Have you received a merchant cash advance lawsuit? Did you sign a confession of judgment for your merchant cash advance loans? What exactly is a merchant cash advance lawsuit and how to defend it? Merchant cash advances (MCAs) have become a popular financing option for small businesses seeking quick access to capital. Unlike traditional loans, MCAs provide upfront cash in exchange for a percentage of future sales, typically repaid through daily or weekly deductions from the business’s revenue. While MCAs offer flexibility and rapid funding, they can also lead to legal disputes. This article explores the landscape of MCA lawsuits, highlighting common issues, legal grounds for disputes, and strategies for both plaintiffs and defendants.
Understand the Merchant Cash Advance
A Merchant Cash Advance (MCA) is a financing option designed to provide businesses with quick access to capital by advancing a lump sum of money in exchange for a percentage of future sales revenue. Unlike traditional loans, MCAs do not have fixed repayment schedules or interest rates. Instead, businesses typically repay by deducting daily or weekly from their credit card or debit card sales. This structure allows repayment to fluctuate with the business’s revenue, offering more flexibility during slower periods. However, MCAs often come with high effective interest rates and fees. These can lead to significant financial strain if not managed carefully.
Get the expert help you need with a free MCA debt consultation from CuraDebt by calling 1-877-504-0981.
Common Issues Leading to MCA Lawsuits
- Usurious Interest Rates: One of the most contentious issues in MCA agreements is the effective interest rate. Though MCA providers argue that their advances are not loans and thus not subject to usury laws, courts have sometimes disagreed, leading to significant legal battles over what constitutes an illegal interest rate.
- Misrepresentation and Fraud: Allegations of deceptive marketing practices and fraudulent terms are common. Businesses may claim they were misled about the true cost of the advance or the terms of repayment.
- Breach of Contract: Disputes often arise when either party believes the other has violated the terms of the agreement. This can include disagreements over the calculation of daily deductions, improper handling of funds, or failure to provide agreed-upon services.
- Confession of Judgment: Many MCA agreements include a clause allowing the lender to obtain a judgment against the borrower without a trial, which can lead to immediate asset seizures. In court, litigants frequently challenge the enforceability and fairness of these clauses.
Navigating Multiple Lenders and Legal Tactics
If you have multiple lenders, the first to obtain a judgment puts themselves in a priority position. They can try to 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 and assets. Business history, probability that you will file bankruptcy, and most importantly, if you are represented by a very litigious attorney.
The Critical Role of Legal Representation
Your lenders have attorneys on their team; finding an MCA attorney near you is crucial. Taking on this process alone can cost you your business. Merchant cash advance attorney near you can understands how to litigate these cases. 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”? 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.
After careful analysis and speaking with your MCA debt advisors near you, your MCA funder may decide that you are not a wise target for litigation. An MCA attorney near you may be able to negotiate your current loan terms and get any pending lawsuits vacated.
Confession of Judgment and UCC-1 Liens
A confession of judgment is a legal agreement in which a borrower consents in advance to the entry of a judgment against them without notice or a hearing if they default on a debt. As per the nature of your advances, the lenders gain access to your business bank accounts. 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 servicing 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 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.
Legal Framework of Confession of Judgment
A confession of judgment is basically a contract provision that allows a creditor to enter a judgment against a debtor without the need to file a complaint or conduct a trial. In states like New York or Pennsylvania, confessions of judgment are still recognized. Here, a creditor may proceed directly to the Clerk of the Court. They can have a judgment entered against a debtor alleged to be in default based upon an affidavit alone. This often leads to a merchant cash advance lawsuit being filed against you and your business.
Steps to Expect in an MCA Lawsuit
Facing a merchant cash advance lawsuit can be overwhelming. Here’s what you can expect:
- Initial Notification: You’ll receive a formal notice indicating the filing of a lawsuit against you. This typically includes details about the claims and the amount the lender is seeking.
- Legal Documentation: Expect to deal with a plethora of legal documents, including a Confession of Judgment, UCC-1 liens, and other contractual paperwork. These documents outline the lender’s claims and your obligations.
