California Finance Lenders Law Licensing Compliance for Merchant Cash Advance Financiers

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California LendingSince the Richard B. Clark v. AdvanceMe Inc. class action case settlement was brought to the awareness of the Merchant Cash Advance (“MCA”) industry, many MCAs applied and obtained a California Finance Lenders Law License from the Department of Business Oversight. (“DBO”)

After your company obtains a California Finance Lenders Law license, it will then need to comply with the California Finance Lenders Law. (“CFLL”)

CFLL does not contain specific financial code sections and regulations to regulate MCAs. However, CFLL regulates consumer and commercial loans. So, MCAs licensed under the CFLL will need to comply with the code sections and regulations that apply to commercial loans, assuming that MCAs provide advances that are each “bona fide” $5,000 or more in principal amount and for commercial purposes.

The MCA contract you use when making advances in other states is likely not in compliance with CFLL. CFLL regulation includes without limitation, (either directly or by incorporation of other California and federal laws) the rates and charges, marketing and advertising, disclosures, contractual provisions, electronic transactions, collections, credit applications, default and repossession, brokers and finders, and general operations of main and branch offices.

The CFLL license application requires the MCA company’s principal (corporate officer or LLC manager) to acknowledge on behalf of the MCA company, that it read the contents of and is familiar with the CFLL, and that it agrees to comply with the CFLL.

Lack of compliance can be brought to the attention of DBO’s enforcement officials as a result of either, a customer or competitor complaint, a DBO audit, through the Annual Report that must be filed by CFLL licensees by March 15 of each year, or by other means.

It is important to not only obtain the CFLL license, but to also comply with the CFLL to keep the license. DBO publishes online enforcement actions, such as Desist and Refrain Orders and Accusations. A CFLL licensee has a right to request an administrative hearing to defend itself and present its case. Unfortunately, although the legality of this practice by DBO is questionable, DBO publishes online none-final (and also final) administrative enforcement actions such as Desist and Refrain Orders (“D&Rs”) and Accusations. (publishing of final administrative orders is specifically authorized by the Financial Code but not none-final orders) Potential customers and competitors who review none-final D&Rs, are under the mistaken belief that the D&R is a final order, and may therefore refuse to conduct business with the licensee.

MCAs who are either CFLL licensees or potential licensees should familiarize themselves with CFLL law to avoid administrative enforcement actions, court actions, loss of business, and other adverse repercussions.

Last modified: August 5, 2016
Alan Abergel, Esq. is a managing attorney of the LAW OFFICES OF ALAN ABERGEL, P.C. located in Los Angeles, California. His law practice areas include lending, financial services, licensing, regulatory compliance, administrative litigation, and corporate law, which are more fully described at

Mr. Abergel, can be reached directly by phone at 818-783-4645, or by e-mail at

The information contained herein is for informational purposes only and should not be relied upon in reaching a conclusion in a particular area or be construed as legal advice. The legal principles discussed herein were reviewed at the time this article was authored but are subject to change. Please consult an attorney before making a decision using the information provided in this article.

Category: Business Lending, merchant cash advance

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