Preventing Regulation in Merchant Cash AdvanceAugust 19, 2013 | By: Sean Murray
Will the merchant cash advance industry ever be regulated?
Insiders say that in order to prevent it or to make the brunt of it less extreme, the industry should preemptively regulate itself. But that’s been said for a while and not much has been done towards it. The industry definitely isn’t a level playing field on rates anymore but it also isn’t very level when it comes to how the products are sold. Out on the street it’s basically fair game to sell the products however you want. The terms in this business don’t necessarily have the same meaning to merchants. A merchant hears 9% holdback and might think that means 9% APR, but it’s on a deal with a 40% factor over 6 months. Then when a competitor offering a 18% factor over 6 months comes along with fixed payments, the merchant sees the rate as being double, even though the cost on the deal is less than half.
Read this article on ISO&Agent and envision the payment processing ISO as a Merchant Cash Advance ISO:
ISOs can protect themselves from lawsuits and regulatory action by establishing uniform, documented sales training programs that follow sales best practices, a sales-training consultant says.That way, if questions arise in court or during investigations, ISOs can produce standardized training documents and test scores that demonstrate they’ve taught salespeople ethical practices, says Mark Dunn, president of Hartland, Wis.-based Field Guide Enterprises LLC.
When I was a merchant account rep, the hardest part about selling a deal was competing against account reps that only pitched the Qualified Rate on 3 tiered pricing. Mid-Quals, Non-Quals, and additional transaction fees weren’t part of the conversation and quite frankly, half the reps selling these deals didn’t even know there were any other costs. Their sales trainers didn’t even teach them about other normal transactional fees. Instead they ingrained 1 line closes in their brains such as, the best rate in the industry, wholesale rate, and the direct rate. This doesn’t really allow merchants to make informed decisions.
Self-regulation will be tough but it is needed in the merchant cash advance industry. Do you agree?
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Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.