1 00:00:00.000 --> 00:00:03.510 Sean Murray: Sure, yeah. So usury, it's not usually what 2 00:00:03.510 --> 00:00:06.600 people want to talk about when they're working lending because 3 00:00:06.630 --> 00:00:09.810 usury kind of has like a stigma just attached to the label. 4 00:00:09.840 --> 00:00:12.660 Yeah. But it's something that's very important to talk about, 5 00:00:12.660 --> 00:00:16.950 because there was a significant ruling that just came out of New 6 00:00:16.950 --> 00:00:21.000 York State. And that is if, this came from the appellate court, 7 00:00:21.030 --> 00:00:22.920 the second department of the appellate court in New York 8 00:00:22.920 --> 00:00:25.320 state, so this does not apply federally, this is a New York 9 00:00:25.320 --> 00:00:28.740 State ruling that if you are a corporation, and that 10 00:00:28.740 --> 00:00:31.530 corporation is the term corporation, is defined under 11 00:00:31.620 --> 00:00:33.240 you know the general business law, you can look that up 12 00:00:33.240 --> 00:00:36.540 yourself. If you are a corporation, you cannot sue 13 00:00:36.810 --> 00:00:41.490 somebody for usury. And usury is basically an interest rate cap, 14 00:00:41.490 --> 00:00:44.520 right. And if you if you've gone above the interest rate cap, 15 00:00:44.550 --> 00:00:49.080 you've committed usury and New York state if you charge more 16 00:00:49.080 --> 00:00:54.270 than 25% interest, I think it's annualized interest, that is the 17 00:00:54.300 --> 00:00:58.290 criminal rate of usury. And this is important to know, because if 18 00:00:58.290 --> 00:01:00.990 you're if you're newer to the business, right. Yeah. Why do we 19 00:01:00.990 --> 00:01:04.740 have all these definitions and things you can and cannot cannot 20 00:01:04.740 --> 00:01:08.160 say? Well, it's because certain states, say you can only charge 21 00:01:08.160 --> 00:01:11.520 certain rates of interest. And if you violate some of these 22 00:01:11.520 --> 00:01:15.930 rules, you could be committing a criminal act in New York State, 23 00:01:16.080 --> 00:01:18.210 and I'm not a lawyer, so you can read it yourself and get legal 24 00:01:18.210 --> 00:01:20.520 advice. But you know, the point, you know, sort of the the 25 00:01:20.520 --> 00:01:23.190 general broad understanding is that, if you charge more than 26 00:01:23.190 --> 00:01:27.030 25% interest in a year, you have committed a crime. 27 00:01:27.390 --> 00:01:28.620 Johny Fernandez: How much jail time? Do you know? 28 00:01:28.870 --> 00:01:30.310 Sean Murray: I don't know. I don't know how much jail, I've 29 00:01:30.310 --> 00:01:32.380 never admitted, like, well, how much jail time is someone going 30 00:01:32.380 --> 00:01:37.450 to get, but you could face jail time, right. And I, you know, 31 00:01:37.450 --> 00:01:39.700 this is this is important for people to know. And so when, 32 00:01:40.090 --> 00:01:42.370 when we draw distinctions as to whether or not something is a 33 00:01:42.370 --> 00:01:45.880 loan, or it's a purchase, or, you know, it's an investment of 34 00:01:45.880 --> 00:01:50.080 some of the other thing, it matters, because if you explain 35 00:01:50.080 --> 00:01:52.240 things wrong and say things wrong, your contract is wrong, 36 00:01:52.240 --> 00:01:55.870 something is wrong. You don't just it's not just confusing to 37 00:01:55.870 --> 00:02:00.250 the customer, you could actually go into territory where you've 38 00:02:00.250 --> 00:02:03.190 committed a crime, you don't want to be in a position, and 39 