California's commercial lending landscape shifted significantly in 2025, with new regulations affecting how blanket loans are structured and serviced. Understanding these changes is crucial for investors navigating today's market.
Senate Bill 1286: Expanding Debt Collection Protections
Effective July 1, 2025, SB 1286 extended consumer-style debt collection protections to commercial debts under $500,000 involving natural persons or personal guarantees. This seemingly technical change has profound implications for blanket loan borrowers.
Previously, commercial debt collection operated under different rules than consumer debt. Now, if you're an individual investor with a blanket loan under $500,000, or if you've personally guaranteed a larger loan, you receive additional protections during collection proceedings.
These protections include:
- Extended response times for legal notices
- Restrictions on collection communication methods
- Enhanced documentation requirements for lenders
- Stricter timelines for foreclosure proceedings
For borrowers, this means more breathing room if difficulties arise. For lenders, it means adjusted procedures and potentially longer resolution timelines.
Assembly Bill 130: Mortgage Servicing Standards
AB 130, effective June 30, 2025, imposed new compliance standards on mortgage servicers, particularly affecting subordinate mortgages common in blanket loan structures.
Key provisions include:
- Enhanced communication requirements between servicers and borrowers
- Stricter protocols for payment processing and application
- Detailed record-keeping mandates
- Specific procedures for handling borrower inquiries
These changes mean borrowers should expect more formal communication from loan servicers and have stronger recourse if servicing issues arise.
California Financing Law: Ongoing Compliance
The California Financing Law (CFL) continues to govern commercial lending, requiring most lenders to maintain licenses through the Department of Financial Protection and Innovation (DFPI). Recent enforcement actions demonstrate the state's commitment to compliance.
Important exemptions remain for:
- Federally chartered banks and credit unions
- Licensed residential mortgage lenders
- Entities making fewer than five California loans annually
Understanding whether your lender falls under CFL requirements affects your rights and protections as a borrower.
Disclosure Requirements for Smaller Loans
California's disclosure law for commercial financings up to $500,000 remains in effect, requiring specific disclosures about rates, fees, and terms. While many blanket loans exceed this threshold, portfolio loans for smaller investors might trigger these requirements.
Required disclosures include:
- Total amount financed
- Annual percentage rate
- Finance charges
- Total payment amount
- Payment schedule
These disclosures provide transparency but also add complexity to loan documentation.
Strategic Implications for Investors
These regulatory changes don't prevent blanket loans but do affect their structure and servicing. Smart investors should:
Understand Your Classification
Determine whether you qualify for enhanced protections under SB 1286. Individual investors and small business owners often receive more protections than large commercial entities.
Document Everything
New servicing standards mean increased documentation. Maintain comprehensive records of all lender communications, payment histories, and account statements.
Review Existing Loans
If you have current blanket loans, understand how new regulations affect your rights and obligations. Some protections apply retroactively to existing loans.
Choose Compliant Lenders
Work with lenders who demonstrate clear understanding and compliance with California's evolving regulatory framework. Ask about their licensing status and compliance procedures.
Plan for Longer Timelines
Enhanced protections and compliance requirements can extend transaction timelines. Build extra time into your financing plans.
The Opportunity in Compliance
While regulations add complexity, they also create opportunities. Lenders who master compliance gain competitive advantages. Borrowers who understand their rights can negotiate better terms and protect their interests more effectively.
At Capital Direct Funding, we've invested heavily in compliance infrastructure to navigate California's regulatory environment.
We see regulations not as obstacles but as frameworks for sustainable, transparent lending relationships.