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Merchant Cash Advance Lawsuit

Business Debt Law Group > Merchant Cash Advance Lawsuit
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Did you receive a Merchant Cash Advance Lawsuit? Did you sign a Confession of Judgment for your merchant cash advance loans?  What is a Merchant Cash Advance lawsuit anyways? Your lenders have attorneys on their team; you need an attorney on yours as well.


Taking on this process alone can cost you your business. Your merchant cash advance attorney understands how to litigate these cases. MCA loans are very different from traditional loans and need to be handled appropriately. 


Your merchant cash advance company can never refer to your advance as a loan. Has there ever been any correspondence with you where they used the term “loan”? Is your MCA paperwork structured like a commercial or consumer loan? Does it fall under your jurisdiction’s usury laws? Was your confession of judgment responsibly executed against you?  


Many MCA agreements include jury waivers and class-action waivers. Is this enforceable is your state? These are all questions that need to be asked.


 Did your merchant cash advance legal issues begin when you stopped paying on your advances? When you stop paying on your merchant cash advances, a merchant cash advance lawsuit will quickly be filed against you and your business.  


If you have multiple lenders, the first to obtain a judgment puts themselves in a priority position to try and garnish bank accounts or levy against your assets. Some lenders use a scoring method to decide how much time and effort they should put into proceeding with legal action against you.  


They make this assessment based on credit reports, income information, demographics, liabilities, assets, business history, the probability that you will file bankruptcy and most importantly, if you are represented by a very litigious attorney.


After careful analysis and speaking with your attorney who is ready to go to battle for you, your MCA funder may decide that you are not a wise target for litigation. A good merchant cash advance attorney may be able to negotiate your current loans terms and get any pending lawsuits vacated.


Confession of Judgement and UCC-1 Liens


As per the nature of your advances, the lenders gain access to your business bank accounts.  In order to halt the lenders from taking any amounts of money they wish from your account at any time they wish, you may face the difficult but necessary decision that you simply cannot afford to continue to service a daily or weekly debt payment.


Not that you choose to but rather, you simply can no longer sustain that MCA payment schedule and survive. Once your MCA lenders become aware of their inability to gain ready access to your business account or that there is no money in the account to afford the usurious daily or weekly payments, the MCA lenders in turn, may begin a pattern of interference with your existing business relationships by contacting your customers and providing them with a copy of a subpoena related to what is called a “Confession of Judgment” recorded in the State of New York or Pennsylvania or, asserting the validity of a blanket UCC-1 lien, allegedly imposing a lien against all of your business assets, including your outstanding receivables.


A confession of judgment is basically a contract provision which allows a creditor to enter a judgment against a debtor without the need to file a complaint or to conduct a trial. In states like New York or Pennsylvania, in which confessions of judgment are still presently recognized, a creditor may proceed directly to the Clerk of the Court and, based upon an affidavit alone, have a judgment entered against a debtor who is alleged to be in default.  


The law did change in New York as of August 30, 2019 whereby, Confessions of Judgment are now considered unlawful if the debtor is a business that is domiciled outside of the State of New York and does no business in the State of New York. 


Two U.S. senators and two congressmen have recently recognized that confessions of judgment adversely affect small businesses in much the same way that these confessions affect individual consumers. 


Sens. Marco Rubio (R. Fl) and Sherrod Brown (D. Ohio), and two Congressmen, Roger Marshall (D. Kan.) and Nydia Velazquez (D. N.Y.), have introduced bipartisan legislation, as a further amendment to the Federal Truth in Lending Act, known as the Small Business Fair Lending Act. If passed, the bill would essentially outlaw the use of confessions of judgment nationwide.


Further, any UCC-1 filings by your MCA lenders merely serve as notice to the outside world of the existence of some type of creditor/debtor relationship but they are not, in and amongst themselves, actionable. 