00:02:03.190 --> 00:02:05.350 it's not gonna be good enough to blame someone else and said they 40 00:02:05.350 --> 00:02:07.210 didn't know. So if you're, if you're a broker out there, 41 00:02:07.210 --> 00:02:09.340 you're new and new to the business. These are things you 42 00:02:09.340 --> 00:02:11.590 need to know, you need to know what the rules are, in every 43 00:02:11.590 --> 00:02:15.940 state, New York State has rules on on usury. And if you if you 44 00:02:15.940 --> 00:02:22.240 work in MCA, well, you know, you need to stay on the side of the 45 00:02:22.240 --> 00:02:25.840 line that says what you what your product does is okay. And 46 00:02:25.870 --> 00:02:30.340 so what's interesting about this particular topic is that we 47 00:02:30.370 --> 00:02:34.840 there was an MCA company that funded a merchant, it was the 48 00:02:34.840 --> 00:02:38.320 name of the company was Global Merchant Cash, and the merchant 49 00:02:38.320 --> 00:02:40.900 breached the contract. I didn't get into the fine particulars, 50 00:02:40.900 --> 00:02:43.750 but this is me reading the you know the history of the case, 51 00:02:44.080 --> 00:02:46.780 the merchant breached the contract, and Global Merchant 52 00:02:47.260 --> 00:02:50.530 Cash filed a confession of judgment. Now, I don't know if 53 00:02:50.530 --> 00:02:55.090 this business was in New York, I don't remember. But the merchant 54 00:02:55.150 --> 00:02:59.620 then sued to vacate the judgment. They said, you can't 55 00:02:59.620 --> 00:03:03.520 put a judgment on me. It's it's void automatically, because the 56 00:03:03.520 --> 00:03:07.180 underlying agreement that MCA agreement was criminally 57 00:03:07.210 --> 00:03:12.220 usurious. And so therefore, the judgment itself is void. And so 58 00:03:12.220 --> 00:03:15.430 they said, hey, Judge, you need to void this because the 59 00:03:15.430 --> 00:03:22.030 underlying agreement is criminally usurious. And the MCA 60 00:03:22.030 --> 00:03:24.130 company filed a motion to dismiss saying, you know, that's 61 00:03:24.190 --> 00:03:29.230 a bunch of a bunch of nonsense. Well, the original trial court 62 00:03:29.260 --> 00:03:31.390 with the New York Supreme Court when thinks its Supreme Court, 63 00:03:31.390 --> 00:03:33.130 we think the US Supreme Court but in New York. 64 00:03:33.310 --> 00:03:34.030 Johny Fernandez: The New York State. 65 00:03:34.060 --> 00:03:36.970 Sean Murray: Yeah, in New York, the lowest court is the Supreme 66 00:03:36.970 --> 00:03:41.260 Court. And the Supreme Court agreed with the merchant, that 67 00:03:41.290 --> 00:03:43.870 maybe there was some merit to the case didn't say that the 68 00:03:43.870 --> 00:03:46.930 merchant won, but maybe there was some merit and the case 69 00:03:46.930 --> 00:03:49.840 cannot could not be dismissed. Yeah. Sorry. I'm going into all 70 00:03:49.840 --> 00:03:51.100 these particulars, but it's. 71 00:03:51.100 --> 00:03:53.430 Johny Fernandez: But it's, it's interesting, because you can 72 00:03:53.430 --> 00:03:55.770 also like see how the example lays out in real life. 73 00:03:55.810 --> 00:03:58.570 Sean Murray: Yeah. So and by the way, you might, you know, notice 74 00:03:58.570 --> 00:04:01.180 in all of this is that it sounds expensive, because there was a 75 00:04:01.180 --> 00:04:04.180 lot of lawyers going back. If you're the small finance 76 00:04:04.180 --> 00:04:06.880 company, right, and you're in this now, you're in this complex 77 00:04:06.880 --> 00:04:08.950 litigation over usury, and you're