My collection lawyer just e-mailed me this.

Client Advisory - Negative MCA Authorities From SDNY

Please be advised that in the last two months, three adverse decisions have come out in SDNY against MCA cases involving ACH debit transactions. In each case, the Court looked beyond the three factor test historically used by New York courts to determine that MCAs are not usurious loans and, instead, applied a different test to determine that the transactions were usurious loans or plausibly alleged usurious loans. Although in differing procedural contexts, the Court sustained RICO claims against MCA companies and/or their principals in each case. The decisions are incredibly negative and, worse still, were issued by three different federal judges, rather than a single outlier judge. There are several other cases in front of the same judges and it seems very likely that we’ll see at least 5-6 negative federal decisions in 2022. The three negative decisions have already circulated among judges in S.D.N.Y. and various state court judges around New York. The 3 federal cases in question are:

Lateral Recovery LLC v Queen Funding, LLC, 2022 U.S. Dist. LEXIS 129032 (S.D.N.Y. July 20, 2022)

Haymount Urgent Care PC v GoFund Advance, LLC, 2022 US Dist. LEXIS 112768 (S.D.N.Y. June 27, 2022)

Fleetwood Servs., LLC v Ram Capital Funding, LLC, 2022 US Dist. LEXIS 100837 (S.D.N.Y. June 6, 2022)

Some of the issues can be mitigated by updating MCA contracts and others will require significant focus on best practices.