After its recent win against MCA lenders a few months ago, the New York Attorney General has filed a new even more aggressive lawsuit against many more merchant cash advance companies that we commonly encounter and defend our business clients against including:
Yellowstone Capital, Fundry, Delta Bridge Funding, Cloudfund, ABC Merchant Solutions, Advance Merchant Services, Business Advance Team, Capital Advance Services, Capital Merchant Services, Cash Village Funding, Fast Cash Advance, Fundzio, Green Capital Funding, HFH Merchant Services, High Speed Capital, Merchant Capital Pay, Merchant Funding Services, Midnight Advance Capital, Mr. Advance Capital, Ocean 1213, Simply Equities, TVT Cap Fund, TVT Capital HR, Thryve Capital Funding, WCM Funding, West Coast Business Capital, and World Global Capital.
After the initial excoriating decision against MCA lenders by Supreme Court Justice Borrok, the NY AG has pushed further to bring MCA practices to light. The AG continues to call these MCA operations fraudulent predatory loans as well as illegal, ultra-high-interest loans. The Attorney General’s main arguments continue to follow a consistent pattern of what we have seen both Federal and State Courts in New York find over the last year. First, the AG contends that these MCA operations consist of Usury and Unlicensed Lending, with some lenders charging up to 820% in interest. They continue to state that these cash advances are a Sham and their Reconciliation clauses which have been a topic we have discussed often are illusory, given that these reconciliation clauses are often there for show and are almost never followed or even reviewed by the lender when requested by the business. This lack of actual Reconciliation further proves that these are in fact loans instead of the purchase of receivables.
The lawsuit goes on to explain that small businesses are often defaulted immediately for just a few missed payments and then pursued aggressively via collection and litigation tactics. Finally, the lawsuit claims that MCA lenders have defrauded business merchants as well as the New York Courts. This is done primarily by the filing of false affidavits and complaints, the lending of usurious loans, and multiple other misrepresentations and deceptions. Ultimately, the AG believes and states that these MCA contracts are unconscionable agreements that the legislature has said are fraudulent.
The AG has asked for the court to issue immediate Injunctive Relief against these Merchant Cash Advance Companies asking for the court to prevent them from continuing business activities while the case continues. Although this case will proceed for some time, the effects are already being felt. Using the exact defenses and potential counterclaims that the Attorney General is putting forth is what is necessary to defend against any aggressive collection and or litigation activity against a business by any Merchant Cash Advance lender.