Merchant Cash Advances Are Not “Masked” Usury or Loans

A New York Supreme Court judge cited the decision rendered in Champion Auto Sales, LLC et al. v Pearl Beta Funding, LLC on Wednesday, when she dismissed usury claims brought against four merchant cash advance companies.

The case at issue was Wilkinson Floor covering, Inc., Stephen Wilkinson v Cap Call, LLC, TVT Capital, LLC, Yellowstone Capital, LLC, Ace Funding Source, LLC (Index #160256/2016)

Champion set forth the general principle that the underlying agreement in that case was not a usurious transaction, she opined. Beside the plaintiff’s claim being procedurally deficient, the judge said that the plaintiffs had not established usury because a rudimentary element of usury is the existence of a loan or forbearance of money and when there is neither, there can be no usury.

Per the Honorable Carmen Victoria St. George:

In New York, there is a predisposition in this State against declaring that contracts are usurious. This is especially true with respect to commercial agreements, where “usurious agreement[s] will not be presumed from facts equally consistent with a lawful purpose.”

Additionally, because plaintiffs’ obligation to pay them future receivables is conditioned on plaintiffs’ receipt of such, the agreements at issue are not loans.

You can download the decision here.