Decoding Merchant Cash Advances in New York: A Legal Overview
February 28, 2024
A Legal Overview of Merchant Cash Advances in New York
New York, a bustling hub of financial activity, presents a unique landscape for
Merchant Cash Advances
(MCAs). Despite being a favored environment for MCAs, the state has pioneered laws that impose consumer-like disclosures for specific commercial loans. This article delves into the legal intricacies surrounding MCAs in New York, shedding light on the Commercial Finance Disclosure Law (CFDL), its implications, and crucial considerations for businesses and MCA providers.
The CFDL in New York, effective since August 1, 2023, extends disclosure requirements, typically associated with consumer lending, to commercial financing instruments, including MCAs. Importantly, these regulations uniformly apply to both MCA brokers and funders.
MCA entities predominantly owned by a financial institution, especially a depository bank, are exempt from the CFDL. This exception underscores the significance of collaborations with FDIC-insured banks for MCA funders.
The final rules define the geographical scope triggering the CFDL's applicability, narrowing it down to where a transaction occurs or the involved parties' location. This limitation helps in clarifying the jurisdiction for compliance.
The CFDL applies to transactions where the recipient is managed or directed from New York or is a resident of New York. Like in other states, relying on the business address provided by the recipient becomes a pivotal determinant.
The law allows MCA funders to assign their rights in the MCA contract. In cases involving a broker, the final rules mandate a clear written disclosure of how and by whom the broker will be compensated.
The CFDL obligates the calculation and disclosure of the finance charge on a transaction, encompassing fees charged by the MCA funder for underwriting and origination.
New York enacted SB 1235 ahead of the curve, requiring particular revelations for business financiers and MCA providers. Notably, the state distinguishes itself by requiring the disclosure of an Annual Percentage Rate (APR), departing from the previously used Annualized Cost of Capital (ACC). This disclosure is triggered whenever a rate, cost, or financing price is quoted based on information from a potential merchant recipient.
New York implemented laws on August 31, 2019, to safeguard merchants, prohibiting MCA funders from issuing a Confession of Judgment (COJ) to a New York resident and merchant. This proactive move aimed to prevent coercive practices and protect the rights of businesses utilizing MCAs.
Merchant Cash Advance Attorney NEW YORK J. Singer Law Group, PLLC, a New York Law Firm focusing on settling Merchant Cash Advance loans for clients across all 50 States and Merchant Cash Advance loans in NEW YORK.
J. Singer Law Group, PLLC, stands as an essential asset for enterprises navigating the Merchant Cash Advance (MCA) environment in New York. With expertise in resolving MCA loans nationwide, the legal firm aids clients in addressing issues such as ACH payments, personal guarantees, Confessions of Judgment (COJs), and other related challenges.
As the epicenter of finance, New York plays a pivotal role in the Merchant Cash Advance industry. Understanding and complying with the evolving legal landscape is crucial for MCA funders and businesses seeking capital. J. Singer Law Group, PLLC, stands as a guiding force, helping companies to navigate the complexities and solve MCA-related challenges in New York and beyond.
Commercial Finance Disclosure Law (CFDL)
The CFDL in New York, effective since August 1, 2023, extends disclosure requirements, typically associated with consumer lending, to commercial financing instruments, including MCAs. Importantly, these regulations uniformly apply to both MCA brokers and funders.
Key Aspects of the CFDL
Bank Exception
MCA entities predominantly owned by a financial institution, especially a depository bank, are exempt from the CFDL. This exception underscores the significance of collaborations with FDIC-insured banks for MCA funders.
New York Nexus
The final rules define the geographical scope triggering the CFDL's applicability, narrowing it down to where a transaction occurs or the involved parties' location. This limitation helps in clarifying the jurisdiction for compliance.
MCA Recipient Location
The CFDL applies to transactions where the recipient is managed or directed from New York or is a resident of New York. Like in other states, relying on the business address provided by the recipient becomes a pivotal determinant.
Assignment and Broker Compensation Disclosure
The law allows MCA funders to assign their rights in the MCA contract. In cases involving a broker, the final rules mandate a clear written disclosure of how and by whom the broker will be compensated.
Finance Charge Calculation
The CFDL obligates the calculation and disclosure of the finance charge on a transaction, encompassing fees charged by the MCA funder for underwriting and origination.
SB 1235 and APR Disclosure
New York enacted SB 1235 ahead of the curve, requiring particular revelations for business financiers and MCA providers. Notably, the state distinguishes itself by requiring the disclosure of an Annual Percentage Rate (APR), departing from the previously used Annualized Cost of Capital (ACC). This disclosure is triggered whenever a rate, cost, or financing price is quoted based on information from a potential merchant recipient.
Legal Protections for New York Merchants
New York implemented laws on August 31, 2019, to safeguard merchants, prohibiting MCA funders from issuing a Confession of Judgment (COJ) to a New York resident and merchant. This proactive move aimed to prevent coercive practices and protect the rights of businesses utilizing MCAs.
Merchant Cash Advance Attorney NEW YORK J. Singer Law Group, PLLC, a New York Law Firm focusing on settling Merchant Cash Advance loans for clients across all 50 States and Merchant Cash Advance loans in NEW YORK.
Merchant Cash Advance Attorney in New York
J. Singer Law Group, PLLC, stands as an essential asset for enterprises navigating the Merchant Cash Advance (MCA) environment in New York. With expertise in resolving MCA loans nationwide, the legal firm aids clients in addressing issues such as ACH payments, personal guarantees, Confessions of Judgment (COJs), and other related challenges.
As the epicenter of finance, New York plays a pivotal role in the Merchant Cash Advance industry. Understanding and complying with the evolving legal landscape is crucial for MCA funders and businesses seeking capital. J. Singer Law Group, PLLC, stands as a guiding force, helping companies to navigate the complexities and solve MCA-related challenges in New York and beyond.
Trying to choose between a merchant cash advance and a business loan? Learn the real differences in cost, risk, and repayment, and how J. Singer Law Group can help if MCA debt is already out of control.
Wondering what an MCA lawyer is and how they can help your business? Learn what merchant cash advance attorneys do and how J. Singer Law Group protects New York business owners.
Searching for an “MCA lawyer near me”? Learn what to look for in a merchant cash advance attorney and how J. Singer Law Group in New York can help protect your business.
Looking for the best MCA lawyer to protect your business from aggressive merchant cash advance funders? Learn what to look for and how J. Singer Law Group can help.
Student loans are rarely discharged in Chapter 7 bankruptcy, but it’s possible under the undue hardship rule. Learn how it works, what you need to prove, and how a New York bankruptcy lawyer can help
Filing for Chapter 13 in New York can help you stop foreclosure, reorganize debt, and keep your home and car. Learn how the process works, who qualifies, and what to expect from the repayment plan.
Confused about Chapter 7, 11, or 13 bankruptcy? Learn the differences, who qualifies, and how each chapter affects debt, assets, and credit. Find out what’s right for you.
Filing Chapter 7 bankruptcy stops collections and wipes out most debts. Learn what happens when you file, what assets you keep, and how long the process takes in New York.
Filing Chapter 7 bankruptcy in New York? Learn when you may lose your car, what exemptions apply, and how to protect your vehicle from repossession.
Wondering if you can remove Chapter 7 from your credit early? Learn what’s possible, what’s not, and how to rebuild your financial future after bankruptcy.