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Michigan MCA Defense Lawyers Business Debt Relief

Small businesses in Michigan struggling with merchant cash advance (MCA) debt have options. Though the MCA lending industry largely operates without regulation, protections exist for business owners—if you know where to look. This article provides an overview of Michigan laws related to MCA loans and expert guidance on working with attorneys to find the right debt relief solution for your business.

How MCA Loans Work

Merchant cash advances provide capital to small businesses by purchasing a portion of future sales, often at high interest rates equivalent to 60-300% APR. The transactions technically function as business sales rather than loans in order to avoid usury laws capping interest rates.While they can quickly provide operating capital, the structure of MCA loans often creates issues down the line:

  • Securitizing – Securitizing MCA loans provides capital for lending but incentives maximizing volume over loan quality
  • Overreliance – This manifests through overreliance on limited data, ignoring total debt obligations, and rushing due diligence
  • Aggressive Collections – Vague contract language combined with daily repayments via credit card receivables or ACH withdrawals empowers collectors

The Small Business Administration warns that MCA loans “may be extremely expensive and come with burdensome terms” compared to SBA 7(a) loans. However, they remain popular due to less stringent approval requirements.

Michigan Usury Laws

Michigan maintains usury laws capping maximum legal interest rates, with violations constituting criminal offenses. However, MCA companies exploit loopholes claiming:

  • Purchases of future sales at a discount do not constitute loans
  • Choice of law provisions specify other states like New York or Delaware with no usury laws
  • Federal laws preempt state usury laws for lending across state lines

The Michigan Penal Code sets a criminal usury rate of 25% APR for individuals and 15% APR for corporations. However, the state lacks clarity on what constitutes a “loan” versus a business “sale”, leaving the door open for MCA arguments.

See also  Atlanta MCA Defense Lawyers Business Debt Relief

Unfair Trade Practices in Michigan

Where usury laws fail to provide protections, Michigan’s Regulation of Collection Practices Act offers other avenues. The law prohibits “oppressive and deceptive” practices by collection agencies seeking repayment of commercial debt.Specific violations potentially applicable to overly aggressive MCA collectors include:

  • Misrepresenting legal status – Implying formal legal procedures initiated without actually filing suit
  • Misrepresenting criminal penalties – Threatening borrowers with criminal charges not applicable to civil debts
  • Excessive communications – Repeated contacts intended to harass or oppress

The law provides the ability to recover damages from collectors plus attorneys fees. Borrowers must carefully document details of communication attempts and specific statements made considered unlawful.

Federal Trade Commission Protections

On the federal level, the FTC’s Telemarketing Sales Rule prohibits certain abusive tactics in collecting debt. Restrictions include:

  • Harassment – Causing a phone to ring continuously with intent to harass
  • Misrepresentation – Falsely implying affiliation with government or legal authorities
  • Calls outside limited hours – Contacting persons more than once within a 7-day period during prohibited calling hours

Violations carry potentially massive fines from the FTC. The Telemarketing Sales Rule provides an important check against overly aggressive collection attempts from out-of-state MCA lenders.

Working with Defense Attorneys

For business owners struggling with MCA loans, partnering with knowledgeable attorneys offers the best opportunity to untangle unfair contracts and fight back against predatory lending practices. The legal team at Delancey Street leverages decades of experience assisting small business clients in debt relief matters.We take an empathetic approach focused on understanding the entirety of clients’ financial situations. Potential options we explore based on circumstances include:

  • Negotiating settlements
  • Structuring payment plans
  • Asserting rights under state and federal debtor protection laws
  • Challenging contract provisions as abusive or deceptive
  • Forcing mediation between parties

Every situation involves unique facts and contracts meriting thorough review by our legal professionals. Through a free consultation, we can best advise on rights and strategies to seek the most favorable solution.With an intricate web of state laws and questionable MCA lending practices, business owners often struggle to advocate for themselves effectively once cash flow issues arise. Particularly when out-of-state investors utilize aggressive collection tactics, leveraging experienced legal counsel levels the playing field.

See also  Los Angeles Merchant Cash Advance Lawyers and Business Debt Relief

Common MCA Defense Strategies

In reviewing MCA contracts, several strategies may provide leverage to fight back against unfair terms:

Usury Violations

  • Argue transactions constitute loans subject to state usury laws
  • Challenge choice of law provisions if entered under duress or deception
  • Dispute federal preemption for lenders lacking national bank charters


  • Challenge one-sided arbitration clauses restricting lawsuits
  • Argue excessive interest rates constitute contract terms “so one-sided as to shock the conscience”

Deceptive Trade Practices

  • Allege false or misleading statements regarding legal status and consequences of non-payment
  • Claim “bait-and-switch” tactics regarding interest rates and repayment terms

Key Takeaways

The MCA lending industry developed largely around avoiding regulations protecting consumers and small businesses. But options exist to challenge predatory contracts and unlawful collection practices. Key takeaways include:

  • Michigan maintains usury laws capping maximum legal interest rates
  • The Regulation of Collection Practices Act prohibits harassment and deception
  • Federal Telemarketing Sales Rules provide additional constraints
  • Experienced attorneys can negotiate settlements or pressure mediation
  • Multiple strategies potentially invalidate unfair contract provisions

No business owner should feel helpless when facing oppressive debt collection pressure from MCA lenders. Understanding rights and options represents the first step. The team at Delancey Street can then leverage our expertise negotiating debt relief outcomes tailored to clients’ unique situations.

About Delancey Street

Founded in 2021, Delancey Street assists small business owners struggling with overwhelming debt. Our dedicated experts take an empathetic, client-focused approach to structuring settlements across all debt types. This includes credit cards, medical bills, personal loans, auto loans, MCA advances and other business financing.We leverage our backgrounds in law, accounting, and finance to evaluate clients’ complete financial pictures. This enables negotiating customized resolutions accounting for total obligations. In certain cases, we may secure concessions reducing principal debt. Or we can work with creditors to establish affordable long-term payment plans.If you run a Michigan small business struggling with an overwhelming MCA loan, contact us for a free consultation. Our team can review your situation, explain rights and protections, and discuss strategies to seek the best possible outcome. With our assistance battling aggressive, unregulated lenders, you can focus energy back on customers and growing your business.

See also  Arizona MCA Defense Lawyers Business Debt Relief

Frequently Asked Questions

What laws regulate MCA loans in Michigan? Michigan regulates interest rates under usury laws, though MCA lenders exploit loopholes claiming sales purchases rather than loans. The Regulation of Collection Practices Act also governs commercial debt collection practices.

What legal defenses can I assert against an MCA lender? Potential arguments include unconscionable contract terms, usury violations if deemed loans, and deceptive statements regarding consequences of non-payment. Experienced attorneys determine the best strategies based on specific contract language.

What settlement outcomes can lawyers typically negotiate with MCA lenders? In certain cases, attorneys secure principal debt reduction. More often, negotiated outcomes involve payment plans stretching out balances over longer terms at reduced monthly amounts. Much depends on the lender, loan details, and borrower’s financial realities.

How can lawyers assist even after an MCA lender initiates legal action? Attorneys can pressure parties into mediations to negotiate mutual resolutions. They also identify procedural issues with filed complaints or counterclaims to assert against lenders. In litigation scenarios, experienced representation remains vital.

What alternatives exist beyond legal action to address an overwhelming MCA loan? One option includes working with a debt settlement firm to negotiate lump-sum payoffs at reduced balances. If closing the business, filing bankruptcy may discharge portions of the debt. Much depends on the specific circumstances.




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