[1StopFunding]

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.

[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.

[1StopFunding]

I don't understand why these guys post this stuff. Thanks Sean for giving us the real deal!

[Sean Cash]

I don't understand why these guys post this stuff. Thanks Sean for giving us the real deal!

There is a segment of this industry now that feels another segment isn't playing by the rules (ethical, moral, or whatever) and it's hurting them competitively. They believe that by hoping regulation comes or inviting it to come, the competitive pressure will disappear. But that's shortsighted. Regulating your competitors means getting yourself regulated, and regulating business-to-business transactions such as these would set a dangerous precedent, not just for lending, but for American freedom.

And who is to decide who has the advantage in a b2b transaction? Would two 25 year olds borrowing money from their parents to fund a small business via MCA constitute a predatory Wall Street lender when the recipient is a 40 year old business with 50 employees and 10 million dollars in annual sales? Whose to say that one party always has the upper hand or is more sophisticated and therefore should be regulated?

Regulation in this industry would mean the hit ABC show Shark Tank would be illegal. Business owners taking crazy deals from self-professed sophisticated sharks?! Somebody better call the Department of Justice!

http://www.merchantprocessingresourc...4/05/the-deal/

Last week I had the chance to personally interview a legendary liberal congressman who laughed at the notion of b2b lending restrictions. The concept is ridiculous. Who it was will be revealed in the next magazine issue.

Ask yourself this question. If no regulation ever comes in any form, how will you continue to be competitive in this industry and what can you as a private business do to promote standards that meet ethical and moral criteria? If you can't think of anything or you don't do anything, then no change will come and it will be your fault, not the government's.

[Jared_Weitz]

There is a segment of this industry now that feels another segment isn't playing by the rules (ethical, moral, or whatever) and it's hurting them competitively. They believe that by hoping regulation comes or inviting it to come, the competitive pressure will disappear. But that's shortsighted. Regulating your competitors means getting yourself regulated, and regulating business-to-business transactions such as these would set a dangerous precedent, not just for lending, but for American freedom.

And who is to decide who has the advantage in a b2b transaction? Would two 25 year olds borrowing money from their parents to fund a small business via MCA constitute a predatory Wall Street lender when the recipient is a 40 year old business with 50 employees and 10 million dollars in annual sales? Whose to say that one party always has the upper hand or is more sophisticated and therefore should be regulated?

Regulation in this industry would mean the hit ABC show Shark Tank would be illegal. Business owners taking crazy deals from self-professed sophisticated sharks?! Somebody better call the Department of Justice!

http://www.merchantprocessingresourc...4/05/the-deal/

Last week I had the chance to personally interview a legendary liberal congressman who laughed at the notion of b2b lending restrictions. The concept is ridiculous. Who it was will be revealed in the next magazine issue.

Ask yourself this question. If no regulation ever comes in any form, how will you continue to be competitive in this industry and what can you as a private business do to promote standards that meet ethical and moral criteria? If you can't think of anything or you don't do anything, then no change will come and it will be your fault, not the government's.

great stuff as usual Sean

[Chambo]

There is a segment of this industry now that feels another segment isn't playing by the rules (ethical, moral, or whatever) and it's hurting them competitively. They believe that by hoping regulation comes or inviting it to come, the competitive pressure will disappear. But that's shortsighted. Regulating your competitors means getting yourself regulated, and regulating business-to-business transactions such as these would set a dangerous precedent, not just for lending, but for American freedom.

And who is to decide who has the advantage in a b2b transaction? Would two 25 year olds borrowing money from their parents to fund a small business via MCA constitute a predatory Wall Street lender when the recipient is a 40 year old business with 50 employees and 10 million dollars in annual sales? Whose to say that one party always has the upper hand or is more sophisticated and therefore should be regulated?

Regulation in this industry would mean the hit ABC show Shark Tank would be illegal. Business owners taking crazy deals from self-professed sophisticated sharks?! Somebody better call the Department of Justice!

http://www.merchantprocessingresourc...4/05/the-deal/

Last week I had the chance to personally interview a legendary liberal congressman who laughed at the notion of b2b lending restrictions. The concept is ridiculous. Who it was will be revealed in the next magazine issue.

Ask yourself this question. If no regulation ever comes in any form, how will you continue to be competitive in this industry and what can you as a private business do to promote standards that meet ethical and moral criteria? If you can't think of anything or you don't do anything, then no change will come and it will be your fault, not the government's.

People laughed at Elliott Ness too. Told him he was crazy and would NEVER be able to take down Al Capone

[Chambo]

Not saying anything pro or con at this juncture. Just saying to arrogantly blow off any notions of it is only encouraging some young Congressman to make his name

We should be considerably more worried about self regulation.

[Finance1]

IMHO- this industry woundn't get regulated even if we directly asked for it. It's just too small. It's a drop in the lending bucket. Regulation comes in when problems are big along with a class of victims. Add in the fact that this is b2b and not b2c and it becomes even less appetizing for regulators.

The first shoe to drop would be individual court cases that call out fixed payment ach programs disguised as receivables purchase contracts. We aren't even seeing that yet.

[Sean Cash]

And just to add to this, there is a growing campaign on the federal level to HELP alternative business lenders and the like do more of what they are already doing. Increasing the SBA default guaranty doesn't seem to solve the problem of the business looking for 20k with 550 FICO and 18 months in business.

The question being tossed around right now, isn't "what can we do to stop these guys?" but "what can we do to support these guys to fund more businesses?" They're learning about who we are, trying to understand it, and it excites them to know that the private sector has found a way to do what big banks and government have not.

Take that pill and swallow it.

[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.

[JSL23]

Great post Sean. Everything you say makes perfect sense.

With that said, without getting into a rant, the Govt. is sticking their nose in business more then ever. I do not think we will get regulated but I wouldn't be shocked if we did. Someone mentioned how the Merchants always confuse MCA with a loan and call the factor "Interest Rate." It doesn't help when you have these loser bloggers feeding into that and calculating APR, all while comparing us to the predatory Mortgage lenders that brought the economy down.

I try to explain the product to newer clients and tell them there is no interest rate(almost always the first question they ask). Of course, when it is a cold call people often lose half of their brain function and their guard is so up a common response is "Oh, so you're going to just give me money right?!". The part where I explain factor rates and revenue based financing get too overwhelming, so their hearing gets extra selective. A few months ago when I first started I'd just go on letting them say loan and interest rate to keep things simple. Now, more and more I stick to my guns and explain that MCA is a form of business financing, not a loan. I let them know there are also Loans out there, but different from the norm. I think it is very important that people do not get caught up in that misconception, and that includes the press, bloggers and people in the Financial Services industry. Again, I doubt any regulation happens, but being proactive by making everyone understand what we do and how it serves the greater good is important.