Fintechs Worry Calif. Bill May Distort Small-Business Lending

Online lenders operating in California such as LendingClub Corp. and OnDeck Capital Inc. would be required to ditch the annual percentage rate (APR) in favor of a new metric when disclosing small-business loan costs if a bill before California’s Assembly becomes law.

The bill (S.B. 1235), which has already passed the state Senate, would require nonbank small-business lenders to estimate the “annualized cost of capital” (ACC) to disclose financing costs. The untested metric selected by the bill’s sponsor, Sen. Steve Glazer (D), would replace the APR often used in disclosures for all types of commercial financing products issued by nonbank ...