Originally Posted by
meirhurwitz
We have been asked by some of our friends and competitors what we were thinking when we launched the MCA anonymous site. Some have suggested that we are attacking our own industry and the ISO's who are the life blood of our company. Those who believe that are near sighted and we believe their uncontrolled behavior is the greatest risk our industry faces. We have all watched closely the Payday industry grow rapidly, make a lot of money and then crash and burn. Payday is similar in some ways to MCA in the rate of return charged and use of the ACH system. We are all fooling ourselves if we think that the regulators that have choked Payday by putting pressure on banks to shut down their ACH lines will never turn their attention to MCA if we are viewed as predatory abusive lenders. Do you really believe that if MCA suffers from the same bad press and public abuse that Payday does that banks will continue to service their ACH accounts? We have already seen a number of MCA companies shut down by their banks without reason. In addition the press if following MCA closely with the predicted IPO plans of Ondeck and Lending Club. OnDeck has gone a very long way in legitimizing our industry. Google and Deutchbanc have both embraced MCA through OnDeck. We all stand to gain from the legitimization of MCA. A recent article by Bloomberg comparing origination practices in MCA to the bad cowboy days for subprime mortgages and discussing the role of ex cons in origination for the OnDeck securitizatoin is just a taste of what is to come if we don't reform ourselves.
Some of the key differences that we need to highlight are:
Merchants are smart and savvy business people that shop around for the best rate and should be allowed to make their own decisions about what is best for their business. They are not helpless consumers living from paycheck to paycheck.
PEW's Payday Lending in America, Policy Solutions identified as one of the key evils of Payday that loans don't amortize but are due in one lump sum that is impossible to pay back. Shifting to installment loans in Colorado was a great solution for consumers because they managed to pay the loan back without being hooked forever.
MCA amortizes and liquidates over the life of an advance. It does not hook the merchant in an unrecoverable cycle of debt that they can never repay. The one exception is the Merchant who is a serial refinance junkie without every graduating to cheaper debt.
Getting hooked on continuous expensive money instead of temporary bridge capital is similar to an addiction. We need to recognize as an industry that while we can claim to fill a legitimate small business need for capital and be respected for it if we continuously fund a merchant that plainly can't afford serial financing and drive them out of business we will be acting as predatory financing companies.
The Gaming industry serves a less pressing need than financing small businesses and unlike Payday is not being forced out of business . It flourishes by accepting regulation and by having effective programs to identify and help gaming addicts.
We would like to invite other members of the MCA industry in creating a structure for eliminating the Merchant who should not be allowed to receive the serial advance when they plainly can't afford it.
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