Liberty Bankcard Digital USA
While there is no universal definition, an MCA is generally defined as an alternative financing product that involves a lump-sum payment to a merchant in return for a specified amount
of its' future receivables to be paid back through an agreed-upon percentage of its Sales Receipts or daily Bankcard sales. Understanding that the MCA is a "purchase and sale" transaction, it
should not be considered a "loan or extension of credit" under federal or state law.
It is not a loan, instead an investment on future receivables.
Liberty Bankcard Digital USA
Is Cash Advance Legal
The last thing you should wish is that your customers are worrisomely waiting for past deposits.
Split- Funding
Split-Funding occurs when the Processor captures and settles transactions
for all parties simultaneously. It eliminates the need for third parties
who can slow down the settlement process that already takes days. Meanwhile,
Merchants are waiting in dire need for their deposits to pay Vendors and Employees.
They select their batch times and liberty bankcard settles the funds by midnight the next day.
Split-funding eliminates the need for ACH, Lockbox, and Third-Party fees. No delays. No surprises.
MCA SPECIFIC SOFTWARE
Our split-funding platform
is specifically built for the MCA Industry. We support both Bankcard and Bank ACH withdrawals.
Our Engineers work 24 hours a day.
developing micro-applications
that deliver funds quickly, securely,
and without a glitch.
Our merchant statements detail
all transactions with a rolling
current balance owed to the MCA.
Our A/I powered smart software
knows when the Merchant is
"paid in full" and automatically stops withdrawals to avoid overcharges.
NO DEPOSIT CONFUSION
Upon 100% repayment of the MCA investment, our system ends
split funding deposits and begins
settling 100% of the transactions
into the merchant account.
Whether you're an MCA Broker or
Broker/Lender funding merchants through traditional methods that
are slowing down deposits
We can alleviate that pressure
through our Artificially Intelligent
software that knows how to follow your orders. Every time.
Deposits arrive by midnight daily
No surprises. No delays.
Liberty Bankcard Digital USA
Split-Fund
The MCA industry is often synonymously
compared to a Payday Loans for businesses.
The concept is evergreen and has helped
millions of merchants over the years.
As with all things involving money, it will attract
unscrupulous people that abuse the concept.
They give the industry a black eye, and
Traditional settlement platforms have not helped.
ACH and Lockbox programs have only frustrated
small Merchants which are barely making it.
Split-funding is the Only Way to go.
Merchants want fast deposits and real people to answer the phone.
Merchants don't like surprises when it comes to their Payback amount.
Cooperman Investment in MCA
Successful MCA's must adapt to the endless competition for Merchants. Today, most Merchants would rather tolerate ACH and Lockbox platforms
than switch their credit card processing accounts. Mainly, because they've switched before and
are not motivated by lower rates.
They want service
An MCA's goal should be to fund money by all legal means possible regardless of the settlement method. They should not compete with Agents.
MCA's should collaborate with Providers that
provide excellent service and quality products.
The percentage deducted from daily batches should never over-burden the Merchant.
Service does not end when the Merchant is funded, and the commission is paid.
When the terminal goes down, merchants want real humans 24 hours a day.
MCA Broker or Broker-Lender?
STURCTURED
An MCA product offers an alternative to commercial credit under which the Provider purchases the right to receive a fixed amount of the Merchants' future receivables.
It is paid back based on a percentage of their daily Receipts or Bankcard Sales. Both require Withdrawals.
In the Receipts Pay-Back method, MCA's risk ACH rejections, closed accounts, collection and legal claims.
In Split-funding, there is no risk of rejections, because the payback is part at the settled Batch. Both parties are deposited 100% of their funds.
Split-funding is the only way
to assure that there are no surprises.
Both parties can be worry-free.
No worrying if money will be jeopardized by withdrawals plaguing the ACH and Lock Box industry.
UNSTURCTURED
An MCA may be subject to various
federal and state law regulations
governing extensions of credit
including state licensing rules for State lenders and brokers.
Usury limits and adverse action notice requirements under the Federal Equal Credit Opportunity Act among other regulations.
