If you are considering getting a Merchant Cash Advance (MCA) or have already gotten one, you may be interested to learn that the New York State Department of Financial Services has issued new regulations that require MCA providers to give customers full disclosure regarding their financing agreements.
If you are about to sign an MCA contract, you may look forward to better protection. These are the things you should look out for in your agreement:
Essential items your contract must have
For you to avoid unfavorable clauses in your contract, here are the key items that you need to look out for:
- Disclosure of annual percentage rate (APR): Your contract must clearly and transparently show the exact calculations for your annual percentage rate.
- Itemization of the amount financed: Your contract must provide a detailed itemization of your financing, including the amount you directly received, any prepaid finance charges and any amount others may have paid on your behalf.
- Prepayment terms: Your contract must disclose whether prepayment will require you to pay additional finance charges or fees and the maximum amount of such charges.
- Recipient’s signature requirement: All the required disclosures must have your signatures before you get the cash advance.
If you notice any of these items missing from your contract, you may contact your provider and ask them to add these details. In addition to the standard disclosures required in the contract, MCA providers must give you clear and complete disclosures separate from the contract. These disclosures must allow you to compare your merchant cash advance with other financing options easily.
What if you have already signed the contract?
If you have already signed a contract with the MCA provider, you may be able to argue that the lack of these details has misled you into accepting an unfavorable agreement. You may have a case for material misrepresentation. Consider seeking legal advice to get better clarity on your particular case.