7 Disclosure Violations That Void or Weaken an MCA in Georgia

Read This Part Before You Get Attached to the Word Void

The title of this page uses the word void because that is what people search for at midnight, and you deserve to know within the first thirty seconds that Georgia’s disclosure statute will not deliver it. Four sentences in O.C.G.A. §10-1-393.18 settle that. Subsection (j) says nothing in the Code section creates a private right of action against any person based on failure to comply. Subsection (k) says a violation shall not affect the enforceability of any underlying agreement. Subsection (g) puts enforcement in the Attorney General’s hands. Subsections (h) and (i) set the price at $500 or $1,000 per violation, capped at $20,000 or $50,000 across everything arising from the same transaction documents, and payable to the state rather than to you.

Two more things Georgia does not have, both of which get asserted in law firm marketing and in fifty-state charts. Georgia requires no annual percentage rate anywhere in its disclosure list, so there is no APR to be wrong. And Georgia registers no commercial financing brokers and no providers, despite a number of surveys saying otherwise; the enrolled 2023 SB 90 contains an advance-fee ban and no licensing scheme at all. If somebody has told you your funder or broker is operating unregistered in Georgia, ask them to point at the section.

So what does move a Georgia file. The seven items below, roughly in the order they get used, starting with the disclosure defects that are still worth documenting even without a cause of action and ending with the collection mistakes that carry real money consequences. This is what an experienced negotiator actually assembles, and none of it depends on a claim that does not exist.

1. Nothing Was Handed Over on Paper the Statute Covered

The starting question is always coverage, because the majority of Georgia advances are outside the statute entirely. O.C.G.A. §10-1-393.18(e)(5) applies the disclosure duty only to transactions consummated on or after January 1, 2024. Subsection (b) then removes twelve categories, including any transaction of more than $500,000, anything secured by real property, leases under O.C.G.A. §11-2A-103, purchase money obligations under §11-9-103, vendor financing, and funding from a federally insured depository, a bank affiliate or subsidiary, a Farm Credit lender or a licensed money transmitter. Subsection (b)(5) excludes a provider that consummated five or fewer commercial financing transactions in Georgia in any twelve month period, and (a)(10) defines a provider as somebody doing more than five in a calendar year.

If your deal cleared all of those gates, subsection (e)(1) required the provider to disclose the terms before consummating the transaction, and (e)(3) sets out what had to be in it: the total amount of funds provided, the total actually disbursed where fees or a prior payoff reduced it, the total to be paid to the provider, the total dollar cost calculated as the difference between funds provided and total repayment, the manner and frequency and amount of each payment or the estimated first payment where amounts vary, and a statement of any prepayment cost or discount. Subsection (e)(2) limits the duty to one disclosure per transaction and excuses any new disclosure on a later modification, forbearance or change.

A complete absence is the cleanest version of this argument and it is not rare, because plenty of funders that adjusted for New York and California never built a Georgia workflow. What it gets you is not a defense. It is a documented, dated regulatory failure that a funder’s counsel has to consider before deciding how hard to push a file, and it pairs with everything else on this page. Treat it as an exhibit, not as a claim.

2. The Dollar Cost Line That Does Not Survive Subtraction

Georgia’s (e)(3) list is arithmetic, and arithmetic is checkable in a way that a narrative disclosure is not. Subparagraph (A) is the total amount of funds provided. Subparagraph (C) is the total amount to be paid to the provider. Subparagraph (D) defines the total dollar cost as the difference between those two figures, not as a fee schedule and not as anything the funder chooses to characterize as cost. If (A) is $80,000, (C) is $118,400 and (D) says anything other than $38,400, the disclosure is wrong on its face.

Subparagraph (B) is where the second common failure lives. It requires the total amount actually disbursed to the business where that is less than the funds provided, as a result of any fees deducted or withheld at disbursement, any amount paid to the provider to satisfy a prior balance, and any amount paid to a third party on the business’s behalf. On a renewal or a consolidation, this is the line that has to reconcile against the payoff of the old position, and on a brokered deal it is the line that has to disclose the origination fee withheld at funding. Compare it to the actual credit on your bank statement and to the settlement statement, and the discrepancies show up quickly.

