Scura helps pizzeria and restaurant Gencarelli settle into continuing battle against merchant advance financing

WAYNE, New Jersey, October 29, 2020 / PRNewswire / – Lawyers for Scura recently tested positive on behalf of Gencarelli’s Pizzeria and Restaurant Inc. in a recent dispute involving cash advances to merchants filed with the Federal District Court in New Jersey. At October 6, 2020, the company settled the case with the loan companies, removing the interest charges claimed on the alleged loan sharks. This case is a milestone in the ongoing battle against merchant advance financing.

In this case, we represented Gencarelli’s Pizzeria, alleging that the defendants had granted our client a loan at illegal interest rates. As part of the loan agreements, the company argued that a loan was disguised as a merchant cash advance so that the defendant could charge an annual interest rate of 117%. On behalf of our client, the firm alleged that this exceeds the two New Jersey State law which maintains annual interest cannot exceed 50% per annum on loans. Finance companies that provide Merchant Cash Advance financing generally argue that these are not loans and therefore finance companies are not subject to the interest limits charged under the laws on the applicable wear. Usury laws are the laws of a particular state that put a cap on the amount of interest that can be charged on a loan. Some states don’t even have usury laws. As a result, many finance companies are formed in states that do not have usury laws.

In the Gencarelli case that we filed, the agreements had states other than New Jersey as the applicable control law in an attempt to avoid ceilings on the allowable interest charged. When filing the complaint, we argued that New Jersey the law should apply because of NJ’s overriding interest in regulating the interest rates charged in the state. Since Gencarelli’s Pizzeria is a New Jersey company, it should enjoy the protections of the state law of NJ.

The defendants disputed the allegations. Our firm argued that the merchant cash advance contained a provision that provided merchant cash advance companies with recourse in the event of non-payment by the merchant. Specifically, because the agreement contained two overly broad additional guarantees that could be applied in the event of non-payment and set a time limit within which the loan was to be repaid, the company alleged that it was a loan usurious disguised as an advance of merchant funds. so that it can charge interest rates in excess of the rates authorized by the New Jersey state laws. The defendants, as expected, denied any wrongdoing in the case and under the settlement agreement.

The results of this settlement are yet another legal battle that further establishes how small businesses can resist and combat predatory lending and business practices.

If you or your business has a legal issue with a merchant cash advance, please do not hesitate to contact one of our New Jersey lawyers to analyze your loan contracts. Lawyers from Scura, Wigfield, Heyer, Stevens & Cammarota LLP can help. Please call our offices to schedule a free consultation and learn about your options.

Scura, Wigfield, Heyer, Stevens & Cammarota LLP is a bankruptcy and personal injury law firm working in New Jersey. Our team deals with all types of bankruptcy, personal injury, estate planning, real estate law and litigation. We are ready to accompany you towards a resolution and ensure that you obtain appropriate legal representation in New Jersey.

SOURCE Scura, Wigfield, Heyer, Stevens & Cammarota LLP

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