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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 considered a loan, so MCA companies can bypass state laws capping interest rates.

• High costs – MCA rates often exceed 100% APR when accounting for all fees. This makes them vastly more expensive than business loans.
• Daily repayments – MCAs take a fixed percentage of daily credit card sales. If sales dip, the payback period extends indefinitely.
• Personal guarantees – Business owners usually have to personally guarantee MCA payments. This puts personal assets at risk.
• Aggressive collections – Some MCA companies use threats and harassment to collect debts. They may attempt to drain business bank accounts.

While MCAs provide fast access to capital, the predatory terms cause many businesses to spiral into unmanageable debt. Defense attorneys can help business owners protect assets and negotiate better repayment terms.

Why Legal Defense Is Crucial For Navigating MCA Debt

MCA companies draft agreements to maximize their profits while limiting consumer protections. However, several legal strategies can curb abusive collection practices and lower repayment burdens:

• Reviewing the MCA agreement for unlawful terms – Attorneys determine if interest rates or fees violate state laws. This may invalidate parts of the contract.

• Halting unlawful collection activities – Lawyers send cease and desist notices if MCA companies use illegal threats or freezing of accounts.

• Challenging personal guarantees and confessions of judgement – Attorneys can often show that personal guarantees or confessions of judgement were signed under duress, invalidating these clauses.
• Working out alternative repayment plans – Lawyers negotiate payment plans that are proportional to a business’s current revenues. This prevents business failure due to excessive payments.

• Settling debt obligations for pennies on the dollar – Experienced attorneys craft settlements allowing clients to resolve debts at a fraction of what they owe.
• Defending against lawsuits – MCA companies frequently file lawsuits against merchants to collect debts. Defense lawyers handle litigation so business owners can focus on operations.

The complex legal landscape around MCA debt necessitates working with specialized attorneys. They understand the intricacies of these agreements and construct nuanced legal arguments to protect client interests. With an attorney’s assistance, devastating lawsuit judgements or account levies can often be avoided.

Key Defenses Against Abusive MCA Companies

Several little-known defenses can counteract the underhanded tactics sometimes deployed by MCA firms:

Unconscionability Doctrine

• Allows courts to void contracts with grossly unfair or one-sided terms that take advantage of a weaker party. MCA agreements often qualify due to outrageous interest rates.

Duress Claims

• Indicates a contract was signed under threats, coercion or undue pressure. This can invalidate personal guarantees compelled under predatory conditions.

RICO Act

• Permits triple financial damages if an enterprise uses illegal measures like extortion or fraud during business dealings. Some MCA companies qualify with overly aggressive collections bordering on racketeering.

Usury Laws

• Interest rates above legal limits are deemed usurious and unenforceable. Hidden MCA fees often push interest rates into illegal territory.

With artful application of these defenses, attorneys shift leverage away from MCA firms and toward struggling merchants. This forces settlement deals or legal outcomes vastly more favorable to the business owner.

Key Steps In Developing A Strong MCA Defense Strategy

Crafting an optimal legal strategy requires a meticulous approach:1. Thoroughly Analyze the MCA Agreement

• Identify all parties, fees, rates, terms and conditions. Look for illegal, deceptive or unconscionable elements.

2. Review Account Statements and Communications

• Assemble a timeline of payments made and collection communications. Highlight unlawful threats, coercion and freezing of accounts.

3. Verify Personal Guarantees and Other Collateral

• Determine what personal assets are pledged to guarantee the MCA. Check if these guarantees can be nullified due to duress or misrepresentation.

4. Calculate the Effective Interest Rate

• Combine all fees, charges and payments to determine the annual percentage rate and whether usury laws are violated.

5. Send Demand Letters Contesting Unlawful Activity

• Formally notify the MCA company of illegal conduct under state and federal statutes and demand remedies.

6. Negotiate Improved Repayment Terms

• Leverage evidence of unlawful collections and usurious rates to negotiate a manageable payment plan based on capacity.

7. Explore Settlement Offers

• Angle for steep settlement discounts off the outstanding balance through mediation or litigation pressure.

Aggressive legal tactics rooted in due diligence and financial forensic analysis can unravel even the most stubborn MCA contract disputes.

Key Questions To Ask Prospective MCA Defense Firms

Not all law practices possess the skills to litigate complex MCA cases. When interviewing prospective counsel, important questions to ask include:

• How many MCA cases have you handled in the past 5 years?
• What percentage of your MCA caseload involves litigation versus settlement?
• Can you provide MCA-specific case results demonstrating favorable client outcomes?
• Do you have experience arguing usury claims and unconscionability defenses?
• Are you familiar with drafting demand letters alleging RICO act or Fair Debt Collection Practices Act violations?
• Will you conduct a detailed financial analysis to construct usury rate and duress arguments?
• What are your views on resolving MCA debts through settlement versus bankruptcy or debt restructuring?
• If litigation occurs, what portion of the legal fees are contingent upon a successful judgement?

