On March 5, New York Attorney General Letitia James released a verified petition against 27 lenders accusing them of a “large-scale, predatory lending” operation in which they allegedly misrepresented themselves in order to issue small businesses short-term loans at “sky-high interest rates” in violation of New York Executive Law §63(12). According to the petition, the 27 lenders (Respondents) have issued “illegal, usurious” and fraudulent loans in the form of Merchant Cash Advances (MCAs), which imposed triple-digit interest rates as high as 820 percent. The NYAG noted such rates are beyond both the maximum civil usury interest rate (16 percent) and the maximum criminal usury interest rate (25 percent). The petition also alleged the Respondents misrepresented their transactions in court, making the court an “unwitting part of their illegal scheme.”

The petition asked the court to permanently enjoin Respondents from committing any further fraudulent or illegal practices, cease all MCA collection payments, and void and rescind all MCAs. The NYAG also will seek and order that the Respondents disgorge all profits and award civil penalties of $5,000 for each fraudulent MCA transaction and $2,000 in costs from each Respondent.