In addition, as demonstrated by the recent FTC's recent enforcement
actions, MCA's are potentially subject to Federal and State Laws
prohibiting unfair or deceptive acts.
When an MCA signifies a default has occurred, their playbook
has already gone into motion.
For instance, many MCA's
have contracts with collection
firms and attorneys who include
harassment tactics and filing suits.
FTC-MCA FINES
The FTC has placed Big Fines on MCA's
that misrepresent the amount of financing Merchants receive relative to
their requests, including collateral
and personal guarantees,
while engaging in unauthorized withdrawals after the investment has been paid back in full.
The FTC will rule against the MCA
with permanent injunctive relief,
recission or reformation, restitution, refund, and disgorgement.
While MCA's may still be considered legal in some states, the FTC and, more importantly, multiple federal courts have scrutinized the way they operate and ruled against the owners, the companies who offer them, and the wrongful ways in which they trick small businesses.
ACH REJECTS
There are countless lawsuits against
MCA Companies stemming from
daily, weekly, monthly and custom
withdrawals from Merchant accounts.
The ACH withdrawals are to payback
the agreed percentage of the revenues
in exchange for the MCA investment.
When the Merchant has a major slowdown in cash flow and ACH
withdrawals reject, collection measures
can spiral out of control leading to
aggressive collection tactics
culminating into claims.
The lack of regulation coupled with lenders’ greed has resulted in some MCA's becoming nothing more than horrible business payday loans.
LEGAL CLAIMS
In the case of a lawsuit,
once someone has attained an attorney
The MCA company should no longer be
reaching out to the Merchant.
The biggest issue is when the Merchant
hires a reputable firm schooled in
MCA products, and seeks the advice
of the Attorney General and FTC.
It’s always important to remember that just because an MCA may technically be “legal,” that doesn’t mean the lenders aren’t engaging in predatory or illegal practices. In many cases, they are. They do currently face some regulation, but it isn’t much, and it isn’t as strict.
And since it’s not a loan, it can’t be regulated in the same way as a loan.
LAWSUITS
If a resolution cannot be reached through negotiation or demand letter,
the Merchant may file a lawsuit
against the MCA company.
Following the filing of the case
the discovery process is initiated by both parties, which includes exchanging
evidence related to the case.
This phase may involve
depositions and interrogatories.
In Haymount Urgent Care PC
v. GoFund Advance LLC. the
courts ruled that GoFund was liable
under the RICO Act for operating a business at criminally usurious rates
and then used improper tactics
to collect on the loans.
Merchant Cash Advance Debt
Liberty Bankcard Digital USA
Factor Rates
The factor rate is used in place of interest to calculate how much you
have to remit after receiving an MCA.
This number is a multiple, usually
1 to 3 times the initial amount.
It provides the full cost of the deal
and gives a clear idea of when
the remittance duties are fulfilled.
With factor rates, the balance increases with additional fees.
Lock Box
This is a Third-Party account used to manage settlement deposits from previous sent batches for payment.
The deposits are then split between the MCA Provider and the Merchant. Normally, 5-20% of each day’s income is transferred to the MCA .
The lockbox is handled by the Third-Party in order to ensure that all remittance payments are settled.
Stacking
Stacking involves taking out multiple cash advances on top of each other. If repayments are reliably made, some MCA lenders will front additional capital with "on-time" payments.
The Merchant can take out as many loans as the lender is willing to give.
Statistically, the more a Merchant Stacks, the higher the likelihood of default. Risk increases exponentially.
ACH
When it comes to Merchant Cash Advance loans, ACH withdrawals
can pose risks for borrowers.
MCA lenders typically have access to the business bank account.
If they default on the loan, they attempt to withdraw funds directly from your account using ACH.
The risk of overdraft fees and bank
closures increase, leading to claims.
Why split-funding lost favor
Way before MCA's begin moving away from split-fund programs,
our main prospects were Mom & Pop stores down Main Street.
In those days, you had to sell or lease EFT terminals to make money.
Residuals were small. Leasing is where the money was.
Merchants were tired of switching accounts long before the MCA industry.
At the time, the industry was a shot in the arm for ISO's and Agents.
