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Last Updated on: 12th September 2023, 04:02 am
Merchant Cash Advances in New Mexico – Useful Info
Merchant cash advances have gotten really popular for small business financing lately. But the MCA industry is pretty unregulated, so lots of business owners feel tricked into unfair contracts. Here in New Mexico, lawyers are working to protect local businesses by challenging shady MCA deals in court.
What are Merchant Cash Advances?
A merchant cash advance gives a business a lump sum of money in exchange for a cut of their future credit card sales. It’s not technically a loan, so MCA companies don’t have to follow lending laws that protect consumers.
MCAs provide quick access to capital for struggling businesses. But with no oversight, predatory behavior is common.
Some typical complaints about MCA companies include:
Deceptively high interest rates, often over 100% APR
Misrepresenting agreement terms
Using confusing language and fine print
Taking money from accounts without notice
Impossible repayment terms that take huge chunks of revenue
Lots of businesses say they didn’t fully get the MCA terms when they signed. Others claim the lender changed terms after signing or kept taking money after the MCA was paid off.
New Mexico’s Efforts to Regulate MCAs
In 2020, New Mexico’s Attorney General Hector Balderas sued several MCA companies for shady and predatory practices. His office keeps investigating and taking legal action against companies accused of ripping off businesses.
But regulation at the state level is limited because of federal preemption issues. The National Bank Act gives authority over banks and lending to federal agencies like the FDIC and OCC. Lately, many MCA providers have partnered with banks or gotten bank charters to dodge state consumer protection laws.
In 2021, New Mexico legislators introduced the Small Business Lending Fairness Act to increase oversight and transparency for MCAs. It would’ve required APR disclosures and state licensing for MCA brokers. But the bill didn’t make it through the Senate.
Advocates keep pushing for reforms to protect local businesses from shady MCA tactics. Small business and consumer groups want federal regulators to close loopholes that let MCA companies avoid state laws.
Challenging Unfair MCA Deals in Court
For New Mexico businesses stuck in abusive MCA contracts, legal action may be the only way out. Business lawyers can review agreements and account records to find illegal practices that could nullify the contract.
Some common ways to challenge MCAs in court include:
Deceptive marketing – Evidence the lender misled the business about costs, terms, etc.
Breach of contract – The MCA company didn’t follow the original agreed terms.
Unconscionability – Agreement terms so unfair the contract shouldn’t be enforced.
Usury violations – Interest and fees exceeded state limits.
RICO violations – Predatory lending amounts to racketeering.
By gathering evidence of unlawful lending behavior, lawyers can build cases to invalidate harmful MCA contracts. They may also be able to negotiate settlements where the MCA company agrees to cancel debts and stop collections.
Choosing a Lawyer to Fight MCA Abuse
New Mexico business owners who feel trapped in abusive MCA deals should contact a business attorney ASAP. Look for a lawyer experienced with commercial litigation and financial contracts. Key things to look for include:
Education – Top law schools produce lawyers who can handle complex business disputes.
Experience – Look for 5+ years handling commercial contract fights and small business litigation.
Specialization – Find lawyers who list MCA disputes and financial services litigation as practice areas.
Track record – A history of winning verdicts and settlements will give you confidence.
Resources – Well-resourced firms have the expertise and manpower for lengthy legal battles.
Communication – Important for clearly explaining legal strategies and options.
Cost structure – Be clear on fee arrangements and billing upfront. Contingency fees or legal finance may be options.
With an experienced lawyer in your corner, you can escape predatory MCA contracts and get justice. Don’t hesitate to exercise your legal rights.
Outlook for Stronger MCA Protections
While New Mexico currently has limited oversight for the MCA industry, things are starting to change. As more cases highlight shady practices, courts and lawmakers are responding. New Mexico businesses should stay hopeful for better protections down the road.
On the federal level, the FTC and other agencies are ramping up enforcement and looking at regulations to stop MCA lending abuses. State lawmakers keep introducing bills to require transparency and restrict predatory behavior. Courts are also more willing lately to scrutinize MCA deals and void unlawful contracts.
For now, working with a lawyer to fight individual predatory MCA deals is the best option. But over time, advocacy and lobbying efforts could convince regulators to enact broader reforms. New Mexico small businesses deserve access to capital without getting trapped in debt cycles. Fairer rules for MCA lending would help local entrepreneurs thrive.