The merchant cash advance industry comes under periodic attack for a number of reasons but actual reviews suggest those problems are more fiction than fact. Recent research suggests that regulated lenders are not the problem. In October, the Pew Small Dollar Loan Project released its first report. “Fraud and Abuse Online: Harmful Practices in Internet Payday Lending” finds that most fraud in the cash advance industry is perpetrated by unregulated online lenders.


Merchant Cash Advance Reviews Suggest the Real Problem:


That point needs to be emphasized more by the industry. Statistics that support the case that unregulated lenders are a problem should be shared as well. A post by Advance America on the Pew Report shares a couple of interesting statistics:


  • 90% of complaints are directed at online lenders, even though they only account for about 1/3 of the market.
  • Illegal actions are concentrated among the 70% of lenders who are not licensed in all of the states where they operate.


Complaint data from the Consumer Financial Protection Board (CFPB) show that only 1/10 of 1% of all complaints against businesses are complaints against merchant cash advance lenders. Business owners lodged 9 times as many complaints against other cash advance organizations.


Lack of regulation is certainly not an issue for storefront lenders, who are regulated by the states where they operate and by the federal government. Pew notes that these regulated lenders are “generally not implicated in the types of illegal practices described in this report.”


Merchant cash advance reviews, then, suggest there is not a general problem with the industry. Future reports from the Small Dollar Loan Project should yield more information that can be useful in both identifying real issues the industry faces and in defending the regulated part of the merchant cash advance industry. This first report lends support the industry’s claim of offering a safe alternative for consumers who don’t have access to other sources of short-term cash.


Real Ways to Protect Consumers


Efforts to restrict locations, numbers of lenders, interest rates and other aspects of the industry may fail to protect customers. Communities might not be improved either. Generalizing from some bad actors to characterize the whole industry can eliminate the benefits of having cash advance outlets in a community. Access to short-term loans can be a huge help to individuals who find themselves in a temporary bind and are also locked out of the traditional lending marketplace for whatever reason.


As the Advance America post claims, consumers are best served by a competitive and properly regulated cash advance industry. Small business owners who end up needed short-term loans that are better provided by regulated lenders in the cash advance industries, versus relying on unregulated merchant cash advance providers. The data make this clear.


The merchant cash advance industry generates relatively few complaints while servicing a huge market for short-term loans. This is something often overlooked in discussions of businesses that serve consumers who can’t get money from other lending institutions. In short, merchant cash advance reviews and research proves that the industry is an extremely valuable asset.

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