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:
April 20, 2019
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.