Certainly, any one of these creditors are free to access the Courts of your home state at their disposal if they so choose but generally, it is not the business model of the MCA lenders to attempt to sue borrowers in their home states. It is much easier for the MCA lenders to attempt to fast track their potential legal actions in New York or Pennsylvania.      


Needless to say, attempting to navigate this minefield to save your business from sheer collapse under the weight of the MCA loans and the pressure of their collectors and attorneys is not something that most business owners are prepared or qualified to handle. You need a skilled and highly experienced lawyer or legal team to address these matters and guide you and your business out these very dangerous waters.  


Free Consultation with a Business Debt Law Group Attorney


 If you have recently fallen behind on your merchant cash advance payments or have already been served a merchant cash advance lawsuit for defaulting on your advances, you need legal representation.  Your MCA lenders have legal counsel on their side, you need the same.  


It is imperative that you speak with legal counsel regarding the best course of action to protect yourself, your assets and devise a plan to keep your business open with enough cash flow to sustain your day to day operations. 


If you are experiencing merchant cash advance legal issues, if you’ve had a breach of contract or if you need a merchant cash advance restructure to help with your cash flow – call us today.


Following an initial free consultation, one of our attorneys will review your merchant cash advances or business loan agreements and share their findings with you.  You may be surprised to learn of your extremely high actual interest rate, costs and fees. Our firm has seen interest rates greater than 400% per annum.  


Once our initial review is complete and you have elected to retain our firm, your assigned attorney will begin to work with your lenders to secure a method and pathway to get you out of the vicious cycle you are presently in and most importantly, help to get you back control of your business and its cash flow. 


There is never a cost to speak with us and all attorney consultations are always complimentary.  You deserve to know what options you have. Call us today to review your business’s hardship or pending lawsuit.


What to Expect from an MCA Lawsuit


Once your merchant cash advance lawsuit is filed, one of our attorneys practicing in your particular jurisdiction shall respond to the legal complaint filed against you. In all likelihood, a Motion to Dismiss the action shall be filed attacking the validity of the debt and the creditor’s paperwork. 


If warranted, an answer and affirmative defenses followed by discovery shall be the next step.  During the time we are defending your merchant cash advance lawsuit, our attorneys shall continue to engage in good faith negotiations with the MCA plaintiff in an effort to settle your debt on terms favorable and affordable to you.


Many merchant cash advance lenders do not have their contracts properly drafted.  This can be used to your benefit. During your merchant cash advance lawsuit, it may be proven that your MCA is actually a “loan” and not an advance. 


The MCA lenders claim is that these “advances” are not “loans”, however they display many characteristics of a loan, where the business owner is required to execute a “personal guarantee” and these MCA lenders will also sue in an attempt to get their money back, which would hardly be considered what is referred to as non-recourse debt.


It is hard to believe, but many of these MCA loans equate to what would be almost a 400% interest rate. Typically, an MCA agreement may be structured such that in return for an immediate payment of $75k under the agreement, your business agrees to sell rights for the lender to collect $120k in all future receivables until the agreed upon loan amount of $120k is satisfied.


When signing up for these MCA loans, the business is also required to turn over access to its business bank account and also, turn over access to its credit card processor.  These agreements typically are structured to allow the funder to sweep an agreed upon daily percentage of receipts received through ACH and/or credit card purchases. 


As is the case in most MCA agreements and, in order for it to be an actual “advance against future receivables”, the daily payments are supposed to fluctuate up and down based upon the amount of your receivables. 


However, in actuality the payment amount never goes down even if your business has a significant downturn in revenue. This practice of your daily payment not rising and falling as it should (as per the terms of the agreement), is indicative of being a “loan”.


Why the Business Debt Law Group?


BDLG and its attorneys have been practicing in the creditor/debtor area of the law for more than 25 years. Collectively, our core team of lawyers possesses more than 60 years of experience in this area of the law. Of equal, if not more importance, is the fact that we are also asset protection, bankruptcy and commercial transaction lawyers.


