[Sean Cash]

Saw this on a website this morning.. Wonder who is starting such a rumor.


articles
Regulators are coming, and the rumor is it's happening quickly.

Author: Mike Bileu
Rumor has it that the Merchant Cash Advance industry is going to be regulated at a federal level soon with individual states to follow; We knew it would happen eventually- There is talk of granfathering ISOs in so long as they have six months in the industry, but they will be required to take a test. In addition ISOs will be expected to accumulate Continuing Education credits also, similar to the Mortgage/Real-Estate industry.

This is dumb. In the next issue of dailyfunder that we're finalizing now, we have a comprehensive article about the regulatory landscape. There is no federal regulation coming.

[Al1]

This is dumb. In the next issue of dailyfunder that we're finalizing now, we have a comprehensive article about the regulatory landscape. There is no federal regulation coming.

Sean,

Do you discuss the FTC's enforcement powers regarding UDAAP at all in your piece? I completely agree with you that there's basically no chance of any new federal legislation coming along to regulate commercial finance. However, I do believe it's possible that in the next few years we could see an FTC enforcement action based on an UDAAP theory. I think you mentioned once that you've seen merchants confuse the split percentage with an interest rate. I think it's possible that the FTC could see that and decide to take a closer look at how some alternative finance products are marketed. If this occurred, I think some industry participants could have issues. This type of enforcement action wouldn't require any additional legislation and has been a recent focus of the FTC.

Definitely not cause to sound the alarm but probably one of the only ways we'd see governmental regulatory action, if at all.

[Sean Cash]

Sean,

Do you discuss the FTC's enforcement powers regarding UDAAP at all in your piece? I completely agree with you that there's basically no chance of any new federal legislation coming along to regulate commercial finance. However, I do believe it's possible that in the next few years we could see an FTC enforcement action based on an UDAAP theory. I think you mentioned once that you've seen merchants confuse the split percentage with an interest rate. I think it's possible that the FTC could see that and decide to take a closer look at how some alternative finance products are marketed. If this occurred, I think some industry participants could have issues. This type of enforcement action wouldn't require any additional legislation and has been a recent focus of the FTC.

Definitely not cause to sound the alarm but probably one of the only ways we'd see governmental regulatory action, if at all.

I believe UDAAP only pertains to consumers and from what I've learned from regulators and the lobbyists that interact with them, small businesses never fall into the category of consumers, not even if it's a 1 man sole proprietorship.

[HeatherF]

I think the key word in the original statement was "brokerage" I do know of a couple brokerage firms or ISO's that have come under scrutiny of the FTC for the representation of the services provided to the merchant and not being clear with their upfront and back end fees.

[Sean Cash]

I think the key word in the original statement was "brokerage" I do know of a couple brokerage firms or ISO's that have come under scrutiny of the FTC for the representation of the services provided to the merchant and not being clear with their upfront and back end fees.

misrepresentation and fraud are different things from regulating the industry. There are some practices in the industry that are considered by some to be immoral but they are not fraudulent.

If you are misrepresenting or committing fraud, your problem is not legislation, it's law enforcement.

[Al1]

I believe UDAAP only pertains to consumers and from what I've learned from regulators and the lobbyists that interact with them, small businesses never fall into the category of consumers, not even if it's a 1 man sole proprietorship.

The UDAAP regulations are some of the only federal laws that apply to commerce with consumers as well as businesses. FTC enforcement actions involving consumer transactions are much more common, but B2B transactions are subject to the UDAAP rules.

I think Heather's comment highlights exactly what the FTC would be looking for, which is disclosure. The FTC isn't concerned with rates or fee amounts. It just wants to make sure this information is being communicated clearly to the borrower/seller and is not being misrepresented, like you mention.

[JayBallentine]

This is dumb. In the next issue of dailyfunder that we're finalizing now, we have a comprehensive article about the regulatory landscape. There is no federal regulation coming.

"There are knowns and there are unknowns. We know what we know. We don't know what we don't know." Donald Rumsfeld.

I have no idea if the gov will regulate. What I do know is that there are federal entities whose curiosity have been aroused by MCA.

There are guys who are doing things to accelerate the rate to which a business goes under. Causation can be argued; "is it MCA's fault, or is it the business owners' fault?" Another debate for another day.

That notwithstanding, it's hard to see the industry continuing to grow at such a rapid clip without putting the government at risk of losing tax dollars from business owners who can no longer pay because they "have been put under."

[Sean Cash]

At the end of the day, there are a lot of moving parts in government at all levels. I cannot say anything with certainty. But lately there is a growing voice of industry participants that think at any moment the feds are going to shut everyone down (and some who wish it) so I've made it a point to go out and get the real story.

What I've found (aside from Operation Choke Point) is a federal government that is supportive of what we are doing, that is learning about the intricacies of what we do, and is offering resources (via governmental record APIs) for funding providers to make more informed decisions. The recurring theme is that small businesses are not consumers and are not afforded the same protections. Most legislators and regulators still to this day have never heard of merchant cash advance and when you explain that they're involved in b2b transactions, they simply do not care to hear anything further.