An Florida MCA funder filed a breach of contract action against a business. The funder alleged that the business had failed to remit payments required by the merchant agreement. The funder sought to recover the amounts owed from the business and the individual guarantor. The business and guarantor filed a counterclaim against the funder alleging that the transaction was a disguised loan that charged a usurious interest rate. The funder failed to respond to the counterclaim and a default judgment was entered against it.
At a hearing to determine the damages to be awarded to the business and guarantor, evidence was presented showing that the contract was for a purchase and sale of future receivables for a purchase price of $250,000.00 and a receipts purchased amount of $347,500.00. Of the $347,500.00, the business paid the funder $108,963.00. Based on the dates of payment and amount paid, the Court found that the transaction carried an interest rate of 72%, which exceeded Florida’s criminal usury cap.
As a result, the Court voided the merchant agreement, awarded damages to the business of $108,963.00 and granted the recovery of its attorney fees from the funder.
1st Global Capital, LLC v. Volt Elec. Sys., LLC, 2017 U.S. Dist. LEXIS 175119