There is no annual percentage rate in this list, which means the number you most need in order to compare this money to any other money is a number nobody was required to give you. Do the conversion yourself before any negotiation: cost divided by funds provided gives the period cost, and annualizing across the actual repayment period gives a figure you can put next to a bank rate. That arithmetic is legitimate, it is not a legal claim, and it changes how owners talk about their own file more than almost anything else on this page.

3. The Payment Line on a Deal That Debits You Daily

Subparagraph (E) requires either the manner, frequency and amount of each payment, or, if the amount of each payment may vary, the manner, frequency and estimated amount of the initial payment. Subsection (e)(4) then requires the agreement itself to include a description of the methodology for calculating any variable payment amount and the circumstances that may cause a payment to vary. Those two provisions are the closest thing Georgia has to a rule about how your daily or weekly debit is explained to you.

The mismatch to look for is between the disclosure and the debits that actually cleared. A disclosure describing a fixed daily amount, sitting on top of an agreement giving the funder a percentage of daily receipts, is describing a different transaction than the one you got. So is a weekly frequency on the paper and a daily ACH in the account. And where the payment genuinely varies, subsection (e)(4) requires the methodology to be in the agreement, so an agreement that gives the funder discretion to set the amount without describing how is a defect in the contract rather than merely in the disclosure.

That last point is why this item matters more than its statutory penalty suggests. The same facts that show an (e)(4) failure tend to show that the payment obligation was fixed rather than genuinely tied to receipts, and a fixed obligation is one of the classic indicators that a transaction is a loan rather than a purchase. The disclosure defect is a small exhibit. The recharacterization argument it supports is a large one, and item four is where that goes.

4. Prepayment, and the Contract Paragraph Nobody Cited

Subparagraph (F) requires a statement of whether there are any costs or discounts associated with prepayment under the commercial financing transaction, including a reference to the paragraph in the agreement that creates each cost or discount. Read that second clause carefully, because it is more specific than most states require. Georgia does not merely ask whether prepayment carries a cost; it asks the funder to point at the provision, by paragraph, that creates it.

Two failures live here. The first is silence, where the disclosure says nothing about prepayment on an agreement that plainly does treat early payoff differently. The second, and more common, is a bare yes or no with no paragraph reference at all, which is a facial failure to comply with what the subparagraph actually requires. Neither one changes your obligation, and both are cheap to document and easy for the other side to verify.

There is also a practical reason to care beyond the statute. Whether an advance carries a genuine prepayment discount is one of the facts that separates a purchase of receivables from a loan, because a true purchase of a fixed receivable amount is not usually discounted for early performance while a loan often is. So the prepayment provision earns its place in the file twice: once as an (F) defect and once as evidence about what the transaction really was.

5. The Advance Fee at Subsection (f)(1), and Everything Around It

This is the strongest provision in the Georgia statute and the only one that regulates conduct rather than paperwork. O.C.G.A. §10-1-393.18(f)(1) prohibits a broker from assessing, collecting or soliciting an advance fee from a business to provide services as a broker, with an advance fee defined at (a)(2) as any consideration assessed or collected before the closing of a commercial financing transaction. The carve-out permits payment for an actual service necessary to apply, such as a credit check or an appraisal of security, but only where the payment is made by check or money order payable to a party independent of the broker. A Zelle transfer to the broker’s personal account is not that.

Subsections (f)(2) and (f)(3) go further and are underused. Subsection (f)(2) prohibits false or misleading representations and the omission of any material fact in the offer or sale of a broker’s services, and it does so notwithstanding the absence of reliance by the buyer, which strips out the element that usually defeats a fraud theory against a broker. Subsection (f)(3) bars any false or deceptive representation in the broker’s business dealings. Together they cover the broker who promised a rate that never materialized, who never disclosed that four applications were out at once, or who described a fee as a lender requirement.

