The Consumer Financial Protection Bureau (CFPB) recently determined that the commercial financing disclosure laws in California, New York, Utah, and Virginia are not preempted by the Truth in Lending Act (TILA). TILA ensures that key information about consumer credit transactions is disclosed to consumers. TILA preempts state disclosure laws only if they are “inconsistent” with it, and the CFPB is authorized to determine whether there is an inconsistency. The CFPB indicates that TILA’s inconsistency standard aligns with conflict preemption. In conflict preemption, a conflict exists when it is impossible to comply with both state and federal law or when the state regulation “stands as an obstacle to the accomplishment and execution of the full purposes of the federal law.”
Recently, New York, California, Utah, and Virginia have enacted laws that require disclosures for commercial financing transactions to businesses, which do not receive TILA disclosures in those transactions. The CFPB received a request from a trade association that it determine that TILA preempts New York’s commercial financing disclosure law. The CFPB then issued a preliminary determination that New York’s law was not preempted. On the CFPB’s own motion, it also provided notice that it was considering making determinations whether TILA preempts the California, Utah, and Virginia laws and indicated that it had preliminarily concluded that those laws were not preempted by TILA.
As stated above, Congress adopted a narrow standard for TILA preemption that displaces state law only in the case of “inconsistency.” This means that states have broad authority to establish their own protections for their residents, both within and outside the scope of TILA. As relevant here, commercial financing transactions to businesses—and any disclosures associated with such transactions—are beyond the scope of TILA’s statutory purposes, which concern consumer credit. To view the full analysis on why the CFPB found that the commercial financing laws of California, New York, Utah, and Virginia are not preempted by TILA, please view the CFPB’s full preemption determination at the link here.