That means that not only will we be highly effective protecting you from the aggressive collection tactics of your MCA lenders and negotiating with those lenders but also, we shall advise you regarding the protection of your hard-earned assets, analyze and discuss with you the structure of your ongoing business enterprise and provide comprehensive counsel concerning the best practices for your organization to follow going forward in order for you to avoid any future commercial debt issues that could impact your business.  


In totality, we are a comprehensive business solutions law firm that will help lead you out of your current period of trouble and guide your business to permanent safer pathways.  


If you are already facing an MCA lawsuit or fear that a default is right around the corner, our firm will be able to guide your business and provide you with options. We will be able to answer whether a restructure, MCA consolidation or an MCA attorney is right for you.

Whether you are a business owner that may have $50,000 in merchant cash advance debt or more than $1,000,000.00 in merchant cash advance debt, the first thing that we do once we are formally retained is to prepare formal and specific attorney representation letters directed at each MCA lender and their respective legal counsel.  


This is the first step toward constructing and installing the shield to protect you and your business from the attacks and harassment that your MCA lenders will certainly attempt to bring upon you.


We shall deliver those formal attorney representation announcement letters to all of your MCA creditors and their attorneys both by certified mail and electronically to put them on notice that we are legal counsel for your business and for you, thereby fortifying our representation of you and asserting our authority to act and eventually settle on your behalf.   


Your MCA creditors will have then been lawfully directed that the creditor and/or attorney are to exclusively communicate with our law firm from that point forward and to cease any and all direct communications with you.  


Install the Shield  


While it normally takes a week or two for the calls, text and emails to cease, the shield installation process is the critical first step designed to back away those creditors so you can experience immediate relief from harassment and allow you to focus your concentration on repairing, rebuilding and growing your business. 


Also, we commit this extensive effort to identify and root out each and every collection agent, collection firm, creditor and/or law firm that has attempted to contact you in recent weeks or months, to not only free you from harassing and threatening communications, but to also provide you the opportunity to focus on the needs of your business and to begin to follow the steps of the specific strategic plan of action our lawyers shall design for you and your business.


Asset Protection Analysis


Once we have successfully shielded you from constant harassment, we will then work with you to finalize our critical path towards success.  We shall engage in an analysis of your business formation structure, the nature of your industry, your customers, vendors, joint venture partners, traditional factoring relationships and the like.  


In order to know how to best protect your assets from arguably, unlawful collection tactics of the MCA lenders and their attorneys we need to understand where you are strong and more importantly where the weak links might exist in your business model.   


Following our comprehensive analysis of your business and its commercial relationships, we shall provide you with a detailed and specific plan of action as to the immediate, intermediate and long term steps to take to protect your assets and your business from these so called “alternative finance” businesses and their borderline illegal collection tactics and measures. 


We may recommend a redesign or restructuring of your business model or possibly recommend the formation of asset protection vehicles to best suit your needs. The bottom line is that we are highly experienced and skilled lawyers retained to provide comprehensive general legal advice to business owners whether that be related to corporate law, commercial transactions, debtor / creditor litigation defense, asset protection, trust and estate planning, bankruptcy debt relief, or business debt negotiation and elimination.


Stop Lenders From Interfering with Your Business


Unfortunately, many of our clients enter into contractual arrangements with one or more MCA lenders with the expectation that the lenders will provide short term factoring receivable funding to assist our clients to meet the financial needs of their businesses between the intervals of their customer regular pay cycles. However, what is often characterized by the MCA lender as a factoring relationship is in fact, an unregulated loan. 


As per the nature of these loans, the lenders gain access to the borrower’s business bank accounts so that the lender can withdraw money each day allegedly to repay the so called, merchant cash advance.  


What this often leads to is the lender drawing more money out of the account than they have been contracted to draw or simply, due to the unsustainable repayment schedule, the borrower eventually begins to bounce checks and finds themselves with a very serious cash flow problem.


