Cash Advance Slip and CFPB's Authority Explained

A cash advance slip is essentially a loan agreement between a lender and a borrower, outlining the terms of the loan, including the amount borrowed, interest rate, and repayment schedule. The lender provides a cash advance to the borrower in exchange for a promise to repay the loan, usually with interest.

The Consumer Financial Protection Bureau (CFPB) has authority over cash advance slips. The CFPB was created in 2010 to regulate consumer financial products, including payday loans, which are often offered through cash advance slips.

The CFPB's authority is based on the Dodd-Frank Wall Street Reform and Consumer Protection Act. This law gives the CFPB the power to oversee and regulate consumer financial products, including cash advance slips, to ensure they are fair and transparent.

Cash advance slips can be obtained from various lenders, including banks, credit unions, and online lenders. However, some lenders may not be subject to the CFPB's authority, which can make it difficult to navigate the loan process.

In many states, cash advance regulations are put in place to protect consumers from predatory lending practices. These regulations vary by state, but some common requirements include a 36% interest rate cap.

Some states also require lenders to be licensed or registered, which can help prevent unscrupulous operators from taking advantage of people in need. This is a crucial step in ensuring that cash advance companies operate fairly and transparently.

In addition to licensing requirements, some states also mandate a cooling-off period between loans, which can help prevent borrowers from getting trapped in a cycle of debt. This can give people a much-needed breathing space to reassess their financial situation.

To determine if a transaction is a loan subject to usury laws, the court must examine whether repayment is absolute or contingent on the merchant's success. This involves considering factors such as reconciliation provisions, indefinite term, and recourse in case of bankruptcy.

A mandatory reconciliation provision in a merchant cash advance agreement can indicate that the transaction is a purchase of future receivables rather than a loan subject to usury laws. This is a crucial distinction, as it can affect the enforceability of the agreement.

Unconscionability is a defense, not an actionable claim, and prima facie tort requires a showing of "disinterested malevolence" as the sole motive for the defendant's actions. This means that merchants cannot simply claim that an agreement is unconscionable and expect it to be invalidated.

Under New York law, a corporation can only assert criminal usury as a defense, not as an affirmative claim for relief. This limits the ability of merchants to use usury laws as a means of escaping their obligations.

Here are some key factors to consider when evaluating a merchant cash advance agreement for usury and racketeering:

The Consumer Financial Protection Bureau's (CFPB) structure has been a topic of controversy, particularly regarding its regulatory authority over legal funding companies. The CFPB's single-director structure, which can only be removed for cause, was initially ruled unconstitutional by a federal district court.

The court's decision was later vacated by the U.S. Court of Appeals for the Second Circuit, which found that the provision is severable from the rest of the Consumer Financial Protection Act. This means that the rest of the CFPB's authority remains intact.

Assignments of settlement awards can be void if prohibited by the settlement agreement or statute. This is a crucial consideration for companies offering cash advances on settlement awards.

Cash advance agreements that function as loans may be subject to usury and consumer protection laws, even if labeled as sales. This highlights the importance of clear labeling and compliance with consumer protection laws.

The CFPB's enforcement actions can still be valid, even if its original structure was found unconstitutional. State authorities can bring consumer protection claims against companies offering cash advances on settlement awards.

A court has vacated a default judgment for an alleged criminally usurious loan, which means the borrower can now contest the loan's legitimacy.

This is a big win for the borrower, who was initially denied a chance to defend themselves in court.

The loan in question was a cash advance slip, which is often used by people who need quick access to cash but may not have the best credit history.

Cash advance slips are typically short-term loans with high interest rates, which can quickly spiral out of control.

The court's decision to vacate the default judgment is a rare occurrence, but it highlights the importance of due process in the legal system.

In this case, the borrower was able to argue that they didn't receive proper notice of the lawsuit, which is a key requirement for a default judgment.

The court ultimately agreed that the borrower's due process rights had been violated, and therefore vacated the default judgment.

This decision is a reminder that borrowers have rights and should be aware of their options when dealing with high-interest loans like cash advance slips.

To ensure proper use of a cash advance slip, receipts must be provided for authorized purchases, and no money should be disbursed unless a paid receipt or invoice is presented.

A written note describing the expense is required if receipts are not issued for a type of expense incurred, and the person who made the expenditure must sign the note.

When cash is advanced to make an authorized purchase, a petty cash advance slip should be signed showing the amount of money the individual received.

The advance slip should be destroyed when the unspent money and a paid receipt are returned.