SB 1286 and AB 2116: What Equipment Finance Lenders Must Change in California
Two California statutes change how equipment finance lenders collect from California borrowers and guarantors. SB 1286 already governs accounts booked, renewed, sold, or assigned since July 1, 2025. AB 2116 reaches every covered small-business deal booked on or after January 1, 2028. Both target the small-ticket space where most equipment finance defaults occur.
SB 1286: the Rosenthal Act now reaches commercial accounts
California’s Rosenthal Fair Debt Collection Practices Act (Civ. Code § 1788 et seq.) used to cover consumer debt only. SB 1286 extended it to “covered commercial debt”: money a natural person owes to a lender, a commercial financing provider, or a debt buyer, where everything that person owes the same creditor totals $500,000 or less (Civ. Code § 1788.2(n), (o)).
What it covers
Guarantors and sole proprietors. The statute protects natural persons. Collecting only from an LLC or corporation falls outside it; collecting from the owner who signed the personal guaranty falls inside it.
Original lenders. Rosenthal defines a debt collector as anyone who regularly collects debts on its own behalf or for others. Your in-house collections and recovery staff are collectors under the statute, not only your outside agencies and counsel.
Lease financing. The statute borrows the Financial Code definition of a commercial financing provider, which includes lease financing: a lease whose purchase option creates a security interest, such as a $1-out lease (Fin. Code § 22800(j)). A lessor under a true fair-market-value lease has an argument that the statute does not reach it, but do not rely on that argument without reviewing the documents.
Timing. The law applies to covered credit entered into, renewed, sold, or assigned on or after July 1, 2025 (Civ. Code § 1788.1(d)). A portfolio purchase or a renewal can bring an older account within it.
What changes in practice
Conduct rules. Rosenthal bars threats of action you do not intend to take, harassment, false or misleading statements, communications that misrepresent attorney involvement, and attempts to collect amounts not owed (Civ. Code §§ 1788.10–1788.17).
Venue. Section 1788.15 limits where a collector may sue. When the claim is on a guaranty of covered commercial debt, the statute permits suit in the county where the borrowing business is located (Civ. Code § 1788.15(c)).
Remedies. A guarantor who proves a violation can recover actual damages, statutory damages, and attorney’s fees (Civ. Code § 1788.30). Waivers of the statute are void (Civ. Code § 1788.33).
AB 2116: licensing and enforceability for small-business financing
Governor Newsom signed AB 2116 (Stats. 2026, ch. 823) on September 30, 2026. It adds a commercial financing chapter to the California Financing Law, beginning at Financial Code section 22655.
Who it covers
The new chapter applies to commercial financing offers of $500,000 or less to a small business (annual gross receipts of $16 million or less, or the state’s adjusted threshold if higher) or its owner. “Commercial financing” includes commercial loans, open-end credit plans, factoring and other receivables purchases, asset-based lending, and lease financing (Fin. Code § 22655(e)). As under SB 1286, lease financing means a lease with a purchase option that creates a security interest.
What it requires
A license. Starting July 1, 2028, providers and brokers of covered commercial financing must hold a license. A provider that files a complete application by that date may continue operating while the application is pending (Fin. Code § 22100.6).
Enforceability tied to licensure. A covered agreement is not enforceable unless the provider is licensed, has a complete application pending, or entered into the transaction before January 1, 2028 (Fin. Code § 22658).
No pre-default confessions of judgment. Providers and brokers may not take a confession of judgment or power of attorney before the recipient defaults (Fin. Code § 22659(a)).
Ability to repay. The commissioner may discipline a licensee that repeatedly fails to consider a recipient’s ability to repay.
Exemptions
The chapter does not apply to Farm Credit System lenders, financing secured by real property, certain vehicle dealer and rental company transactions, or a person that makes one or fewer covered transactions in California in a 12-month period, or five or fewer incidental to its business (Fin. Code § 22656). It contains no general exemption for non-bank equipment lenders.
Open questions
The licensing requirement starts six months after the enforceability rule, and commentators have flagged that gap. It is also unclear whether a lender that already holds a California Financing Law license must amend it. Expect DFPI guidance before 2028.
What to do now
Flag every California account with a natural-person obligor by booking, renewal, or acquisition date, and by total exposure to that obligor.
Review demand letters, call scripts, and text and email templates used on guarantors against the Rosenthal conduct rules.
Confirm venue before filing suit against a guarantor.
Require your agencies and outside counsel to confirm SB 1286 compliance in writing.
Calendar July 1, 2028, and decide now whether your company, and each broker or referral partner that sends you California deals, will need a license.
Retire pre-default confession-of-judgment and power-of-attorney provisions from California documents used after 2027.
Grant, Kessler & Zunshine represents equipment finance lenders and lessors in California, on contingency. See how we handle equipment finance collections, or call (619) 233-7078.
This article provides general information, not legal advice, and reflects California law as of October 2026. Prior results do not guarantee a similar outcome. Grant, Kessler & Zunshine, APC, 1331 India Street, San Diego, CA 92101.