was evident that this rule, which seeks to amend the Equal Protection Credit Opportunity Act (ECOA) to require strict reporting requirements for small business lenders, was one of great concern for everyone. As many factoring lenders know, this rule requires significant obligations to collect and report data about credit applications.  While it specifically excludes factoring companies, it does, however, include merchant cash advance companies.  

In addition, many states have enacted Consumer Finance Disclosure Laws, which require onerous disclosures for lenders, including factors. Already passed in California, New York, and Utah, similar laws have been proposed and are pending in ten other states, including North Carolina. Moreover, each law is different and carries its own regulations and disclosure requirements, making it a procedural challenge for factoring companies to navigate and ensure they are compliant with their national books of business. Lobbying efforts continue, spearheaded by the American Factoring Association (AFA). 

Ward and Smith's Creditors' Rights and Financial Institutions teams are committed to assisting in monitoring those efforts. We also provide guidance to lenders on how to comply with state laws and work proactively with clients on the varying requirements. If you have questions, contact our office for assistance.

--
© 2023 Ward and Smith, P.A. For further information regarding the issues described above, please contact Thomas C. Wolff.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

We are your established legal network with offices in Asheville, Greenville, New Bern, Raleigh, and Wilmington, NC.