Merchant Cash Advance Dispute
People say a merchant cash advance is the purchase of a business’ future receipts. It’s usually repaid with daily or weekly debits from the merchant’s bank account. It’s guaranteed by the business owner and secured by a UCC lien. So put simply, business owners in Georgia want to know if they need a lawyer to fight a merchant cash advance dispute? The answer is it depends on where the fight is. Most merchant cash advance funders have a contract that picks the law of the state of New York and the courts of the state of New York. So the first lawyer you need may be a New York lawyer. Of course, you then need a Georgia lawyer when the judgment is domesticated in Georgia, a Georgia bank receives a garnishment summons or it’s time to talk about bankruptcy.
Commercial Financing Disclosure Law
There is a commercial financing disclosure law in Georgia. Firms soliciting Georgia merchants may have missed this. Senate Bill 90 was signed by Governor Brian Kemp on May 1, 2023. It amended the Fair Business Practices Act by adding O.C.G.A. § 10-1-393.18. It applies to transactions consummated on or after January 1, 2024. It applies to accounts receivable purchase transactions of $500,000 or less. So this applies to MCAs. The provider is required to disclose in writing, prior to the consummation of the transaction, the following: The amount of funding provided; the amount of money received by the recipient of the funds; the amount of money the recipient is obligated to pay the provider; the total cost of the purchase transaction in dollars and how the payments will be made; the frequency of the payments; and the amount of each payment. Financial institutions are exempt. So are providers that do five or fewer transactions with Georgia businesses each year. And transactions secured by real estate.
Despite the name of this law, there is little to no protection under the Georgia disclosure law. The only person who can bring a case under this law is the Georgia Attorney General so a merchant is not allowed to sue a provider if a disclosure wasn’t provided. The fine for not providing the disclosure is $500 per violation, for a maximum of $20,000 for a first offense. $1,000 per violation, for a maximum of $50,000 for a second and subsequent offense. Failure to provide the disclosure does not make the funding agreement unenforceable. This law requires disclosure of the total dollar cost, not an annual percentage rate (APR). There is no cap on factor rates or fees. Failure to provide or failure to properly provide a disclosure can be used as a reason to complain to the AG about a provider and can be used as a leverage point when dealing with a provider, but does not erase what is owed.
Treats the Advance as a Loan
Georgia’s usury rules help only if a court treats the advance as a loan. Under O.C.G.A. § 7-4-2, parties to a loan above $3,000 and below $250,000 may agree in writing to any rate. That freedom is expressly subject to § 7-4-18, which makes it a misdemeanor to charge more than 5 percent per month. Fees and other indirect charges count toward that ceiling. In Norris v. Sigler Daisy Corp. (1990), Georgia’s Supreme Court held that a lender violating § 7-4-18 loses the interest but can still collect principal. The obstacle for most merchants is that their contracts choose New York law, so a court may never reach Georgia’s ceiling at all.
But we did find a state-level case on point: Ruth v. Cherokee Funding (2018). In Ruth, the Georgia Supreme Court ruled that a litigation funding agreement with only contingent and limited repayment obligation was not a loan under Georgia’s lending statutes. The court also opined that a sham contingency can be disregarded. Commentators saw it as a good decision for funders who structure deals as sales.
More directly on point from Georgia is a 2019 decision by the U.S. Bankruptcy Court for the Northern District of Georgia, applying New York law, in GMI Group v. Unique Funding Solutions, 606 B.R. 467, where U.S. Bankruptcy Judge Paul Baisier held that the advance was a loan, and criminally usurious under New York law. The merchant’s right of reconciliation was illusory and the advance was effectively guaranteed to be repaid. In a 2019 decision, the same court held that a different agreement was a true sale. The advance could be varied from month to month in the amount paid each day. There was no term for the advance and the merchant’s bankruptcy did not trigger a default. What matters is what the agreement provides.
Confessed Judgments
Confession-of-judgment clauses have lost most of their force against Georgia merchants. On August 30, 2019, New York amended CPLR 3218. A confession can now be filed only in the New York county where the defendant lives, and a business counts as living wherever it has a place of business. A Georgia company with no New York location therefore cannot have a confession entered against it there, at least on affidavits filed after the change. Georgia’s own statute, O.C.G.A. § 9-12-18, allows confessed judgments only within a lawsuit regularly filed and docketed in the defendant’s home county. Georgia has also refused to enforce jury-trial waivers signed before any dispute arises, in Bank South v. Howard (1994).
Forum-selection Clauses
However, those cases are typically subject to forum selection clauses. Georgia upholds forum-selection clauses (per the U.S. Supreme Court’s Bremen decision) except when it is “unreasonable” to do so, see Iero v. Mohawk Finishing Products (2000) (Georgia Ct. of Appeals enforcing forum-selection clause selecting New York); Chironsoft v. Yokim Marketing (2025) (same court holding that signing a forum-selection clause was an act of consent to the jurisdiction of the court). As a result, the funder’s suit will likely be brought in New York state court. If brought in federal court in Georgia, the suit will be brought in one of the three federal district courts in the state, the Northern, Middle and Southern districts (established in 28 U.S.C. 90).
Uniform Enforcement of Foreign Judgments Law
A New York judgment reaches a Georgia business through the Uniform Enforcement of Foreign Judgments Law, O.C.G.A. §§ 9-12-130 through 9-12-138. The creditor files an authenticated copy of the judgment, the clerk notifies the debtor, and enforcement can be stayed while an appeal is pending. Local practice varies by court. In the Athens-Clarke County Magistrate Court, filing costs $62 including certified mail. The debtor then has 30 days after notice to respond, and a hearing is set within 30 days of a response. Once the judgment is domesticated, the creditor may pursue a writ of fieri facias, a levy, or garnishment.
Bank Garnishment – The quick answer to garnishment is to be quick, due to changes in the Georgia Code in 2016 (see Senate Bill 255). When the summons is served on the bank, the bank must hold funds of the customer that are not exempt from garnishment from the date of service until five days after the service. Subsequently, the bank must answer (not sooner than five days after service and not later than 15 days after service of the summons) and turn over all admitted funds to the court. If the bank does not answer within 15 days, the bank is considered to be in default. A notice of rights and claim form disputing the garnishment shall be provided to the business. Due to the short amounts of time, it is more effective to have an attorney admitted to practice in the State of Georgia after domestication or garnishment.
The Right Lawyer
Your situation determines the right lawyer. If there is a New York lawsuit, the lawyer who will need to appear has to be admitted there, and a lawyer admitted only in Georgia cannot file the answer. At least one lists admission in New York, New Jersey, Connecticut and Florida, but not in Georgia. A merchant who has both a New York lawsuit and Georgia collection activity might need a lawyer in each state, cooperating.
Some Georgia merchants may need a bankruptcy lawyer or a settlement negotiator more than a litigator. The Northern District of Georgia’s GMI cases have shown that a Georgia bankruptcy judge can determine whether an advance is really a loan. The GMI court also examined the business’ payments to the funder under fraudulent transfer law. If the contract contains a genuine reconciliation clause and the business can pay something, negotiating a settlement may be quicker than any court.
