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Mark T. Dabertin Quoted in deBanked Article, 'Gold Rush: Merchant Cash Advances Are Still Hot'

8/18/2019
Mark T. Dabertin Quoted in deBanked Article, 'Gold Rush: Merchant Cash Advances Are Still Hot'

Mark T. Dabertin, special counsel in the Financial Services Practice Group of Pepper Hamilton, was quoted in the August 18, 2019 deBanked article, "Gold Rush: Merchant Cash Advances Are Still Hot."

Moreover, notes Mark Dabertin, special counsel at Pepper Hamilton, a top national law firm based in Philadelphia, the state of New Jersey is contemplating licensing MCA practitioners. The Minnesota Court of Appeals recently determined in Anderson v. Koch that, because of a "call provision" in a funding contract, a merchant cash advance was actually a loan.

And, Dabertin warns, the Federal Trade Commission, which has the authority to treat a merchant cash advance as a consumer transaction—replete with the full panoply of consumer disclosures and protections—is training its gunsights on the industry. "On May 23," Dabertin reports in a memo to clients, "the FTC launched an investigation into potentially unfair or deceptive practices in the small business financing industry, including by merchant cash advance providers."

These pressures from government and the courts will only make doing business more costly and drive up the industry's barriers to entry. Failing to stay legal, moreover, could not only result in punitive court judgments, but render an MCA firm vulnerable to legal action by their investors.

"It's inevitable that the industry will evolve," Dabertin says, and firms in the industry will have to self-police. "They will need to hire counsel and a compliance staff," he adds. "You can't just do it by the seat of your pants."

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