Once the MCA lenders realize that they are unable to successfully withdraw money from the borrower’s bank account any longer, they most often will begin a pattern of intentionally interfering with that borrower’s existing business relationships by contacting the borrower’s customers attempting to explain to those customers that they are the lawful owners of the borrower’s accounts receivable and the customer is to pay the MCA creditor directly what is owed, rather than paying the business owner. 


These activities are generally not related to any court order or judgment and instead, may rise to the level of what is referred to as “tortious interference with an existing business relationship”.  


When this sort of business interference takes place, our law firm tackles the matter head on by directing a cease and desist order to the MCA creditor, by promptly writing to and speaking with our client’s customers and their lawyers or legal departments, thereby effectively and quickly mitigating this potentially damaging interference with your business relationships.


If the MCA lender can no longer successfully access the business owner bank account to draw money out as they wish –and possibly they have tried to interfere with the business owner’s existing customer or vendor relationships– but have been unsuccessful in their attempts to intimidate or inflict further damage, they are most likely to attempt to sue the business and the business owner personally. 


The vast majority of these Breach of Contract lawsuits will be filed in the State of New York.   They are most often filed in New York because that is the State where most of the MCA lenders and their attorneys are domiciled.  Our law firm shall defend these lawsuits if one or more are filed against you and your company. 


Fighting for You and Negotiating a Settlement


Depending on the circumstances, we shall seek an order from the court dismissing the suit.  If there are no grounds for dismissal of the suit then, we shall dig our heels in and make it very difficult for the Plaintiff MCA lender to move their case forward thereby gaining substantial leverage in settlement negotiations. 


We will aggressively negotiate a reasonable and sensible settlement of the subject debt that your business can afford.


Further, many of our business owner clients have their own general business or corporate attorneys that they have worked with for many years in their home state.  


If a client has an attorney they work with regularly in their particular jurisdiction of operation, we would like to be introduced to that attorney at the inception of our representation and to work closely with that attorney throughout the entirety of our process.


We also provide bankruptcy counsel and advice. If, after our analysis of the clients’ financial affairs, we feel that a further discussion regarding bankruptcy options is warranted.   Generally, our legal fees are structured as flat fees to paid incrementally over time. 


A well thought out and reasonable flat legal fee and corresponding payment schedule for such shall be quoted to a potential client after we have assessed the gravity of a particular client’s situation and the amount of legal work that will be involved in protecting, defending and advising the client.


Ideally, we wish to resolve our client’s business debts by eventually reaching reasonable settlement agreements favorable to our clients. Each of our clients in this particular realm of Merchant Cash Advances have signed personal guarantees for their MCA debts.


Merchant Cash Advance Lawsuit Goals 


We seek to ultimately free our clients from the burden of those personal guarantees and the potential court ordered judgments associated therewith, haunting them for the remainder of their lives.   


We shall aggressively engage your lenders, free you from harassing and threatening collection efforts, advise you as to necessary asset protection measures, defend possible lawsuits filed against you and your business, help you to maintain healthy relationships with your customers and vendors, work with your existing professionals and negotiate in good faith to bring about favorable settlements for you, so you can go on running your business and living your life free from problematic and/or crippling debt. 


A key to our process is time. For this process to be most effective, our clients are required to exercise a degree of patience. Time is needed for negotiation to lower the settlement expectations of your MCA lenders. Time is required by most of our clients to accumulate funds necessary for settlement and to help place their businesses in better, long-term positions.


As lawyers, we need time to analyze your business needs, strengths and weaknesses, in order to design and implement a new strategic plan to protect your business activities going forward.  


We understand this is confusing and stressful time for you.  Let us take the burden off of your shoulders. Before you have any bank accounts frozen or garnished, UCC liens filed against merchant processors / vendors or you have a lengthy lawsuit filed against you that you would have to spend countless hours and money on, call us today for a complimentary consultation.  We are here to help you any way we can.

Need help with any type of legal issue?  Our attorneys are here to help you.  Contact us now.

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