The honest limit is the same as everywhere else in this section. Enforcement runs through the Attorney General under (g), and (j) removes any private right of action. What you have is a complaint a regulator can act on and a documented fact pattern that a funder does not want attached to a file. In our experience the broker facts are the ones that move a negotiation most reliably in Georgia, precisely because the funder often did not know what its broker did and does not want to find out in writing.

6. A Reconciliation Right That Existed Only on Paper

This is the argument with actual Georgia precedent behind it. In GMI Group, Inc. v. Unique Funding Solutions, LLC, 606 B.R. 467 (Bankr. N.D. Ga. 2019), the court examined an advance of $75,000 against a purchased amount of $111,750 with a $1,117 daily payment, and found the reconciliation right illusory. The provision allowed adjustment only once a month, it was paired with a covenant requiring the merchant to maintain a bank balance of twice the daily payment, the daily amount worked out to roughly 34 percent of daily collections, and nothing specified when a reconciled amount would take effect. A right that can be exercised once a month, against a balance covenant that makes falling behind a default, is not much of a right.

That reasoning has been picked up elsewhere and the pattern is consistent. A New York trial court found sole-discretion reconciliation illusory and indicative of a secured loan in AH Wines, Inc. v. C6 Capital Funding LLC (N.Y. Sup. Ct. 2020). A bankruptcy court reached a similar conclusion about a once-monthly clause with no obligation to return overcollections in J.P.R. Mechanical, Inc. v. Radium2 Capital, LLC (Bankr. S.D.N.Y. 2025). The other direction exists too, and pretending it does not would be useless to you: in Guttman v. EBF Holdings (Bankr. D. Md. 2025) the court held that a clause saying the funder shall adjust is mandatory and evidences a true sale, and dismissed the usury counts where the trustee never alleged the provision had failed in practice.

The lesson from the funder-favorable side is the operative one. The winning version of this argument is not that the clause reads badly; it is that you asked, in writing, and the reconciliation did not happen. Requests, denials, the documents the funder demanded, the delays and the debits that continued at the old amount are the record that makes the theory work. If you have not asked yet, the reasons a funder gives are worth understanding first, and we catalog them on our page about why reconciliation requests get denied.

7. Usury After Recharacterization, and Why Georgia Is Harder

Suppose the recharacterization argument in item six succeeds and the advance is treated as a loan. In New York that unlocks a real remedy, because a corporation retains the criminal usury defense at 25 percent under Penal Law §190.40 and a criminally usurious loan is void in its entirety after Adar Bays v. GeneSYS ID, 37 N.Y.3d 320 (2021). Georgia is a different country on this point and you should hear it plainly. O.C.G.A. §7-4-2(a)(1)(A) lets the parties set any rate by written contract once the principal exceeds $3,000, and (a)(1)(B) removes the remaining formality above $250,000. The 16 percent cap at (a)(2) reaches only principal of $3,000 or less.

That leaves one line. O.C.G.A. §7-4-18(a) makes it a misdemeanor to reserve, charge or take, for any loan or advance of money, interest greater than 5 percent per month, directly or indirectly by commission for advances, discount, exchange, or any contract or contrivance whatsoever, and subsection (b) confirms the section is cumulative of the other usury laws. Five percent a month is 60 percent a year. A $40,000 advance repaid at $57,200 over ninety days crosses it comfortably, so the line is reachable, but it is a criminal statute rather than a civil damages provision and what it does for a merchant’s civil case is a question a Georgia attorney has to answer on your specific facts.

