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  1. #26
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    Quote Originally Posted by Jason Sterling View Post
    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?

  2. #27
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    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.
    Last edited by kpeng; 12-07-2022 at 05:51 PM.

  3. #28
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    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.

  4. #29
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    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 View Post
    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.

  5. #30
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    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 View Post
    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.

    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

  6. #31
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    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.

  7. #32
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    Sean --TY! --Right on!
    Marcus Clapman
    Capybara Capital
    marcus@capybarausa.com
    www.capybarausa.com
    646-708-5986 (Text Friendly!)

  8. #33
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    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.

  9. #34
    Veteran Reputation points: 120507 Chambo's Avatar
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    Quote Originally Posted by ADiamond View Post
    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.

    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
    Doesn't really matter what Sean and DeBanked say, it matters what the State of California says.

    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.

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