Vetting lawyers thoroughly on niche qualifications and past performance gives clients the greatest odds of prevailing against MCA creditors.

Unraveling The Contract Fine Print – Key MCA Agreement Provisions To Review

MCA contracts contain dense legalese that overwhelms most business owners. Attorneys well-versed in these documents can decipher key areas benefiting creditors and identify clauses that may be legally assailable. Essential sections meriting close inspection include:

Interest Rates, Fees and Payment Terms

• Scrutinize all interest charges, origination fees, underwriting costs, and default penalties. Calculate the true annual percentage rate.
• Note the contracted rate and timing of repayments deducted from credit card settlements. Seek unreasonable terms.
• Watch for “confessions of judgement” that admit fault prior to any trial. These remove due process protections.

Account Access and Control Agreements

• Be wary of provisions granting MCA firms unilateral access to business bank accounts and credit card processors. This allows improper account sweeps when payments fall behind.

Personal Guarantees and Collateralization

• Review all personal assets and collateral pledged to guarantee the MCA, including real estate, accounts, or personal injury settlements. Determine if these guarantees are enforceable.

Choice of Law, Arbitration and Jurisdiction Clauses

• Identify the state laws governing the contract and where lawsuits must be filed and argued. This shapes available defenses and burdens of proof.

Parsing the finer details of MCA contracts requires guidance from specialists well-versed in these instruments. They understand how to navigate complex legalese to reveal opportunities.

Good Faith Attempts At Repayment Strengthen Legal Defenses

Judges and juries look more favorably upon businesses with records of good faith efforts to honor contracts, even if unfavorable terms eventually necessitated legal intervention. Steps that demonstrate good faith include:

• Adhering to original repayment terms for as long as realistically possible before defaulting
• Communicating promptly with the MCA provider when financial difficulties emerge
• Providing business financial statements illustrating inability to meet overly burdensome payment schedules
• Attempting to renegotiate terms prior to completely ceasing payments
• Setting aside some revenues in escrow earmarked toward debt obligations

Documenting steps taken to align with contractual duties despite cash flow shortages helps prove improper conduct rests with the MCA firm, not the business owner. It also builds judicial sympathy for the merchant’s plight.

Beware Of Unethical Tactics Employed By Some MCA Firms

Merchants must remember that predatory MCA companies use myriad schemes to ensnare borrowers in spiraling debt. Common ploys include:Masked True Costs

• Quoting misleading dollar amounts for the merchant cash advance without accounting for fees and payments deducted daily from credit card receipts.

Pressuring Quick Signings

• Rushing contract signatures before owners can review terms or consult attorneys.

Mandatory Payment Deductions

• Requiring automatic withdrawals from merchant accounts without control over timing or amounts.

Arbitration and Jurisdiction Manipulation

• Constraining court hearing locations and legal options via fine print clauses.

Oral Promises Contradicting Written Terms

• Making false claims about contract details that are not reflected in actual documentation.

Leveraging Personal Collateral

• Coercing owners to pledge personal assets to secure MCA loans under veiled threats of declining the application.

Harassment and Intimidation

• Freezing bank accounts, contacting customers about unpaid debts, or falsely threatening criminal charges to force collections.

Staying attuned to the reality that some MCA firms prioritize fast profits over ethical practices is key to protecting legal rights.

About Delancey Street’s Business Debt Relief Lawyers

The Delancey Street Firm provides top-tier legal representation to businesses nationwide seeking relief from predatory lending practices keeping them trapped in a cycle of crippling debt. Our attorneys have decades of combined experience constructing innovative defenses on behalf of small business clients pursued by merchant cash advance lenders, private lenders, factoring companies and other alternative capital providers.We understand the intimidation and desperation faced by business owners targeted by the aggressive legal machinery funding MCA operations. Our firm levels the playing field through hard-hitting representation optimized to restrain collections, eliminate exposure, and shift leverage for reduced judgements. We know which pressure points to target to get predatory lenders to stand down.In addition to defending clients in individual actions, our lawyers are actively involved in national efforts to expose and reform abuses across specialty finance industries. We currently consult with both advocacy groups and legislators seeking to update state and federal commercial lending regulations addressing contemporary alternative capital instruments.The Delancey Street Firm provides hope for small businesses when unscrupulous lending practices drive them to the brink. Contact our team 24 hours a day for a free consultation on your legal situation. We are always available to advise and defend business owners ready to break free from abusive debts

 

 

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IF YOU’RE LOOKING FOR A BUSINESS DEBT SETTLEMENT COMPANY, VISIT DELANCEY STREET. CLICK HERE NOW.

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