In May, several members of the Husch Blackwell Alternative Commercial Finance team attended the 2025 International Factoring Association Annual Conference. Between rounds of golf with new acquaintances, dinners with friends and clients, and engaging discussions on the convention floor, our team took the opportunity to listen carefully to industry participants. We aimed to gain deeper insight into the perspectives, challenges, and concerns facing alternative commercial finance companies today. Here’s some of what we overheard:
“We’re in the clear on federal regulatory concerns.”
With the CFPB’s 1071 rule delayed, the OCC scaling back scrutiny, and enforcement priorities in flux, some companies are breathing a little easier. But state regulators, especially in New York and California, are still active—and, in some cases, even more emboldened. Licensing, disclosure laws, and usury scrutiny continue to drive risk exposure, especially for nonbank lenders. Furthermore, federal statutes such as the Equal Credit Opportunity Act and Dodd-Frank Section 1071 remain in effect, and the CFPB has yet to issue rulemakings that would formally reverse many regulations implemented during the Biden administration. Assessing regulatory risk is a complex undertaking, requiring companies to balance their product mix, risk tolerance, and strategic objectives. In our view, alternative commercial finance companies should take a thoughtful approach to evaluating their individual risk profiles in light of the evolving regulatory landscape.
“Everyone’s talking AI, but no one wants to be the first enforcement test case.”
Whether it’s underwriting, fraud detection, or collections, the potential for AI to streamline operations is significant. However, compliance and legal teams are quick to highlight the associated risks. While there is widespread interest in automation, there is also growing concern about how regulators may interpret algorithmic decision-making under UDAAP and fair lending principles—even within the small business context. Furthermore, unless the federal government begins to consider national standards for the implementation of AI, including its use in financial services, there is a substantial risk that AI regulation will become as fragmented as the current approach to commercial loan disclosures
“We’re not a lender, but that doesn’t stop regulators (and sometimes courts) from calling us one.”
Factors and other alternative finance providers continue to operate under heightened scrutiny from regulators applying laws originally designed for traditional lenders. State regulators—and an increasingly active plaintiffs’ bar—are showing a greater willingness to recharacterize transactions, particularly in cases involving disputes over disclosures or pricing. This trend exposes alternative finance companies to additional legal and regulatory risks, such as usury claims or licensing challenges, that may not have been anticipated under their original business models. The rapid proliferation of fintech products, embedded finance solutions, and complex bank partnerships is further blurring the lines between lenders and non-lenders. As these distinctions become less clear, alternative finance providers must be diligent in structuring their transactions and maintaining robust compliance frameworks. Careful attention to evolving regulatory interpretations and proactive risk management are essential to navigating this dynamic landscape.
“I liked it better when no one knew what alternative commercial finance was.”
With greater visibility comes increased scrutiny. As the alternative commercial finance industry—and, in particular, fintech solutions applied in the commercial finance space—matures and attracts more mainstream capital, it faces a new set of growing pains, chief among them heightened attention from policymakers, regulators, and the media. This public policy spotlight is unlikely to fade in the near future. As a result, alternative lenders must be prepared to navigate a more complex regulatory environment and respond proactively to evolving expectations around transparency, consumer protection, and responsible innovation.
Trade associations play a critical role in shaping the regulatory landscape for the industry. By submitting formal comments on proposed regulations, these organizations ensure that the unique perspectives and operational realities of alternative finance companies are represented in the policymaking process. They also serve as a unified voice when engaging with political leaders, advocating for balanced regulations that promote innovation while protecting consumers and small businesses. Regular dialogue with legislators, regulators, and other stakeholders is essential—not only to educate them about the value alternative finance brings to the market, but also to address misconceptions and build constructive relationships that benefit the entire industry.
Participation in industry associations and policy discussions is more important than ever. By working collectively to influence the direction of regulation and public perception, the industry can help ensure a stable and sustainable path forward as it continues to grow and evolve.