like, wait, I didn't even 78 00:04:08.950 --> 00:04:12.790 know there was a, you know, some type of law. But anyway, the MCA 79 00:04:12.790 --> 00:04:16.060 company, Global Merchant, Cash appealed, and there was there 80 00:04:16.090 --> 00:04:19.660 was a whole a lot of issues in the case itself. Yeah. But they 81 00:04:19.660 --> 00:04:24.340 appealed on the issue that they couldn't claim usury as the 82 00:04:24.340 --> 00:04:27.850 reason for why the judgment should be vacated. That's the 83 00:04:27.850 --> 00:04:31.000 one they're like, that claim itself should be dismissed. 84 00:04:31.180 --> 00:04:35.260 Because you can't sue for usury if you're a corporation. And 85 00:04:35.260 --> 00:04:38.020 this wasn't a theory that they had. That's what the plain text 86 00:04:38.020 --> 00:04:41.410 of New York State law says if you're a corporation, you can't 87 00:04:41.410 --> 00:04:44.770 sue and say after the fact, hey, you know, this was this was 88 00:04:44.770 --> 00:04:48.970 usury. Right? The statute says you can't do that. But guess 89 00:04:48.970 --> 00:04:52.870 what hundreds of businesses have tried. They've actually done 90 00:04:52.870 --> 00:04:56.440 that. After the transaction has taken place, one sides not 91 00:04:56.440 --> 00:04:59.950 happy. And you get these situations where the merchant is 92 00:04:59.950 --> 00:05:02.650 suing and saying this was usurious the whole time. It's 93 00:05:02.650 --> 00:05:07.270 like, well, did you get what you wanted? Yes. So they did what 94 00:05:07.270 --> 00:05:09.490 you asked? Yes. And you signed it? Yes. 95 00:05:10.560 --> 00:05:14.100 But now, but now, I'm, you know, like, it's like one of those 96 00:05:14.100 --> 00:05:17.310 weird situations. Well, the appellate court in New York 97 00:05:17.550 --> 00:05:20.430 ruled in favor of Global Merchant Cash, the MCA company. 98 00:05:20.670 --> 00:05:22.980 And all they did was read the plain text of New York State law 99 00:05:22.980 --> 00:05:25.590 that says if you're a corporation, you can't sue for 100 00:05:25.590 --> 00:05:29.070 usury. Even if it was criminal, even if it was alleged to be 101 00:05:29.070 --> 00:05:32.580 criminal right. Now, you can defend, you can use that as a 102 00:05:32.580 --> 00:05:37.050 defense, if there's if the MCA company or their funding company 103 00:05:37.050 --> 00:05:41.880 and finance company is suing you. Right. And you believe as 104 00:05:41.880 --> 00:05:45.240 the as someone who's defending themselves that it was criminal 105 00:05:45.240 --> 00:05:48.630 usurious, you could assert that it was. Yeah. You know, that was 106 00:05:48.630 --> 00:05:52.110 usury as a defense. But you can't go on the attack. Like if 107 00:05:52.140 --> 00:05:54.510 someone gave you exactly what you wanted. Yeah. You know what 108 00:05:54.510 --> 00:05:56.580 I mean and your business, and you're like, aha, I'm coming 109 00:05:56.580 --> 00:06:00.120 after you now for you gave me exactly what I said. Yeah. New 110 00:06:00.120 --> 00:06:04.230 York State says law says you can't do that. So in terms of 111 00:06:04.230 --> 00:06:07.680 usury, it was now double confirmed between the plain text 112 00:06:07.680 --> 00:06:10.680 of the law. And the appellate court in New York state says if 113 00:06:10.680 --> 00:06:14.130 you're a corporation, you cannot sue someone for usury. So if 114 00:06:14.130 --> 00:06:17.220 you're out there in the MCA, or business lending world this is 115 00:06:17.250 --> 00:06:18.360 this is an important ruling.