Understanding CT Cash Advance Laws and Regulations

In Connecticut, cash advance laws are governed by the state's Uniform Commercial Code.

The maximum loan amount under Connecticut law is capped at $15,000.

Connecticut's cash advance laws prohibit lenders from charging interest rates above 12% per year, and lenders must also cap fees at 10% of the loan amount.

Lenders are also required to clearly disclose the terms and conditions of the loan, including the APR and any fees associated with the loan.

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Connecticut has very little regulation surrounding merchant cash advances, which means MCA companies can charge extremely high fees since they are not consumer-focused and aren't regulated under the Fair Debt Collection Practices Act.

In 2018, the state enacted Senate Bill 471, which instituted an interest rate cap of 60% APR on MCA agreements. This prevents providers from imposing excessively high rates and fees.

Some MCA companies attempt to skirt state laws by structuring their advances as purchases instead of loans. To prevent this, Connecticut imposes limitations on related fees and charges through Title 36a of state statutes.

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Here are some key Connecticut MCA laws and regulations:

MCA companies can try to get around these laws by including a Confession of Judgment (COJ) in their contracts, which allows them to obtain a default judgment against the borrower without notice or opportunity to defend themselves in court. However, New York-based MCA funders are banned from issuing COJs to out-of-state borrowers, including those in Connecticut.

If a Connecticut business owner enters into an MCA agreement with unreasonable or illegal terms, they may be able to challenge the validity of the contract. An experienced business lawyer can review the documentation and determine if the provider violated applicable laws.

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The Connecticut Department of Banking is the regulator you can turn to if you have a complaint about a cash advance lender in the state. Their address is 260 Constitution Plaza, Hartford, CT 06103, and you can reach them by phone at 860-240-8299 or 800-831-7225 (toll free).

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You can file a complaint on their website at https://portal.ct.gov/DOB/Consumer/Consumer-Complaints/Banks. This is a great resource if you feel you've been taken advantage of by a lender.

The Connecticut Department of Banking also keeps track of complaints from consumers. According to the CFPB Consumer Complaint Database, some common issues include charges from accounts, fraud and threats, and not exiting debt. Here are the specific numbers:

These numbers are updated as of March 2024, so you can get an idea of the types of issues that have been reported to the Department of Banking.

A CT Cash Advance is a form of business financing where a company sells a portion of its future credit card sales in exchange for an upfront lump sum payment.

The provider essentially purchases the rights to collect daily payments from a business until the advance has been repaid in full, plus fees and interest. This is different from a traditional small business loan, which typically features set repayment schedules.

The borrowing company makes payments by allowing the CT Cash Advance provider to withdraw predetermined percentages from their credit card receipts.

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Tayne Law Group, a reputable financial services law firm, offers debt relief options for businesses struggling with merchant cash advances in Connecticut. Their team of experienced attorneys can help negotiate with MCA providers to seek debt relief options.

If a Connecticut small business cannot keep up with MCA payments, they risk the provider aggressively withdrawing large percentages of daily credit card receipts. This can severely hurt cash flow and operations.

An experienced Connecticut MCA lawyer will know how to approach these negotiations and deal with aggressive collection tactics. They can also provide alternatives if the MCA provider refuses to offer reasonable settlement arrangements.

In extreme cases, bankruptcy may be an option for debt relief. However, the ability to erase MCA obligations through bankruptcy depends on how the specific advance is classified.

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A skilled Connecticut bankruptcy lawyer will thoroughly analyze the MCA agreement to find potential loopholes for discharging the debt. They will also assess whether the client meets eligibility requirements for the different bankruptcy chapters based on their overall financial situation.

Connecticut has a specific law governing cash advance regulations.

The law, known as "An Act Requiring Certain Financing Disclosures", was signed into law by Governor Ned Lamont on June 28, 2023.

It applies to providers of sales-based financing products, including commercial financial brokers.

Entities that conduct no more than five commercial financing transactions in a 12-month period are exempt from the law.

To do business in Connecticut, providers must register with the state banking commissioner by October 1, 2024, and renew their registration every year.

Before making a final and binding offer, providers must give borrowers certain information, including the total amount of the loan and cost of borrowing, a repayment schedule, and details about how much money brokers will earn from the transaction.

Loan agreements cannot force borrowers to give up their right to a hearing over a prejudgment remedy.

The law allows the Department of Banking to recognize and use another state's loan disclosure rules if they meet or exceed the requirements of Connecticut's law.

Those who breach the Connecticut law may face civil penalties of up to $100,000 per violation.

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