MCA Defense Lawyers Provide Expert Assistance with Merchant Cash Advance Debt

Merchant cash advances (MCAs) can provide quick access to capital for small businesses. However, the terms of MCA agreements are often predatory, with exorbitant interest rates and aggressive collection tactics. If your business is struggling with MCA debt, specialized legal defense may be needed.

How MCAs Work and Why They Can Be Problematic

A merchant cash advance provides a business with a lump sum of capital in exchange for a percentage of future credit card sales. It is not technically a loan, so MCA companies can bypass state laws capping interest rates. However, the equivalent annualized interest rate often exceeds 100%.While MCAs provide fast money with minimal eligibility requirements, the payback can quickly become unmanageable. Many companies soon find themselves owing two to three times the original advance amount. The MCA company may then resort to daily debits from the merchant’s bank account or litigation to recoup the debt.

Common Abusive MCA Company Tactics

MCA companies often engage in unethical tactics to pressure merchants into signing unfavorable contracts and to maximize collections. Some common issues include:

• Deceptive teaser rates: The MCA sales pitch focuses on best-case scenarios with lower rates that only materialize under ideal conditions. The actual rates and terms are much worse.
• Misrepresenting legal options: MCA companies may falsely claim that contracts are binding or that merchants have no defenses against collection lawsuits.
• Aggressive collections: MCAs will debit accounts without warning, causing checks to bounce and problems with vendors. They may also bar merchant access to card processing equipment.
• Frivolous litigation: MCA companies frequently file lawsuits without proper documentation or legal standing, hoping merchants will not defend themselves.

Fighting back against predatory MCA companies requires experienced legal counsel. Defense lawyers can analyze contracts for weaknesses, build courtroom arguments, and compel fair settlements.

Key MCA Contract Defenses to Explore

MCA agreements often have flaws that skilled attorneys can leverage as defenses against collection efforts:

• No meeting of the minds: For a contract to be valid, both parties must fully understand and agree to the terms. Complex MCA contracts with unclear terms may be unenforceable.
• Unconscionability: If an agreement is grossly unfair and one-sided, courts can deem it unconscionable and require more equitable terms. Excessive MCA rates may qualify.
• Fraud and misrepresentation: Evidence that the MCA company deceived the merchant during contract negotiations can invalidate the agreement. This includes inflated projections of cash advance amounts and rates.
• Usury violations: States have maximum allowable interest rate caps that MCA contracts can potentially violate, especially with compounding fees.

Why Defending Against MCA Companies Takes Industry-Specific Expertise

MCA companies utilize aggressive legal teams to protect their predatory business model. Fighting back requires lawyers equally versed in the intricacies of MCA financing. Expectations include:

• Deep MCA industry knowledge: Attorneys must thoroughly understand MCA contracts and tactics to build effective counter arguments. General practice lawyers often lack this specialized expertise.
• Courtroom experience: MCA lawsuits may need to be argued before a judge and jury. Lawyers should have proven trial experience and success.
• Resource leverage: Top MCA defense firms have the resources to match MCA legal teams in court. They can perform deep discovery research to uncover damaging evidence against MCA companies.
• Negotiation skills: The best outcome is often an equitable settlement avoiding drawn-out litigation. Lawyers must negotiate firmly from a position of strength while securing merchant relief.

Reputable MCA defense lawyers with specific industry experience provide the best chance of relieving crippling MCA debt burdens. Their guidance and advocacy can neutralize predatory contracts and practices.

Key Questions to Ask Prospective MCA Defense Counsel

Not all attorneys have the qualifications to successfully defend against MCA companies in and out of court. Merchants should ask these key questions during consultations:

• How extensively have you argued MCA cases in courtrooms? What were the outcomes?
• What experience do you have negotiating MCA contract relief and debt reductions? What results have you secured for clients?
• How familiar are you with the common terms, rates, and tactics used in MCA contracts and collections?
• What resources does your law firm dedicate specifically to MCA defense cases?
• Can you provide merchant references who obtained positive MCA lawsuit outcomes or settlements?

Thorough vetting ensures merchants select counsel with demonstrated expertise defending against MCA companies.

Options for Addressing MCA Debt Issues

• Renegotiate the agreement: The MCA company may agree to more reasonable rates and terms if legal action seems likely. Experienced lawyers can drive negotiations.
• Contract rescission: If there is evidence of deception or no mutual understanding, the entire MCA can be ruled invalid and voided.
• Unconscionability claims: Courts may require unethical MCA companies to lower rates to acceptable levels.
• Usury violations: Interest rates above state limits may justify contract revisions to comply with caps.
• Fraud accusations: Indications the MCA company misled the merchant could lead to contract changes or civil settlements.
• Bankruptcy filing: Chapter 7 or Chapter 11 bankruptcy can eliminate or restructure overwhelming MCA debt as part of a court-mandated payment plan.

The path forward depends on the unique circumstances of each MCA agreement and the merchant’s financial situation. MCA defense lawyers are best positioned to chart the optimal course.

Why Legal MCA Debt Relief is Preferable to Alternative Approaches

Merchants struggling with excessive MCA payments may consider other options beyond legal defense, but these tend to have major drawbacks:

• Debt consolidation loans – These loans charge additional interest and fees on top of what is already owed. Relief is temporary as the merchant remains buried in high-interest debt.
• Credit counseling – Counselors lack authority to compel better MCA terms. At best, they may help merchants prioritize payments across obligations.
• Debt settlement – MCA companies have little incentive to provide meaningful settlement concessions without legal pressure. Merchants lack negotiation leverage on their own.
• Bankruptcy without counsel – The complex bankruptcy process is difficult to navigate alone. Powerful MCA creditors can also exploit missteps and documentation errors.

Retaining experienced MCA defense lawyers maximizes the chances of permanent and significant debt reduction. Alternatives only offer partial, superficial, and temporary relief.

Beware MCA Company Requests for Confessions of Judgement

Many MCA contracts require merchants to sign a confession of judgement (COJ) at the outset. This document admits liability and authorizes the MCA company to enter a judgement against the merchant without notice. Armed with a COJ, the MCA can raid bank accounts, place liens, and initiate asset foreclosures.However, COJs signed under duress or based on misrepresentations are not legally enforceable. MCA defense lawyers can often successfully argue for COJ nullification, eliminating immediate threats to merchant finances and property.

The Delancey Street Approach to MCA Defense

Delancey Street provides aggressive legal advocacy for small businesses drowning in MCA debt. Our attorneys have extensive courtroom experience challenging unfair MCA company tactics and contracts.We fully examine the unique circumstances behind every MCA agreement. This allows us to attack them through tailored contract defenses and arguments proven to neutralize abusive terms and coercive collection practices.Our goal is always complete relief facilitated through favorable legal judgements or settlements. We have the industry expertise and resources to give overwhelmed merchants a fighting chance against predatory MCA companies. Contact us today for a free consultation.