April 8, 2026 – By Christian Smith, Berkshire Financial Services
On February 19, 2026, the Appellate Division of the New York Supreme Court issued its ruling in People v. Richmond Capital Group, LLC. The court affirmed a 77 million dollar judgment against a group of MCA lenders on four grounds at once. The agreements were disguised loans subject to usury law. The lenders’ usurious intent was established as a matter of law. The lenders engaged in repeated and persistent fraud. And the MCA contracts were substantively unconscionable. All four holdings were affirmed on appeal.
What the Case Was About
The New York Attorney General brought a special proceeding against Richmond Capital Group, Ram Capital Funding, and Viceroy Capital Funding, along with their individual principals, alleging predatory lending practices across more than 3,000 transactions styled as merchant cash advances. The Supreme Court entered a 77,289,631 dollar judgment. The lenders appealed. The Appellate Division affirmed.
The facts are not complicated. The agreements had reconciliation provisions on paper. In practice, no reconciliation was ever performed. Daily payments were fixed and did not reflect a good faith estimate of actual receivables. Merchant requests for reconciliation were subject to the lenders’ sole discretion and were routinely denied. Bankruptcy was treated as default. Personal guarantees were required and enforced regardless of actual business performance.
The agreements said purchase of future receivables. The conduct said fixed-payment loan. The court looked at what actually happened and called it what it was.
The Four Holdings and Why Each One Matters
The first holding applied the three-factor test. The court asked whether genuine reconciliation occurred, whether the term was truly indefinite, and whether the lender bore any real risk if the merchant failed. On all three, the lenders came up short. Reconciliation was discretionary and denied. The term was effectively fixed. Personal guarantees meant the lender faced no real downside. Loan, not purchase.
The second holding goes further. The court found the lenders’ usurious intent was established as a matter of law. That is the standard that removes the question from a jury and resolves it at the legal level. The lenders could not argue their way out at trial because there was nothing left to argue about.
The third holding found the lenders engaged in repeated or persistent fraudulent acts. The record included false affidavits used to obtain confessions of judgment against merchants, where a lender obtains a court ruling without a trial. The record also showed undisclosed fees and debiting of amounts in excess of what was owed. These were not isolated incidents. They were the business model.
The fourth holding extends furthest as precedent. The court found the MCA contracts were substantively unconscionable. The court called the interest rates “exorbitant and criminally usurious.” Unconscionable means a deal was so one-sided that a court will not enforce it regardless of what was signed. The court also held that procedural unconscionability was not foreclosed by the fact that many of the merchants were sophisticated businesspeople or had prior MCA experience. Sophistication and experience do not cure misrepresentation.
What This Ruling Is Not
Richmond Capital was not a mainstream MCA operation. Its principal had been the subject of federal criminal proceedings. The FTC had previously secured a permanent ban against the company and its owner in 2022. The conduct documented, including threats of violence and harassment campaigns, represented an extreme end of the industry’s behavior spectrum.
The industry will argue, and has already argued, that this ruling is limited to bad actors and does not reflect standard MCA practice. That argument is worth understanding because it will come up.
What This Ruling Actually Establishes
The significance of Richmond Capital is not what the lenders did to merchants in the most extreme instances. It is the analytical framework the Appellate Division used to evaluate the contracts themselves.
The three-factor test applies to every MCA agreement, not just to the most egregious operators. The reconciliation question, the finite term question, and the recourse-upon-bankruptcy question apply to the contracts sitting in active files right now.
The unconscionability holding is the development that extends furthest. Prior case law focused on recharacterizing MCAs as loans and the usury analysis that follows. A finding that MCA contracts are substantively unconscionable on their face, affirmed at the appellate level, adds a separate legal theory available to attorneys challenging these agreements. It is not dependent on proving usury. It runs alongside it.
What It Means If You Are Currently Carrying MCA Debt
The Richmond Capital ruling does not retroactively resolve your file. It adds to the body of appellate case law that attorneys working active MCA restructuring cases can cite and build on.
The lender’s position that you signed the contract and are bound by it is getting harder to sustain. Courts are applying a three-factor test that looks past the label. They are finding usurious intent as a matter of law. They are holding that experienced business owners are not foreclosed from challenging agreements that misrepresented their terms. And at least one appellate court has now called MCA contracts substantively unconscionable on their face.
The contract you signed is not the end of the analysis. In an increasing number of jurisdictions and under an increasing number of legal theories, it may be the beginning of one.
The ruling does not do the work. The structure does. Enrollment is what activates the structure.
To speak with a Berkshire Financial Services Finance Manager about your file, call 1-800-801-1019.
Informational purposes only. Not legal advice. Berkshire Financial Services is not a law firm. Results vary.