Arizona has no general usury statute. That fact does not leave Arizona business owners without options. It means the legal strategy relies on different tools, and those tools are effective when properly deployed.
Arizona’s economy, construction, hospitality, healthcare, technology, real estate services, retail, and professional services across Phoenix, Tucson, Scottsdale, Mesa, and statewide, generates significant demand for small business working capital. MCA companies target Arizona businesses aggressively, and the stacking of multiple advances is common.
Arizona repealed its general usury statute in 1980, making it one of the few states with no general interest rate cap for most transactions. This makes Arizona a favorable choice-of-law jurisdiction for MCA companies, some agreements select Arizona law specifically because of the absence of a usury cap. But the absence of a usury statute does not eliminate legal remedies. It shifts the legal strategy to other frameworks that are powerful in their own right.
The Legal Landscape in Arizona
While Arizona has no general usury statute, the state maintains regulatory requirements for lenders through the Arizona Department of Financial Institutions. An entity making loans in Arizona may be required to obtain a consumer lender license or a commercial mortgage banker license depending on the transaction type. If the MCA is recharacterized as a loan, the funder may be operating as an unlicensed lender in Arizona, which creates regulatory exposure and may independently affect the enforceability of the agreement.
Arizona’s Consumer Fraud Act, A.R.S. § 44-1521 et seq., prohibits deceptive or unfair acts and practices in trade or commerce. The statute provides a private right of action with actual damages, punitive damages in appropriate cases, and attorney’s fees. The CFA is the primary legal tool for Arizona MCA borrowers. It covers the full range of MCA-related misconduct: misrepresentation of costs, omission of material terms, failure to honor reconciliation obligations, deceptive collection practices, and mischaracterization of the nature of the transaction.
Arizona courts are familiar with substance-over-form arguments in commercial transaction disputes and are equipped to evaluate whether a transaction labeled as a purchase is, in substance, a loan. While the state’s MCA-specific case law is still developing, the analytical framework is well-established through lending and commercial transaction precedent.
Recharacterization and Usury
Recharacterization in Arizona does not trigger a usury defense because there is no usury cap to exceed. However, recharacterization still matters significantly for two independent reasons. First, if the MCA is a loan, the funder may be required to be licensed as a lender under Arizona law. An unlicensed lender operating in Arizona faces regulatory action by the Department of Financial Institutions and potential unenforceability of the loan agreement. The licensing requirement applies regardless of the interest rate.
