Do I need a license to conduct MCA business in Cali?
Or is just extra forms and 4 months that is needed?
Does anybody know?
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Do I need a license to conduct MCA business in Cali?
Or is just extra forms and 4 months that is needed?
Does anybody know?
Not a lawyer but my understanding was that you already needed a license to conduct MCA business in California, whether brokering or funding, and that failure to have one is a crime (misdemeanor).
No you don't need a CA license. You can use a super broker. However, many lenders are not no longer doing loans in CA.
For funders willing to do CA deals you need to provide 4 months at submission and once the offer is presented disclosure documentation is needed, seems very fly by night so far
No quality funders have changed this, broker license or not, just a matter of not disclosing information that would trigger compliance of the disclosure docs yet being the key takeaway, the funders issue these once docs are presented
If the super broker were gathering PII and selling the terms I suppose that would be fine, but if you are doing those things I think the law would still view you as brokering the transaction.Quote:
Originally Posted by Olderguy
No that's not correct.Quote:
Originally Posted by OC Funder
"Due to California’s strict requirements about when disclosures must be provided, you cannot provide written offer details (principal/advance amount and any rate/pricing/cost or total repayment/remittance amount) to a merchant and state that the offer is the only one presented by Credibly. Presentation of a single offer triggers the disclosures and a single offer has not been made by Credibly until you select one in the Offer Calculator. Until you have selected an offer and contracts have been generated and sent to the merchant, if you are providing offers in writing (including text message) you must communicate multiple Credibly offers to the merchant."
"Once you’ve selected an offer in the Offer Calculator for your California merchant, you will notice a new pop up window. You’ll have to click to confirm prior to sending/downloading the contract."
California licensure requirements are separate from the disclosure requirements. To my knowledge, the new disclosure requirements did not affect the licensure requirements that have long been in place.Quote:
Originally Posted by Olderguy
Well I have been dealing with FundShop, SmartBiz, Smart Advanced, to name a few and it's never come up. For the very few loans that are done California, it doesn't justify the licensing requirements as near as I can tell.
For some it's not worth doing business in California, and for others they roll the dice and choose to ignore the requirements. For you, I highly recommend contacting an attorney. You seem to be located in California, which would make me think it would be easier for them to enforce penalties.Quote:
Originally Posted by Olderguy
any person who willfully violates any provision of this division, or who willfully violates any rule or order adopted pursuant to this division, shall, upon conviction, be punished by a fine of not more than ten thousand dollars ($10,000), by imprisonment in a county jail for not more than one year or pursuant to subdivision (h) of Section 1170 of the Penal Code, or by both that fine and imprisonment. However, no person may be imprisoned for the violation of any rule or order unless he or she had knowledge of the rule or order. Conviction under this section shall not preclude the commissioner from exercising the authority provided in Section 22713.
Bro....the lenders (super brokers) are doing just fine funding deals in California....give one of them a call and ask them. I think you are misinterpreting the law. Don't you think the lenders know this?Quote:
Originally Posted by OC Funder
Lenders operate outside the law all the time. In fact multiple lenders have paid massive fines for violating CA licensure laws. Based on banking attorneys have told me, this is my understanding of how it works. Maybe your lenders know better.Quote:
Originally Posted by Olderguy
I doubt that is the case with the lender's I indicated above. Maybe some MCA lenders, but not thie super brokers I deal with. Make a phone call.Quote:
Originally Posted by OC Funder
Cali will be interesting to follow...
So in terms of CA licensing -Quote:
Originally Posted by Shorebird
Who needs a license?
This is an area that one should consult with an attorney. We are talking about Laws here. (Laws can be overturned/ challenged -- Which is why I'm so liberal in some areas..)
Complying with the law could actually create its own set of liabilities, one group is arguing.
https://debanked.com/2022/12/funding...isclosure-law/
https://dfpi.ca.gov/california-finan...-license-faqs/
Here's the requirements. But like i said I use a lender that is already licensed.
And the disclosure laws are being litigated by the trade groups.
However, I went though the regulation in the mortgage business requiring nmls license, broker licensing and audits and it's the future of the business. Financial disclosure are all part of it. Most of you will leave the industry as this expands to other states.
Any A-paper funder will require that the broker has a license. This isn't new at all. Once you start with the B and C-paper funders, then they typically start to look the other way.
Even if you use a superbroker, you still need a license. Will you get caught? Probably not.
There are ways to navigate around it but I was also told it does not follow the spirit of the law.
I'm just going to listen to the professionals lol
As far as the CA license goes, you need a license according to the law. Whether you send it to a super broker or not. If you get paid on the deal you need a license. For the disclosure requirements as of now any offer that is communicated to the client needs to have a disclosure communicated prior to sending the agreement. Will that change? Probably, however this is the current landscape as our partners see it.
California is one of the largest economies in the USA. They have regulations to do business within the state. More states will probably do the same in the future. Do the work required, get licensed, and follow the regulations period... Financial services can require some hard work and regulations. If you are not willing to do the work to do business in one of the largest economies in the USA I suggest finding another profession.
Yes but the larger companies have lots of Liability's in more areas then you can Imagine and not following laws to the tee (whichever they are!) can be a disaster waiting to happen. Sean can remind us of the big MCA settlement with state of Cali back in the days.
