[FUNd]

A judge cannot throw out a decision? Cannot void a contract? ABSOLUTELY they can

Yep, that's what I was wondering. So in all likelihood, all these are is a waste of time and a scare tactic.

[Chambo]

Yep, that's what I was wondering. So in all likelihood, all these are is a waste of time and a scare tactic.

Depending on the judge and venue

[mcaguru]

I was a little concerned about regulation until my pet looked me in the eye and with out him batting an eye he told me the following:


Read My Lips "DONALD TRUMP"



(not that I'm against regulation when its for safety or an uneducated individual (although "The Donald" loves the uneducated), we don't want regulation to make it illegal to give away 30% of a company to investors so grandkids don't own 100%/etc B2B we are talking smart business owners that when a crunch happens they don't need to layoff employees).

[mcaguru]

I don't see how a judge can't just kick a COJ out of court when it's presented to be enforced. Doesn't seem legal to have someone confess to a civil wrong before they commit the act.

I just spoke to a guy that likes buying big skyscrapers (ones you don't need to wear sunglasses on that entire block and can snap your neck trying to see the top) and he told me COJ are common to sign before an act is committed.

[FUNd]

I just spoke to a guy that likes buying big skyscrapers (ones you don't need to wear sunglasses on that entire block and can snap your neck trying to see the top) and he told me COJ are common to sign before an act is committed.

I was a little concerned about regulation until my pet looked me in the eye and with out him batting an eye he told me the following:


Read My Lips "DONALD TRUMP"



(not that I'm against regulation when its for safety or an uneducated individual (although "The Donald" loves the uneducated), we don't want regulation to make it illegal to give away 30% of a company to investors so grandkids don't own 100%/etc B2B we are talking smart business owners that when a crunch happens they don't need to layoff employees).

In the great words of Everest, WTF are you talking about?

[mcaguru]

In the great words of Everest, WTF are you talking about?

Rap up the deal your working on and than read it again or call me.

[FUNd]

Rap up the deal your working on

YO, I'm workin' on dis deal,
Gonna make legit money, not steal.
When they sign it today,
I aint got no time to play,
Got to go get another fo real.

[AlexSMF]

Do you know this for a fact or just assuming they got burned. Cuz other funders use this as a scare tactic/way of recourse, which could be very helpful

Came out directly out of their reps mouth.

[AlexSMF]

Wait, I thought EBF was positioning themselves to compete with the 'prime' funders like OD with all these "WTF" and "Holy S*it" emails about low buy rates?

Did not work out for them apparently. I spoke to my rep about it and he said to me that they are pulling back on their "WTF" and their "Holy S*it" Apparently they have a pretty big "WTF/Holy S*it" deal to a merchant who defaulted very early on. Once again, this is what I was told. Not sure how one deal going south for a company like Everest is a reason to completely switch directions but maybe there is more there then what he said or knew. That said, I have been noticing their offers coming back to be far more conservative than in the past. I had 6-7 deals with them that I closed elsewhere because they were not competitive on 90% of them.

[HDF]

Did not work out for them apparently. I spoke to my rep about it and he said to me that they are pulling back on their "WTF" and their "Holy S*it" Apparently they have a pretty big "WTF/Holy S*it" deal to a merchant who defaulted very early on.

But it was such a classy and well thought out campaign. Ground breaking. Who the F*** was in that boardroom when this went down?

[Sachip24]

YO, I'm workin' on dis deal,
Gonna make legit money, not steal.
When they sign it today,
I aint got no time to play,
Got to go get another fo real.

Bars

[Cfairbank]

I was a little concerned about regulation until my pet looked me in the eye and with out him batting an eye he told me the following:


Read My Lips "DONALD TRUMP"



(not that I'm against regulation when its for safety or an uneducated individual (although "The Donald" loves the uneducated), we don't want regulation to make it illegal to give away 30% of a company to investors so grandkids don't own 100%/etc B2B we are talking smart business owners that when a crunch happens they don't need to layoff employees).

Marcus, we are regularly on Capitol Hill and regulation is absolutely coming to this space -- the question is from whom, when, and in what form -- and common sense federal regulation is far better than state-by-state regulation which will happen if the federal regulators don't move quickly (and in NY it could be particularly harsh on cash advance companies). Cash advance now carries a stigma from which it will be difficult to recover, and I'd recommend that all parties (lenders, funders, and brokers) assess their business model and make their business practices as unassailable as possible.

To your other point re: COJs, many folks outside the cash advance space do occasionally require a COJ, that is true. That doesn't mean it is a "good" or even accepted practice. From Wikipedia: [COJs] are highly controversial and may be invalidated as a violation of due process by courts, since the obligor is essentially contracting away his right to raise any legitimate defenses."

