🌊 California’s Regulatory Ripple Just Reached Broker Conversations

(Effective January 1, 2026)

This is an important update for brokers operating in California.

California’s Commercial Financing Disclosure Law is not going away. Standardized, pre-transaction disclosures remain firmly in place. (CFDL) 

What is changing, as of January 1, 2026, is that California has expanded its regulatory scrutiny to include how pricing is discussed throughout the application process, not just what appears in the disclosure itself.

In other words, California is now changing the conversation—literally.
The focus has expanded from how deals are documented to how deals are explained.

That includes:

Calls.
Texts.
Emails.
Sales conversations.
Broker explanations.

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From Disclosure to Ongoing Communication

When California implemented the CFDL in 2023, the focus was clear: ensure merchants receive standardized, transparent disclosures before entering into a commercial financing transaction.

That framework still applies. 

The next phase of the regulatory ripple builds on it.

As of January 1, 2026, California law extends disclosure-related requirements into the entire application process, meaning brokers and funders must be mindful of pricing language used at every stage — not just at signing.

Source: Hudson Cook LLP via deBanked
https://debanked.com/2025/12/brokers-and-funders-are-you-ready-for-changes-to-california-law-effective-january-1-2026/

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🚫 Certain Pricing Language Is Now Off-Limits

Use of the term “Factor Rate” is Now High Risk in California

Under California S.B. 362, providers and brokers may not use the term “rate” in a manner likely to deceive a recipient.

Regulators have explicitly flagged the use of:

• “X% factor rate”
• “Y% fee rate”

Because factor rates typically diverge materially from APR, regulators have signaled that using the term “factor rate” in merchant-facing conversations may be considered misleading.

Important:
Factor rate terminology may still be used internally — but not in conversations with California merchants.

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“Interest Rate” Has a Narrow Definition

The term “interest” may only be used when referring to an annual simple interest rate.

This means:

• Daily, weekly, or monthly pricing cannot be described as an “interest rate.”
• Sales scripts, emails, and agreements using non-annual rates as “interest” may need to be updated

Again, the product hasn’t changed — the language around it must.

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🔁 The New APR Reminder Requirement

California is also adding an ongoing APR reminder requirement during the application process.

Once a specific offer has been extended, any time pricing is discussed, the broker in coordination with the provider, must also restate the APR or Estimated APR, using that exact terminology.

This applies during:

• Follow-up calls or text messages
• Emails referencing pricing or financing amounts
• Online portals displaying offer details
• Funding calls prior to disbursement

The “application process” is interpreted broadly and may continue until funding occurs or the offer is withdrawn.

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🔑 What ISOs and Brokers Should Do Now

These updates do not impact Nexi’s products; they impact how pricing conversations are handled.

To prepare, ISOs and brokers should consider:

• Creating clear, written guidelines that define how pricing may be discussed with California merchants
• Requiring ISOs and brokers to acknowledge the new rules in writing
• Updating sales scripts, email templates, and portal language to ensure the APR or Estimated APR is consistently stated whenever pricing is discussed

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🧱 Where Nexi Stands

At Nexi, we have always believed that transparency lives in conversations — not just contracts.

That’s why we emphasize:

✅ Plain-language explanations merchants can understand

✅ Compliance-forward communication standards

✅ Ongoing broker education as regulations evolve

✅ Clear pricing discussions aligned with disclosure requirements

As California raises the bar, ISOs and brokers who adapt early will reduce risk, build trust, and strengthen long-term merchant relationships.

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🔚 Final Thought

California’s message is clear:

Disclosure still matters — and now, so does how you talk about it.

The regulatory ripple has moved from documents into conversations.
Brokers who adjust now will be best positioned for what comes next.

Ready to work with a partner built for what’s next?

👉 Let’s talk.

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Disclaimer: This newsletter is provided for informational purposes only and does not constitute legal advice. Readers should consult their own counsel before taking any action based on the information herein for registration requirements and enforcement oversight..