- Asset Freezing: Freezing or subjecting business bank accounts and assets to liens can hinder accessing funds for daily operations.
- Court Proceedings: You must have to attend court hearings where both sides will present evidence and arguments. It’s crucial to have legal representation to navigate this process.
- Customer Interference: Lenders might contact your customers, informing them about the lawsuit and potentially disrupting your business relationships and operations.
- Potential Settlements: There may be opportunities for negotiation and settlement. Engaging with a skilled attorney can help you explore these options to mitigate damages.
- Judgment Enforcement: If the court rules in favor of the lender, they can enforce the judgment by seizing assets, garnishing wages, or placing liens on your property.
Merchant Cash Advance Collections
Once a judgment has been obtained through a confession of judgment, MCA lenders often move quickly to collect the debt. Collections efforts can be aggressive and may include freezing your business bank accounts. And further garnishing your wages, or placing liens on your business assets. Additionally, MCA lenders might contact your customers directly, informing them of the lawsuit and potentially disrupting your business operations. The primary goal of these collections efforts is to recover the outstanding debt as efficiently as possible. This often leaves the business owner with limited financial resources to continue operations.
Selling a Business with a Pending Lawsuit
Selling a business with a pending lawsuit, especially one related to MCA disputes, can be extremely challenging. Legal and financial uncertainties may deter potential buyers. However, it is not impossible. To successfully sell your business under these conditions, full disclosure of the lawsuit is essential. You may need to negotiate with the buyer to assume responsibility for the legal issues. Or you might agree to settle the lawsuit prior to the sale. Engaging with a skilled attorney can facilitate these negotiations. They can also help structure the sale to minimize risk to the buyer and maximize the seller’s return.
Enroll in MCA Debt Relief Program
If you’re struggling with overwhelming debt from merchant cash advances, enrolling in the MCA debt relief program with CuraDebt can provide the relief you need. CuraDebt’s specialized program is designed to help business owners navigate the complexities of MCA agreements and negotiate better terms with lenders. By enrolling, you will gain access to a team of experienced professionals who will analyze your financial situation, develop a customized debt relief plan and represent you in negotiations to reduce your debt burden. MCA debt relief program aims to alleviate financial stress and prevent aggressive collections. It also gives you a clear path toward financial stability for your business.
Small Business Debt Relief Programs by CuraDebt
CuraDebt offers comprehensive small business debt relief programs tailored to meet the unique needs of struggling business owners. Business debt relief programs are designed to help businesses overcome financial challenges caused by high-interest loans, credit card debts, vendor debts, and other financial obligations. By working with CuraDebt, business owners can benefit from expert advice, personalized debt management strategies, and skilled negotiation services aimed at reducing overall debt and improving cash flow. With CuraDebt’s small business debt relief programs, accessing the resources and expertise necessary to navigate financial difficulties is possible. This can help secure a brighter future for your business.
Business Debt Settlement Program by CuraDebt
The business debt settlement program by CuraDebt offers a strategic solution for businesses burdened by overwhelming debt. This program focuses on negotiating with creditors to settle debts for less than the full amount owed, providing significant financial relief. CuraDebt’s team of seasoned negotiators works diligently to reach favorable settlements that can reduce your debt load, improve your cash flow, and allow your business to operate more smoothly. The business debt settlement program not only helps you manage and resolve your current debt but also sets the stage for long-term financial health and stability.
Conclusion
Merchant cash advances (MCAs) can offer a lifeline for small businesses needing quick access to capital, but can lead to potential legal disputes such as merchant cash advance lawsuit. Understanding the intricacies of MCAs, the common issues that lead to lawsuits, and the importance of legal representation is crucial for any business owner considering this type of financing. Navigating the legal landscape of MCAs requires careful attention to contractual details, potential breaches, and the implications of Confessions of Judgment. Understanding the risks and seeking legal assistance is crucial. CuraDebt provides tailored MCA debt relief program and business debt relief programs to manage MCA debt and navigate collections. Whether facing collections, considering selling a business with a pending lawsuit, needing cash advance on a pending lawsuit, or seeking debt relief, professional guidance from CuraDebt can mitigate financial challenges and secure a stable future for your business.