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Dealing with Merchant Loan Lenders

Debt settlement companies are not attorneys and should not be giving legal advice about debt. This is one of the many claims in a new lawsuit brought by Funding Metrics against 14 individuals and two companies, Decision One Debt Relief and Veritas Legal Plan.  The plaintiff, Funding Metrics, is in the business of lending against the accounts receivable from business owners, which is commonly referred to as “merchant cash advance” funding.  In the lawsuit, Funding Metrics alleges that the defendants fraudulently present that they are able to renegotiate and re-structure these merchant cash advance agreements with Funding Metrics and other funding companies.  Funding Metrics brings this claim under The Racketeer Influenced and Corrupt Organizations Act or RICO, a federal anti-fraud law.  To put it simply, Funding Metrics alleges the defendants are lying and committing fraud to business owners by falsely claiming they are able to renegotiate or re-structure these merchant cash advance loans. The allegation goes further stating that the debt companies charge for these services and don’t even work on the loans at all.

These merchant loans however can be very troublesome to business owners, and present a very legitimate problem for businesses in trouble.  Business owners, like consumers, can get hard up for cash. Merchant cash advances can be a lot like consumer payday loans.  Lenders will make sometimes very unfavorable loans based on monies that will come in at a later date. Many times, these loans are so unfavorable that business owners simply fall behind on payments or never could keep up from the beginning.  Some of these loans require weekly and even daily payments to the lender at high interest rates.  So, business owners look for a solution and help when they fall behind on payments, and these debt settlement COMPANIES present themselves as the answer, when it looks increasingly that they are not the answer.

One of the major problems alleged in the lawsuit is lack of legal support.  Any defaulted debt can result in a lawsuit.  Decision One Debt Relief tried to resolve the issue by using Veritas Legal Plan, which it presents as “legal insurance” although it is not clear what that means.  Decision One Debt Relief certainly gives legal advice to its business clients, but that may be unlawful given it is not a law firm and that may be the unauthorized practice of law, which requires a license.  In short, as evidenced by this lawsuit against debt settlement companies, debt is a legal practice and is always best handled by a law firm that specializes in debt.

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Garrett F. Charity

Garrett F. Charity is Lead Attorney in the McCarthy Law PLC Los Angeles, California office and a member of the California Bar. He received his Bachelor of Arts Degree in Art History from Princeton University and his Juris Doctor Degree from Southwestern University School of Law where he was a recipient of the Schumacher Scholarship.
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