A trucking company claims that the merchant cash advance industry charges usurious loans under the guise of helping small businesses grow and prosper.
Emba Transportation Inc. and owner Elmir Kocan demanded restitution from 800Fund.com for a $136,000 loan, in a Jan. 6 complaint filed in Westchester Supreme Court.
“800Fund is one of the growing number of merchant cash advance companies whose entire model preys upon struggling small businesses,” the lawsuit states.
800Fund”™s attorney, Joseph Sussman, responded in an email that both sides have amicably resolved all claims. The settlement has not yet been publicly docketed.
Neither party to the lawsuit is from Westchester. Emba is based in Auburn, Georgia. 800Fund is based in New York City. But merchant cash advance companies had been taking advantage of liberal New York laws to enforce loan guarantees, according to the complaint, and 800Fund filed Kocan”™s and Emba”™s guarantee in Westchester.
New York has since amended its laws to prohibit such forum shopping.
In 2016, Kocan needed capital to cover overhead, expense and liabilities for an expanding business, according to the complaint, and 800Fund promised to help him grow by solving Emba”™s cash flow needs.
Kocan signed a Future Receivables Sales Agreement. He received $135,811 and agreed to pay back $197,850, at $1,644.44 per day for 120 days.
The interest rate was ostensibly 10.7% of Emba”™s daily receipts, but the effective rate, according to the complaint, was 99%, “which constitutes criminal usury” under New York law.
Kocan claims that cash advances are called future receivables sales agreements to disguise the true nature of the transactions and circumvent usury laws. Borrowers are required to sign confessions of judgment that lenders use to enforce payments.
Emba quickly fell short on the daily payments, and 800Fund filed the confession of judgment in Westchester in November 2017. The court issued a $267,447 judgment, including $53,444 in legal fees, the same day.
A year later, Emba filed for Chapter 11 bankruptcy protection. It closed doors in December 2018, according to the complaint, “ultimately driven to financial ruin at the hands of this predatory lender, and others.”
The “others” may refer to other cash advances that Kocan does not disclose in the lawsuit.
The 6th Avenue MCA Fund, for instance, also filed a confession of judgment in Westchester in 2017 and won a $29,383 judgment against Kocan and Emba.
Bankruptcy claims were filed by Advantage Funding Commercial Capital Corp., $498,859; Funding Strategy Partners, $166,030; JB&B Capital, $143,426; Commercial Credit Group, $134,229; and Kash Capital, $47,397.
Kocan levels several charges at 800Fund, including fraud, in the current lawsuit. He asked the court to cancel the 2017 judgment, the confession of judgment and other supporting documents.
Sussman, the attorney for 800Fund, did not disclose the terms of the settlement.
Nassau County attorney Kenneth H. Dramer represented Kocan and Emba.