Recent CFPB developments
CFPB announces it will not “prioritize” Dodd-Frank 1071 enforcement. The CFPB has announced it will deprioritize enforcement of its rule requiring financial institutions to report lending data for women-owned, LGBTQI+-owned, and minority-owned small businesses, citing a focus on other priorities and concerns about fairness given ongoing legal challenges. The 1071 Rule was finalized in 2023 but has faced lawsuits from banking groups and a stay from the courts, with compliance deadlines pushed back for mainly banking entities amid appeals. Although the Supreme Court upheld the CFPB’s funding structure, other legal questions remain unresolved, and the Fifth Circuit Court of Appeals has paused enforcement for a limited number of parties pending further review. Meanwhile, efforts to repeal the rule continue in Congress, though political hurdles remain. The CFPB has also signaled that it may revisit and revise the rule through additional rulemaking in the future.
CFPB plans to reverse open banking rule. The CFPB has announced plans to withdraw its Section 1033 Open Banking Rule, which was designed to give consumers greater control over their financial data and set standards for data sharing between banks and fintech companies. The decision comes after a lawsuit from banking groups alleged the CFPB overstepped its authority, leading the agency to conclude the rule was unlawful. While the CFPB is pulling back the current rule, the underlying Dodd-Frank Act still requires the agency to issue regulations granting consumers access to their financial information, though it is uncertain how or if the new administration will proceed. The move has drawn praise from traditional banking associations, who argue the rule was flawed, and criticism from fintech advocates, who say its withdrawal benefits big banks at the expense of consumer choice and innovation.
CFPB rescinds CFPA interpretive regarding state enforcement. On May 15, the CFPB rescinded its 2022 interpretive rule that had broadened state authority to enforce federal consumer financial protection laws under Section 1042 of the Consumer Financial Protection Act. This move returns state enforcement powers to their original, narrower scope, limiting states to enforcing only the CFPA and its regulations, rather than all federal consumer protection laws. The CFPB’s decision also ensures that states are subject to the same enforcement limitations as the bureau, particularly regarding certain entities like merchants and auto dealers, and encourages states and the CFPB to coordinate actions rather than pursue overlapping cases. While the bureau’s reversal aims to clarify boundaries and reduce duplicate enforcement, some states may continue to assert broader powers, potentially leading to future legal disputes over the extent of their authority.
CFPB issues proposed rule rescinding amendments to its procedures for supervisory designation proceeding. On May 14, the CFPB proposed rescinding recent amendments to its procedures for designating certain nonbank financial firms for supervisory oversight. The bureau is concerned that the current rules—which allow public disclosure of decisions only when a company contests its supervisory designation—could unfairly pressure entities to consent simply to avoid negative publicity. By reconsidering these amendments, the CFPB aims to ensure a fairer process for nonbanks facing potential supervision based on consumer risk, and it is seeking public input on the proposed changes until June 13.
CFPB withdraws FCRA data broker rule. The CFPB has withdrawn its proposed rule, “Protecting Americans from Harmful Data Broker Practices (Regulation V),” which would have expanded the Fair Credit Reporting Act (FCRA) to classify data brokers as consumer reporting agencies and introduced stricter requirements for data use and dispute processes. The CFPB decided not to move forward after receiving significant feedback questioning the rule’s fit with the FCRA and the agency’s legal authority. The bureau will not pursue these changes at this time but may revisit the issue in the future if needed.
New and upcoming laws and regulations
- California Rosenthal Act
- Effective date: July 1, 2025
- California will now subject certain commercial finance transactions to the Rosenthal Act, which governs debt collection activities in California. Specifically, the new law expands the act to include commercial debt where the total debt owed to the creditor is no more than $500,000. Commercial finance companies who are subject to the Rosenthal Act will have to comply with substantial debt collection requirements for certain California transactions.
- Dodd-Frank 1071
- Key dates:
- July 18, 2025: Tier 1 Covered Financial Institutions (i.e. those originating at least 2,500 covered credit transactions in both 2022 and 2023) must begin collecting data.
- June 1, 2026: Filing deadline for Tier 1 Covered Financial Institutions.
- This federal law requires covered finance companies to collect and report data related to certain commercial finance applications and originations. The new law aims to assist regulators in detecting purported disparate impact discrimination claims by commercial finance companies under the Equal Credit Opportunity Act. Note also that smaller Covered Financial Institutions will have to begin collecting data under Section 1071 in 2026.
- NOTE: As discussed above, the CFPB has claimed that it will not “prioritize” enforcement of the Section 1071 Rule and has signaled that it anticipates opening a new rulemaking process to revise the current rule. Nevertheless, as of this writing, the rule is still in effect, and litigation stays are not yet global—reaching instead only parties to the respective court cases.
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