Georgia’s industrial usury statute is one of the toughest in the country. A recharacterized MCA that exceeds the threshold does not merely create a defense. It creates a forfeiture of the entire interest charged — not just the excess, but all of it.
Georgia’s economy — driven by logistics, hospitality, healthcare, construction, technology, and professional services in the Atlanta metro area and across the state — makes it a significant market for merchant cash advances. Business owners seeking fast working capital sign MCA agreements that carry effective costs far higher than traditional financing, often without understanding the true price until the daily withdrawals begin to compound against declining revenue.
Georgia’s legal framework provides meaningful and powerful protections for MCA borrowers, anchored by one of the nation’s most consequential usury statutes and a consumer protection law that addresses deceptive lending and financing practices. The forfeiture remedy alone makes Georgia one of the strongest states for borrowers challenging MCA agreements.
The Legal Landscape in Georgia
Georgia’s Industrial Loan Act, O.C.G.A. § 7-3-14, imposes severe penalties for usurious lending. A lender who charges interest exceeding 5% per month (60% per annum) forfeits the entire interest on the loan. The borrower is required to repay only the principal. This is not a reduction in interest to the statutory maximum. It is a complete forfeiture of all interest charged. On an MCA where the borrower is repaying $140,000 on a $100,000 advance, the forfeiture eliminates the $40,000 premium entirely. The borrower repays only $100,000, less any payments already credited to principal.
Georgia’s Fair Business Practices Act, O.C.G.A. § 10-1-390 et seq., prohibits deceptive and unfair practices in consumer and commercial transactions. The statute covers misrepresentation of the cost and terms of financial products, omission of material information, and deceptive collection practices. Prevailing plaintiffs can recover actual damages, attorney’s fees, and in some cases, additional penalties. The combination of the FBPA with the Industrial Loan Act’s forfeiture remedy creates a two-pronged legal framework that addresses both the deceptive conduct and the excessive cost.
Georgia does not permit confessions of judgment. Any judgment entered against a Georgia business owner must be obtained through conventional litigation with full due process protections. The funder cannot bypass the court system to freeze accounts or seize assets without filing a lawsuit, serving the defendant, and giving the defendant the opportunity to defend. This prohibition levels the playing field and ensures that every MCA dispute in Georgia is resolved through a process where both sides are heard.
Recharacterization and Usury
The recharacterization analysis in Georgia follows the national risk-based framework. If the funder eliminated its downside risk through fixed payments, personal guarantees, non-functional reconciliation clauses, and aggressive collection mechanisms, the transaction is a loan. Georgia courts have the benefit of the analytical framework developed in New York and other jurisdictions, and the reasoning is directly applicable.
When a recharacterized MCA produces an effective APR exceeding 60%, the Industrial Loan Act’s penalty provisions apply: the lender forfeits all interest. The borrower repays only the principal advanced. On a $100,000 advance with a factor rate of 1.40, the lender forfeits the $40,000 premium and recovers only the $100,000 principal, less payments already made. If payments already made exceed the principal, the borrower owes nothing and may have a claim for recovery of the excess payments.