As FUNd also pointed out, the whole concept of requiring a customer to confess judgement before they have even defaulted is ridiculous -- and if someone is in the third position with a COJ, what do you think the 1st position lender will do if the stacker attempts to enforce the COJ? That is in direct violation of the UCC (not to mention the contract), and absolutely a reason to sue for tortuous interference if the deal goes south. More and more A and A/B paper first position lenders (Breakout included) are ramping up efforts to sue (or have sued) citing tortuous interference. Attempting to enforce the COJ (or using it as a threat to be paid first, when the third position should be be third in line) will just add fuel to the fire.

[ADiamond]

Why are we even debating if COJ's are a good practice? Do you know how hard it is to collect on an MCA without a COJ, and to those who don't believe in them do you know how effective they are when it comes to collecting? Nearly impossibly and VERY effective, respectively.

The fact that EBF, the head honcho of c-f paper, is now requiring COJ's should tell you how much money they lost. Let's assume they fund $40MM a year, which probably isn't far off. Let's also assume, but at the same time be pretty sure because it's coming from a trusted source that their default rate is at least 15% - that's $6MM in debt annually (at least) that they have to spend even extra money on litigation to pursue and obtain a judgment and by that time, their chances of collecting on it decrease drastically. What is their other option? Sell the debt at $.10 on the $1.00?

Regardless of how many hits they've taken or what their default rate is I am sure they are still turning a profit. But, you can't consistently lose that much money year after year with how saturated and competitive this space is becoming and still be on top in 5 years from now. Anyone funding anything BUT "A" paper deals without a COJ may as well just buy me a seat at the world series of poker, your chances of seeing your money come back are a lot better!

[NoBigDeal]

As FUNd also pointed out, the whole concept of requiring a customer to confess judgement before they have even defaulted is ridiculous -- and if someone is in the third position with a COJ, what do you think the 1st position lender will do if the stacker attempts to enforce the COJ? That is in direct violation of the UCC (not to mention the contract), and absolutely a reason to sue for tortuous interference if the deal goes south. More and more A and A/B paper first position lenders (Breakout included) are ramping up efforts to sue (or have sued) citing tortuous interference. Attempting to enforce the COJ (or using it as a threat to be paid first, when the third position should be be third in line) will just add fuel to the fire.

The verbiage of a COJ is not that the funder is expecting to sue the merchant. It's actually the opposite. I can't tell you how many COJ's are sitting in my desk, collecting dust, cuz they're not being enforced. COJ's state "IN THE EVENT OF A DEFAULT," the merchant is confessing judgement. At the time the merchant signs, the event hasn't occurred. Once the blocked payment comes, BAM! account gets locked up as quickly as 5 hours later

[ADiamond]

The verbiage of a COJ is not that the funder is expecting to sue the merchant. It's actually the opposite. I can't tell you how many COJ's are sitting in my desk, collecting dust, cuz they're not being enforced. COJ's state "IN THE EVENT OF A DEFAULT," the merchant is confessing judgement. At the time the merchant signs, the event hasn't occurred. Once the blocked payment comes, BAM! account gets locked up as quickly as 5 hours later

A coj does not specifically state "In the event of a default" but they do say:

This confession of judgment is for a debt due to Plaintiff arising from Defendants’ failure to pay to Plaintiff, Merchant Defendant’s accounts-receivable, which were purchased by Plaintiff pursuant to the secured Merchant Agreement dated CONTRACT DATE, and for Defendants’ breach of the secured Merchant Agreement

This is the problem merchants have with COJ's, they are automatically confessing to a judgment against them even though they didnt default yet.

[NoBigDeal]

A coj does not specifically state "In the event of a default" but they do say:



This is the problem merchants have with COJ's, they are automatically confessing to a judgment against them even though they didnt default yet.

Just goes to show, we word our COJ's differently

[FUNDTASTIC]

That policy is going to kill a lot of deals.

I've had one merchant have a fit about the COJ I pray I don't lose anymore deals over a COJ

[FUNd]

The verbiage of a COJ is not that the funder is expecting to sue the merchant. It's actually the opposite. I can't tell you how many COJ's are sitting in my desk, collecting dust, cuz they're not being enforced. COJ's state "IN THE EVENT OF A DEFAULT," the merchant is confessing judgement. At the time the merchant signs, the event hasn't occurred. Once the blocked payment comes, BAM! account gets locked up as quickly as 5 hours later

Regardless, COJs are potentially unenforceable, take additional legwork and cost, and are intimidating to the merchant. MCA is hard enough to sell without having to get the merchant to notarize a legal confession to a crime they haven't even committed. Furthermore, the circumstances of 'default' could be extenuating, a bank error, or even an act of God. As a self-preserving merchant with good credit and solid cash flow, I would never, ever sign something like that.

[FUNd]

I've had one merchant have a fit about the COJ I pray I don't lose anymore deals over a COJ

When COJs are attached to every document package you send out, there will be a lot more.