Smart professionals and companies make inquires to regulators or work with regulators to make sure they are conducting business within the rules/regulations. Ask before begging for forgiveness later......Quote:
Originally Posted by MCA-VET
https://debanked.com/?s=california+license&x=0&y=0
https://dfpi.ca.gov/california-finan...law-about/#Who
1) You all really should be consulting legal professionals for clarity, but I would love for Sean & Debanked to update some current guidance for this as all of their articles are circa 2015-2016 when this was a problem.Quote:
Who is Required to Obtain a Finance Lenders License?
In general, any person engaging in the business of a finance lender or finance broker in California is required to obtain a license under the California Financing Law. The California Financing Law contains a number of exemptions for persons licensed by other regulatory agencies.
Definitions
“Finance lender” includes any person engaged in the business of making consumer loans or making commercial loans.
“Finance broker” includes any person engaged in the business of negotiating or performing any act as broker in connection with loans made by a finance lender. A broker license authorizes brokering of loans to licensed finance lenders; it does not authorize brokering of loans to those who are not licensed finance lenders.
2) A "MCA" is not a loan in CA, it appears, and as such is not subject to lending licenses. HOWEVER, it appears they are subject to APR disclosure laws and lending license or not, it appears that a BROKER OF ANY financial product or financial product marketing is required to be licensed in CA, from my interpretation of the Expansion Capital legal filing I found below. Correct me if I am wrong on that last part?
3) It appears as far as "MCAs" are concerned in CA, they are super strict on disclosure notice - although I've read in some places they admit that "APR" can technically not be calculated for a MCA, and if we're being honest "APR" theoretically does not even apply to a MCA product from a financial standpoint, but who knows? CA also appears to be super strict on MCA companies abiding by their specified percentage / reconciliation clauses in order for the contract to be valid.
https://dfpi.ca.gov/2020/04/06/advis...nce-contracts/
https://dfpi.ca.gov/wp-content/uploa...-Group-LLC.pdf
A lot of info in this, just search "merchant cash"
https://dfpi.ca.gov/wp-content/uploa...01-18-RBLC.pdf
Anthony are you funding Cali now ?
We are still funding MCA credit card split deals in California. We remit via Lockbox or direct split relationship with several credit card processors.
The disclosure provision which is a huge element of the law is unenforceable when it comes to the product we sell because of variations in sales patterns creating variations in payment thus you can’t disclose what you don’t know in terms of how many payments, the amount of payments or the payment term. MCA ACH deals would have more of an issue with the law due to fixed payment arrangements. This is another advantage of using our credit card sales based product.
Jason, that's awesome news! Is anyone over at Fundkite be able to tell us what they think with regards to their ACH split program?Quote:
Originally Posted by Jason Sterling
The disclosure still applies to credit card splits. The disclosures are required for financial products, regardless of repayment method. ACH Remits are not "fixed", or at least they should not be. ACH remit amounts should be calculated based on a percentage of merchant's calculated average sales at the time of funding. Should merchant's sales deviate, the ACH remit amount should as well. This is why "true-ups" are done on a regular basis.
Split deals are 100% subject to the disclosure law. The state doesn't care if payments can't be predicted or are variable or whatever. That's partially why the law has been the subject of so much controversy. You must disclose an APR and predict.
This is not true. The whole point of the the disclosure law is your specific product to begin with, to create and disclose APRs for unknowable things. Your business model is a textbook case of what the law covers. You have 2 days now to be ready for compliance.
Quote:
Originally Posted by Jason Sterling
There are multiple things being discussed in this thread.
1. lender/broker licensing (an old requirement)
2. commercial financing disclosure (a new requirement)
---
1. If you do MCA, the answer to #1 is something your lawyer will have to answer. In the past it has been possible to do MCAs without a license. It also been risky so you must talk to an attorney about this.
2. If you do MCA, whether ACH or split, you are subject to the commercial financing disclosure law that goes into effect in 2 days and all that entails. It is a highly complex law with a lot of moving pieces. You cannot wing it and throw in a form or whatever and think you'll be good. These regulations took more than 4 years to create and it requires very competent legal counsel to even attempt to successfully navigate.
Quote:
Originally Posted by ADiamond
If you are wondering "where the heck do I even start on this California thing?" It's taken 4 years to formulate the final complex rules. Expect to spend a lot of money on competent legal counsel.
This guide (of which I make no money on referrals or anything) for example, will give you all the basic info: https://www.counselorlibrary.com/pub...ures-guide.cfm Yeah, it's really expensive ($7,000) and you will still ultimately need an attorney to assist you with compliance on top of it but ignoring the law could lead to a place where you are facing millions in fines and lawsuits.
Sean --TY! --Right on!
I am not sure that is correct @Sterling ^ you can try it out but when the ambulance chasers come knocking you will have to battle that statement and risk paying huge fines or having your contracts deemed unenforceable for repayment. There are case laws in CA historically that thought their contracts were iron clad and both cases were settled for millions of $ . Today, this law takes effect.
Doesn't really matter what Sean and DeBanked say, it matters what the State of California says.Quote:
Originally Posted by ADiamond
As far as I can decipher, sending to super broker doesn't add any benefit in this case. As of Friday, ALL OFFERS must be sent directly to the merchant, and the funder needs to receive a Received Receipt, before anything written can be sent to any broker, super or mortal. Penalties are far more severe than the other penalties mentioned to date.
In summary, when a Cali merchant is sent to funder, they will tell you "offer was sent" and that's about it until the merchant acknowledges receiving it. No details can be given.
I guess this also means the days of hiding the phone #'s and emails from the funder are over as well.