Cash advance not a loan, court hears

A former senior banker who founded a company that is accused of unlicensed moneylending argued in court yesterday that no other common law jurisdiction categorised its cash-advance product as a loan.

Richard Grainger, a 40-year-old Briton who is a former senior director of Barclays Capital, testified in Eastern Court that no research he conducted before setting up Global Merchant Funding (GMF) showed that its cash-advance product was considered a loan in either the United States, Britain or Canada.

'It was clear that, in those markets, it was treated as a sale and purchase of credit card receivables. It was not treated as a loan,' said Grainger, an economics graduate of Cambridge University.

Under the 'merchant cash-advance contract' that it offers to restaurants and retailers, GMF buys merchants' future credit card and debit card receivables at a discount, he said. The company takes a certain percentage of card sales directly from the merchant's processing bank. There is no deadline by when the amount must be paid.

GMF has pleaded not guilty to one count of carrying out business as a moneylender in breach of the Money Lenders Ordinance. The ordinance carries maximum penalties of a HK$5 million fine and 10 years' jail.

The prosecution argues that the nature of GMF's product is a loan, but GMF says it is a cash advance.