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At the Law Offices of Anthony Rumore, P.A. We are client and solution oriented, not problem oriented. We focus on resolving the legal matters and problems of every one of our clients. For us, sharing the precise nature of the legal issues with the client is just the beginning of the problem resolution process. We are determined to present our clients concrete and realistic solutions for their problems.

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  • 1318 Southeast 1st Avenue, Fort Lauderdale 33316
  • 954-942-2414

In the News

Merchant cash advnace & handling creditor pressure


What to expect and how to contend with the high-pressure and aggressive collection tactics used in Merchant Cash Advance lending.

This article is intended to give Merchant Cash Advance ("MCA") borrowers and anyone considering an MCA as a quick source of operating capital insight into how these creditors operate. The first thing to understand is that most U.S. jurisdictions do not regulate MCA lending. Banks and traditional finance companies are regulated at the federal and state level, and payment applications such as PayPal, Venmo, and Cash App carry some degree of regulation. MCA lending, by contrast, has almost no regulatory oversight, so there are essentially no laws governing how MCA lenders or their collection agencies may pressure a business owner during collection.

Pressure often begins before a borrower ever misses a payment. When you accept an MCA and receive funding on a daily or weekly repayment schedule, the creditor obtains direct ACH access to your business bank account and automatically pulls each payment. Brokers and collection agents frequently stay in contact even when nothing has been missed "Are you going to make your payment this week?" "Are you having any financial difficulty we should know about?"

That access cuts deeper than most borrowers realize. Once funded, the creditor can see your cash flow, deposits, expenditures, and the checks you write. Your banking activity is monitored continuously, and if you appear to be approaching trouble, the creditor will ramp up the pressure before a single payment is missed. In many cases the MCA creditor understands a borrower's finances better than the borrower does.

A New Advance With Higher Repayment - "Stacking"
When a borrower shows signs of cash-flow strain, the lender may offer a new, higher-dollar advance. Sometimes it pays off the existing (or already-delinquent) advance and replaces it with a larger one on worse terms; other times it funds a new advance on top of the one the borrower is already struggling to pay. Adding a second, third, or even fourth advance in this way is called "Stacking." The logic is worth following. You start with one advance and struggle to pay it. A second provides short term relief but raises your total obligation; a third does the same, until three or four daily or weekly payments are consuming most of your operational cash flow. A borrower who could not manage one advance is now servicing several at once, with far more ACH withdrawals draining the account each day or week. The short term infusion only worsens the underlying problem by increasing the total amount of unhealthy business debt.

MISSED PAYMENTS ARE WHEN THE REAL PRESSURE BEGINS
Once a borrower misses or bounces a payment, the extreme pressure begins. Whether the borrower was struggling with a single advance or can no longer cover stacked payments, a missed or bounced payment triggers the hyper aggressive, unregulated tactics of the lenders and their captive (that is, controlled) collection agencies. One or two missed payments can produce anywhere from fifteen to sixty calls and texts per day, and they are typically threatening "You need to make your payment today or we intend to take everything you have" is a common theme.

Because these creditors and agents are unregulated, they will say and do almost anything. It is not unusual for them to contact a borrower's family spouse, parents, siblings using contact information pulled from public records. The family has nothing to do with the MCA, but pressuring them is simply another way to pressure the borrower. Creditors also contact a borrower's customers, using customer information taken from bank statements or the original application. They call those customers, send demand letters seeking payment directly, and send UCC lien letters.

How MCA Pressure Differs From Bank Collection
This is very different from collection by a bank or traditional finance company. A regulated bank is subject to collection laws and to oversight from agencies such as the Consumer Financial Protection Bureau, the Federal Reserve Board, the SEC, and the FDIC. A bank cannot call you past a certain hour or make untruthful threats, and once you are represented by counsel on a consumer or regulated bank debt, the creditor may no longer contact you directly only your attorney.

MCA debt is unregulated commercial debt, so even after a borrower is represented by counsel, MCA creditors may continue to contact and harass the borrower directly. The pressure therefore takes many forms: monitoring your bank statements and communications, offering additional advances that dig the hole deeper, creating a stacking situation that almost guarantees default, and once a payment is missed dozens of calls, texts, and emails a day threatening to take your home, seize your assets, and accuse you of fraud.

MCA creditors and their agents will threaten almost anything, including finding a way to put a borrower in jail a claim that is completely untrue and unfounded all to regain access to your bank accounts or extract more money on a delinquent account. They get away with it because, being unregulated, they are effectively permitted to lie to a borrower.

Our attorneys offer free consultations to analyze a borrower's situation, explain how we can help protect against these tactics, and discuss strategies for resolving problematic MCA debt. If you believe you may default on a merchant cash advance, it is critically important to consult qualified legal professionals so that you understand your options and can build a strategy to protect yourself, your business, and your family.

Anthony Rumore, Esq.
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