McCune Wright Arevalo, LLP, has spent the last fifteen years protecting consumers and small business owners from unscrupulous lenders and bankers through class action lawsuits. That has included obtaining a $203 million verdict against Wells Fargo. It has also involved obtaining well over $1 billion for its clients against financial institutions engaged in unfair and illegal banking practices. McCune Wright Arevalo, LLP, is now investigating bringing class action lawsuits against unscrupulous merchant advance funding companies. The effective interest rates for these loans combined with the manner of collection may subject these contracts up to scrutiny as whether they are unconscionable and thereby unenforceable.
The Operations of Merchant Advance Funding Companies
Small businesses have struggled to obtain financing from commercial banks since the 2008 recession, and instead have turned to merchant cash advance companies who offer quick and easy funding. In 2019, the merchant cash advance industry financed an estimated $19 billion in funding to borrowers, as traditional banks became less available. Merchant advance funding companies operate with almost no government oversight and what most would consider extreme interest rates. As the common arrangements between these lenders and borrowers is to use contracts developed by the lenders to call the loans sale instead of the loans they are in all respects, so that the lenders can avoid having their conduct and loans regulated and subject to banking and disclosure laws.
In order to secure the loan, business owners must provide their recent sales and identify their business partners, customers, and amounts they owe. They must also grant lenders complete access to their bank accounts. Borrowers then typically receive a percentage of their future revenue from the merchant cash advance companies, which they then are required to repay via automatic withdrawals from their bank accounts, with repayments varying from daily to week to week. However, if the borrowers have insufficient funds through no fault of their own, the merchant cash advance companies can freeze their accounts by filing “confessions of judgement” – filed without the borrowers’ knowledge, doubling the amounts of money owed and crippling the company.
Merchant Cash Advance Companies Capitalize on Small Businesses During Pandemic
Although many small businesses are being forced to close their doors amongst pandemic COVID-19, merchant cash advance companies are continuing their attempts to collect the unconscionable and outrageous interest on the funds they had advanced. Some of these merchant advance funding companies have reportedly resorted to aggressive collection techniques, such as threatening emails and texts or visits to borrowers’ homes.
In the interest of assisting struggling small businesses, McCune Wright Arevalo, LLP, is taking action and investigating these merchant cash advance companies regarding the legality of the underlying contracts to charge outrageous overdraft fees, and the collection attempts towards their borrowers.
Protecting and Serving Small Businesses and Consumers Throughout the U.S.
McCune Wright Arevalo, LLP has a history of aggressive class action representation. Serving throughout the United States, we have represented consumers and small businesses in financial services class action litigation involving overbilling, mortgage fraud, and more. In addition to our $203 million verdict against wells Fargo, we have recovered over a billion dollars in verdicts and settlements in financial services settlements and verdicts.
We bring an unwavering drive and commitment to justice on behalf of small business owners and consumers in every case we pursue, and we are dedicated to seeing that wrongs are made right for our clients, leading to a fairer marketplace for all.
If you’ve been subject to a contract with potentially unconscionable contract and/or harassment or what may be illegal collection conduct by merchant advance funding companies, call us today at (909) 345-8110.