MCA money was fresh and made it easier to sell both products.
Cash Advances were a fresh revenue stream.
Merchants needed money too, and the idea of re-paying it back
from credit card sales was great. Merchants started switching again until
Shifty Reps began promising ridiculously low rates full of hidden fees and disappointing customer service. Terminal support was even worse.
Driven by Funding commissions, Agents forgot customer service.
And, just as the industry began "working the bugs out" of the MCA space,
Merchants stopped switching and went back to their local banks.
Yet, they wanted the more MCA loans.
The MCA industry was also born during a time that terminal leasing
commissions were coming to an end. Agents were losing 100K
a year over the "Free Terminal" incentive campaigns.
This marketing trend disrupted leasing income and broke the Agents backs. Terminal income came to an end. Cash Advances became mainstream.
Super ISO's Partner with MCA's
As terminal income came to a crawl, Super ISO's cut deals with MCA's
to increase lost income. This turned MCA's into "Glorified ISO's" who
split residuals with the Super ISO and required ISA's to join the Super ISO
in order to submit deals. ISR's chose to move onto other MCA's.
This upset the Applecart. Independents were mad. The industry became desperate for deals. Smaller unregistered ISO's began collaborating
with neutral MCA's that did not require them to switch.
This allowed Independents to keep their current ISR agreements.
Liberty Bankcard wants your business, not your customers.
Merchants want service and support. If one is missing, they will go away.
WHY
MERCHANTS LEAVE
When Reps focus on money
from either leasing terminals
or selling Cash Advances,
it's rare to find Agents that
truly serve their customers.
No Service. No Customers.
LITIGATIONS
If MCA's are so bad for your business, you might wonder, how and why they’re legal? Those questions can be tricky to answer because there’s a lack of consensus on MCA regulation across
the country. While they may be legal in some states, they’re not in others.
MCA's are considered legal IF they
meet a variety of specific characteristics which on paper they might, but in practice they rarely meet.
Courts judge their tactical behavior.
NO SUPPORT
It's hard to understand why people
get into the service industry, when
they have no intentions of following up once the sales is made and paid.
MCA reps that have never sold
merchant accounts and only care
about the commissions will cause
serious hardship for the ISO-ISR.
The Banks pay residuals ONLY
for servicing the accounts.
Boarding accounts is only the beginning.
No service. No long-term customer.
SHIFTY RATES
Rates can be presented in different
ways, and unless the MCA is able
to analyze merchant statements,
offering competitive rates is not possible. Rates are not universal or predictable.
According to www.business.com
41% of Merchants do not know what
it's costing them to accept payments.
Processors have different rate structures.
Avoid Tiered pricing models.
Stick to Interchange Plus pricing to
know exactly what you really paid.
HIDDEN FEES
If you're processing through your
local Bank or an independent,
your merchant account is more likely
riddled with hidden fees.
Whether you are accepting payments
in person or over the phone, fees are
embedded within bundled rates
of Qualified, Mid-Qualified,
and Non-Qualified transactions.
At Liberty Bankcard, we don't mark-up
Interchange rates, instead we pass-on our costs and wholesale the support.
Agents don't want to board accounts onto Shifty ISO's and MCA Brokers.
Upset Sub-ISO's and Agents began seeing MCA's as Competitors who were "back-dooring" their residual streams by "getting" their customers' processing accounts.
Not surprisingly, the industry morphed into a "no honor among thieves" atmosphere full of trust issues and broken partner alliances.
As Super ISO's, Banks and Processors got caught-up in legal webs, they backed-off split-funding programs. Often finding themselves as Defendents in MCA and Merchant litigations. Not good.
Liberty Bankcard Digital USA
The Merchant Service Provider you choose will determine the lifespan of your merchant.
Invest Smartly
Choosing the right MCA Company
is as simple as accepting the right
terms and conditions for the Business, and its ability to repay the MCA's investment risk.
In essence, the MCA is taking most of the risk and is betting that the Merchant will repay as agreed.
Because it is not a loan, instead an investment in future receivables, the repayment period should be
six to nine months.
Split-funding is the only way to avoid unexpected surprises.