Then there is the sentence that closes the door on covered paper. O.C.G.A. §10-1-393.18(c) provides that for purposes of Chapter 1 of Title 7, which is where both usury statutes live, a provider’s characterization of an accounts receivable purchase transaction as a purchase is conclusive that the transaction is not a loan and not a transaction for the use, forbearance or detention of money. On a covered deal, the label wins by statute. The way through is subsection (b): if the transaction fell outside the statute because it predates January 1, 2024, exceeded $500,000, or came from an exempt provider, then (c) never attached and the ordinary substance inquiry is still open. That coverage question has to be answered before the rate question, not after.

Fraud, Unconscionability, and the Two Doctrines That Sit Outside the Statute

Misrepresentation is the theory people reach for first and abandon fastest, usually because of one paragraph. Georgia generally requires a party claiming fraud in the inducement of a written contract to elect: affirm the agreement and sue for damages, in which case an integration or merger clause can defeat reliance on anything said outside the document, or rescind the agreement and sue in tort, which requires giving back what you received. Nearly every funding agreement contains a merger clause, so which path is even available depends on facts your Georgia counsel has to work through before a demand letter goes out. Where the statements came from a broker, subsection (f)(2) is a better lever anyway, because it removes reliance from the analysis entirely.

Unconscionability is real but narrow. Georgia has a statutory version for sales of goods at O.C.G.A. §11-2-302, which does not directly govern a financing agreement, and courts otherwise apply the doctrine sparingly between businesses, looking at both procedural circumstances and substantive terms. A sophisticated party that signed a commercial contract does not get much traction from price alone. Where the doctrine tends to matter is in combination: a take-it-or-leave-it document delivered under time pressure, a cost that only becomes visible after arithmetic nobody was required to show, a reconciliation right that cannot be exercised, and a confession or arbitration provision on top. That is an argument, not a certainty, and it belongs in a negotiation more often than in a complaint.

The realistic assessment for most Georgia files is that no single theory here wins outright, and that a documented combination changes the number. A funder deciding between $0.65 on the dollar and litigating against a file containing a coverage-eligible disclosure failure, a broker advance fee, a written reconciliation request that went unanswered, and a defective garnishment is making a business decision, not a legal one. Delancey Street is a settlement company rather than a law firm, and the attorneys within its network handle any of this that has to be filed.

The Collection Process Is Where Georgia Actually Bites

The strongest procedural leverage in a Georgia file usually appears after judgment, in the garnishment chapter the legislature rewrote in 2016. Under O.C.G.A. §18-4-13 the garnishee must serve its answer on the defendant as well as the plaintiff and must mail the defendant a Notice to Defendant of Right Against Garnishment together with a claim form, with service shown by written acknowledgment or certificate of mailing. Under §18-4-15 the defendant becomes a party by filing a claim with the clerk stating why the money or property is exempt, and a judge is required to order a hearing not more than ten days from the date the claim is filed.

The consequences of a mishandled garnishment fall on the garnishee and they are severe enough to shape everyone’s behavior. An ordinary garnishee that has not answered within forty-five days of service is automatically in default under O.C.G.A. §18-4-21, with fifteen days to cure by answering and paying costs; a financial institution is in default at the fifteenth day under §18-4-22. After the cure window closes, a default judgment may be entered against the garnishee for the entire remaining balance of the judgment against you, and §18-4-24 lets it move within ninety days to cut that down to $50 plus what it actually held. That is why your bank and your customers respond to these summonses immediately.

There is a structural limit that helps you over time. Under O.C.G.A. §18-4-9 a creditor may issue summonses from time to time until the judgment is paid, but no new summons may issue after two years from the original filing except in a continuing garnishment, and the proceeding automatically stands dismissed at that point unless funds remain in the court registry or a summons issued within the preceding thirty days. Combined with the ten-day claim hearing, that gives a Georgia defendant real procedural tools, and the full sequence is on our page about what a Georgia creditor can seize.

Who Should You Call? Our Top-Rated Business Debt Firms

One firm on this list works the entire lifecycle of a business debt file, from stopping the daily debits through attorney-led negotiation, UCC lien removal, and a signed release. The other two cover broader debt categories that often sit alongside the advances. Choose accordingly.