CFPB issues decision on TILA preemption of state laws

The CFPB today issued a determination that state disclosure laws covering lending to businesses in California, New York, Utah and Virginia are not preempted by the Truth in Lending Act, confirming its preliminary determination that “there is no conflict because the state laws extend disclosure protections to businesses and entrepreneurs that seek commercial financing.”

Last year, the bureau was asked to review a New York state law requiring financial disclosures before consummation of covered transactions, although the law applies to “commercial financing” instead of consumer credit. Specifically, the law requires providers to issue disclosures when “extending a specific offer” for various types of commercial financing. California, Utah and Virginia have similar laws.

“States have broad authority to establish their own protections for their residents, both within and outside the scope of the Truth in Lending Act,” the CFPB said. “The Truth in Lending Act only preempts state laws under what is known as conflict preemption. The state laws reviewed by the CFPB concern protections for businesses to ensure they can understand the credit terms available to them. This is beyond the scope of the Truth in Lending Act’s statutory consumer credit purposes.”