[Cfairbank]

The verbiage of a COJ is not that the funder is expecting to sue the merchant. It's actually the opposite. I can't tell you how many COJ's are sitting in my desk, collecting dust, cuz they're not being enforced. COJ's state "IN THE EVENT OF A DEFAULT," the merchant is confessing judgement. At the time the merchant signs, the event hasn't occurred. Once the blocked payment comes, BAM! account gets locked up as quickly as 5 hours later

So a funder can claim a default has occurred (with only the funder's stated burden of proof and potentially not even any legal ability to collect), push forward the COJ, and collect without any sort of due process? Come on, that's ridiculous to claim that is a legitimate course of action. To a certain extent, I understand how a regulated institution (bank or the type of company in Marcus's example that carries the first position) can get away with it, but for subordinated positions, you legally CANNOT collect on it until the first is paid. Again, none of these issues impact me -- i just sit back shocked with all the talk of regulation that there is seemingly no effort to promote better practices in the cash advance space -- it's going to destroy what, when structured properly (and actually treated like a cash advance), is a great product for many small businesses.

[Funder Mark]

So a funder can claim a default has occurred (with only the funder's stated burden of proof and potentially not even any legal ability to collect), push forward the COJ, and collect without any sort of due process? Come on, that's ridiculous to claim that is a legitimate course of action. To a certain extent, I understand how a regulated institution (bank or the type of company in Marcus's example that carries the first position) can get away with it, but for subordinated positions, you legally CANNOT collect on it until the first is paid. Again, none of these issues impact me -- i just sit back shocked with all the talk of regulation that there is seemingly no effort to promote better practices in the cash advance space -- it's going to destroy what, when structured properly (and actually treated like a cash advance), is a great product for many small businesses.

Not a single funder WANTS to use a COJ. When you use a COJ, it means you have given up hope on collection the remaining balance of whatever is left, and are now working through the legal system. It takes time and money to collect on a defaulted account, and I know cases where even when the merchant did default, the amount that was owed was too small to collect on, even with the COJ, as the time and money spent on collections would be better used elsewhere.

Imagine the COJ is in a glass box marked "In case of emergency'. That is the only time a COJ would be used.

Unless I am entirely mistaken.

[mcaguru]

[QUOTE=Cfairbank;48552]Marcus, we are regularly on Capitol Hill and regulation is absolutely coming to this space -- the question is from whom, when, and in what form -- and common sense federal regulation is far better than state-by-state regulation which will happen if the federal regulators don't move quickly (and in NY it could be particularly harsh on cash advance companies). Cash advance now carries a stigma from which it will be difficult to recover, and I'd recommend that all parties (lenders, funders, and brokers) assess their business model and make their business practices as unassailable as possible.


Carl the only way to please regulators if we fund deals under 20% annually.

[Cfairbank]

Not a single funder WANTS to use a COJ. When you use a COJ, it means you have given up hope on collection the remaining balance of whatever is left, and are now working through the legal system. It takes time and money to collect on a defaulted account, and I know cases where even when the merchant did default, the amount that was owed was too small to collect on, even with the COJ, as the time and money spent on collections would be better used elsewhere.

Imagine the COJ is in a glass box marked "In case of emergency'. That is the only time a COJ would be used.

Unless I am entirely mistaken.

You are right, it's a scare tactic, and as far as I know, in this space it's only used by folks that primarily take subordinated positions (for clarity, I'm referring to COJs signed up front, there are lenders that will require it AFTER default has occurred and I have no issue with that). I am not even sure if one that has been signed before the default occurred has ever been enforced in the cash advance space (i would assume in some jurisdiction one has?). The one thing I know for certain: it is viewed as highly controversial even outside of cash advance, and, if my firm required COJs up front (we don't), I personally would want no part of trying to defend this practice to a potential regulator or even an investor.

Edit to note: Sean informed me that many COJs are in fact enforced each month. That still doesn't change my view on the practice, but I guess it supports why many firms are willing to take the regulatory or headline risk that comes with it.

[Cfairbank]

[QUOTE=mcaguru;48583]

Marcus, we are regularly on Capitol Hill and regulation is absolutely coming to this space -- the question is from whom, when, and in what form -- and common sense federal regulation is far better than state-by-state regulation which will happen if the federal regulators don't move quickly (and in NY it could be particularly harsh on cash advance companies). Cash advance now carries a stigma from which it will be difficult to recover, and I'd recommend that all parties (lenders, funders, and brokers) assess their business model and make their business practices as unassailable as possible.


Carl the only way to please regulators if we fund deals under 20% annually.

Regulators aren't focused on rates; they are focused on oversight, proper disclosure, UDAAP, debt traps, and predatory protections. In the dozens of meetings I have attended, not once have I heard the concept of a rate cap as a remotely likely option.

[FUNd]

Regulators aren't focused on rates; they are focused on oversight, UDAAP, debt traps, and predatory protections. In the dozens of meetings I have attended, not once have I heard the concept of a rate cap as a remotely likely option.

Cheers to that Carl!