The co-owner of Paper Doll Vintage Boutique says the business lost thousands of dollars in “a predatory business scam.” Friday night the community chipped in to help the retailer recover.
Paper Doll, which has two women’s vintage clothing stores, in Sayville and Patchogue, was forced to close its Huntington store in October because of the losses, said Dominique Maciejka, who co-owns the business with her boyfriend, Joseph Laspina.
The Greater Sayville Chamber of Commerce and local businesses lent their support to a fundraiser for the business Friday night to help it keep the remaining shops open. The Paper Doll Vintage Fashion Show Benefit Gala was held at the Sayville VFW Post 433.
“It has been so touching. . . . It really makes me feel like the town wants us there and that what we do is unique enough and matters. It’s not just a retail store. It’s a whole community,” said Maciejka, 35.
With tickets at $40 each, the event included food donated by local restaurants, as well as live music, a photo booth, tarot card readings and other offerings.
“We’re trying to make lemonade out of lemons here,” she said.
Due to a settlement reached in January, Maciejka is barred from discussing the specifics of her court case.
According to documents filed in the U.S. District Court for the Southern District of New York in Manhattan in November, Maciejka laid the blame for her business’ woes at the foot of Quicksilver Capital in Valley Stream, which gave her a merchant cash advance, or MCA. An MCA is a type of funding for small businesses in which lenders grant up-front cash as an advance on a borrower’s future sales.
Quicksilver did not respond to a request for comment. Christopher R. Murray of Stein Adler Dabah Zelkowitz in Tarrytown, the attorney listed in court documents as representing Quicksilver, hung up on a reporter and did not immediately respond to an email seeking comment.
With an MCA, the business pays back the balance plus a premium “through automatic deductions from the merchant’s daily credit card or debit card sales or from its bank account,” according to the National Consumer Law Center, a nonprofit based in Boston. “Like payday lenders, providers of merchant cash advances may claim that their loans are short-term -- and that [annual percentage rates] are irrelevant -- when in fact the business model is based on a long-term debt trap,” the center says.
MCA lenders are increasingly at the center of controversy because, according to critics, they treat MCAs like repayable loans with daily payments, which make them unlawful because they exceed the interest rates allowed by state law. In New York the interest rate limit on business loans is 25 percent.
In a December letter requesting Maciejka’s legal action against Quicksilver be dropped, Murray wrote that “it is settled law in New York that purchase and sale of future accounts receivable transactions are not usurious loans,” or loans charging unreasonably high interest rates.
MCA contracts often include clauses called “confessions of judgment,” in which borrowers sign away their right to resolve disputes in court.
“They can enter judgment against you without any notice and seize your bank accounts without you even knowing. You wake up in the morning and all your money is gone,” said attorney Shane R. Heskin, a partner with Philadelphia law firm White and Williams LLP.
The New York Assembly and Senate passed bills this week banning the use of confessions of judgment for out-of-state borrowers. The Federal Trade Commission launched an investigation into the merchant cash advance industry in May.
Known for litigating MCA cases, Heskin represented Maciejka’s business, Forget Me Not Fashions LLC doing business as Paper Doll Vintage Boutique, and another plaintiff in a class-action suit filed in November against Quicksilver Capital and affiliated businesses over MCA practices.
Maciejka alleged that Quicksilver deducted $304 daily from Forget Me Not Fashions’ checking account for several months as repayment for $45,000 borrowed in July, according to the court filing.
The daily deductions allegedly sometimes exceeded the contract’s stipulated deduction limit of 19 percent of daily sales, according to the court complaint. Quicksilver refused to refund the money or adjust the daily payment, according to the complaint.
Quicksilver’s actions resulted in Maciejka and Laspina’s closing the Huntington store, as they were unable to pay rent, buy merchandise or make payroll, according to the court filing.