Washington State’s Consumer Protection Act is one of the most broadly applied consumer protection statutes in the country. It does not require proof of intent. It does not require proof of individual reliance. It requires only that the practice be unfair or deceptive and affect the public interest.
Washington State’s economy, technology, agriculture, maritime, aerospace, healthcare, construction, retail, and professional services across Seattle, Tacoma, Spokane, and statewide, supports a diverse small business sector that MCA companies target actively.
Washington’s legal framework provides meaningful and powerful protections for MCA borrowers, anchored by one of the nation’s most effective consumer protection statutes and a usury framework with an exceptionally low threshold and powerful remedies including double recovery of interest paid.
The Legal Landscape in Washington State
Washington’s Consumer Protection Act, RCW 19.86, prohibits unfair or deceptive acts in trade or commerce. The statute provides a private right of action with actual damages, treble damages up to $25,000, attorney’s fees, and injunctive relief. The CPA does not require proof of intent to deceive, only that the act or practice was deceptive or unfair and that it affected the public interest. MCA marketing and collection practices that are misleading, regardless of the funder’s subjective intent, are actionable. The public interest element is typically satisfied by showing that the practice has the capacity to harm other similarly situated business owners, a standard easily met when the deceptive practice is part of the funder’s standard business model.
Washington’s usury statute, RCW 19.52, limits interest to 12% per annum on most transactions. Higher rates are permitted for certain licensed lenders meeting specific regulatory requirements. A recharacterized MCA made by an entity not qualifying for the higher-rate exemption is subject to the 12% cap. The statute provides powerful remedies: usurious interest is forfeited in its entirety, and the borrower may recover twice the amount of any interest already paid. The double recovery provision means the borrower recovers not just what was overpaid, but double the total interest paid.
Washington’s Department of Financial Institutions regulates lending activity in the state and requires licensure for entities making loans. An entity making loans in Washington without proper licensing may face regulatory action, fines, and potential unenforceability of the loan agreements. If the MCA is recharacterized as a loan, the funder’s licensing status becomes directly relevant.
Recharacterization and Usury
Washington courts can apply the national recharacterization framework. If the MCA funder bore no genuine risk of loss, because payments were fixed, the guarantee eliminated downside exposure, and reconciliation was non-functional, the transaction is a loan. A recharacterized MCA carrying an effective APR exceeding 12% triggers Washington’s usury statute, with forfeiture of all interest and potential double recovery of all interest paid.
The 12% threshold is exceptionally low compared to the effective APRs of recharacterized MCAs. Virtually every MCA on the market, when recharacterized as a loan, exceeds this threshold. The forfeiture and double recovery provisions create extraordinary leverage. On an MCA where the business owner has paid $40,000 in interest, the double recovery provision allows recovery of $80,000. Combined with forfeiture of all remaining interest owed, the remedy transforms the dispute from a debt obligation into an affirmative recovery claim.
