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ARTICLE · 11 JANUARY 2022

FTC Bans Merchant Cash Advance Provider From Industry

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On January 5, the FTC announced that two defendants will be permanently banned from the merchant cash advance and debt collection industries, and required to pay $675,000...

United StatesConsumer Protection
Moorari K. Shah
Moorari K. Shah
A.J. Dhaliwal
A.J. Dhaliwal
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On January 5, the FTC announced that two defendants will be permanently banned from the merchant cash advance and debt collection industries, and required to pay $675,000 to resolve allegations that they used deceptive and illegal means to seize assets from small businesses, non-profits, and religious organizations. The order results from a 2020 complaint against two New York-based companies engaged in small-business financing, along with several of their owners and officers.

The FTC notes that merchant cash advances are a type of alternative small business financing where merchant cash advance companies provide funds to businesses in exchange for a percentage of the businesses' revenue. Typically, a merchant cash advance company will make daily withdrawals from the business's bank account until the obligation has been met. However, the original complaint alleged that the defendants violated the FTC Act for engaging in deceptive and unfair practices by, among other

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