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New Jersey Merchant Cash Advance Lawyers Can Provide Debt Relief
Running a small business is tough. You have to worry about paying employees, keeping customers happy, managing inventory, and a million other things. With all those plates spinning, it can be tempting to take out a merchant cash advance loan to keep things going when money gets tight. But those loans come with sky high interest rates and aggressive collection tactics if you fall behind. If you took out one of these predatory loans in New Jersey and are struggling to pay it back, there are consumer protection laws and defenses that can help. A New Jersey merchant cash advance lawyer can help you understand your rights and options.
-How Merchant Cash Advances Work
Merchant cash advance loans seem appealing because they are quick and easy to get. Unlike a bank, the lender doesn’t care about your credit score or business financials. Instead of getting a lump sum, the lender buys a percentage of your future credit card sales. You pay back a fixed amount from each day’s credit card receipts until the balance and fees are paid off.So for example, if you were advanced $10,000, the lender may take 15% of daily credit card sales as the payback. On a day you did $1,000 in credit card transactions, $150 would go to paying back the loan.Because there is no set repayment schedule, the total interest paid can quickly spiral out of control. The annual percentage rates often exceed 100-200%. Many businesses end up paying double or more what they originally borrowed.If you fall behind on payments, some lenders will freeze your bank account or sue you. New Jersey has consumer protection laws that can help in these situations.
New Jersey Usury Laws Cap Interest Rates
New Jersey has usury laws that limit how much interest lenders can charge on commercial loans under $50,000. Lenders cannot charge over 16% annual interest.Many merchant cash advance lenders try to skirt these laws by claiming they are not making loans but rather purchasing future receivables. But the New Jersey Supreme Court recently ruled these are in fact loans subject to usury laws:
“In determining whether an agreement constitutes a usurious loan or a bona fide sale of receivables, courts must consider the totality of the circumstances surrounding the transaction and apply their sound judgment.”
So if you were charged an annualized rate over 16%, the loan may be void and unenforceable under New Jersey law. A merchant cash advance lawyer can help you fight back against aggressive collection attempts.
Federal Trade Commission Has Sued Predatory Lenders
The Federal Trade Commission has been cracking down on predatory business financing tactics. In a recent case against merchant cash advance provider Passport Capital, they alleged:
-- Misrepresenting the cost of the advances
- Taking more money than disclosed from bank accounts
- Refusing to honor agreements to modify repayment terms
- Threatening borrowers who fell behind with legal action or credit damage
If you have experienced similar deceptive or abusive tactics, you can file complaints with agencies like the FTC, Consumer Financial Protection Bureau, and your state attorney general’s office. Their investigations build evidence for legal action against shady lenders.
New Jersey Has Strong Protections Against Abusive Collection Practices
New Jersey has laws protecting consumers and small businesses against overly aggressive debt collection attempts. Prohibited practices include:
- Harassing phone calls at inappropriate hours
- Discussing the debt publicly to embarrass you
- Making false threats about legal action
- Trying to collect amounts not legally owed
Under the New Jersey Fair Debt Collection Practices Act, you can sue a debt collector for statutory damages of $1,000 – $5,000 per violation. If the collector is breaking other consumer protection laws too, the penalties can be even higher.
Work With An Experienced New Jersey Merchant Cash Advance Lawyer
If you are struggling to pay back a predatory merchant cash advance loan in New Jersey, contact an experienced business debt relief attorney. They can analyze the loan terms to spot violations of usury laws or other protections. If the loan is deemed void or unenforceable, the harassment and threats to your business should stop.An attorney can also negotiate with the lender or debt collector. There may be ways to settle the debt for less than the full inflated balances demanded. Or set up affordable long term repayment plans.
Having a lawyer deal with aggressive collections can relieve a huge amount of stress when you are trying to save a small business. Paying attorney fees upfront can be difficult, but many lawyers offer flexible payment plans or contingency fee arrangements. With the potential statutory damages from consumer protection violations, hiring a lawyer on contingency can make sense.
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