MCA Defense Lawyers Business Debt Settlement

Merchant cash advance (MCA) loans have become an increasingly popular way for small businesses to access quick financing. However, some MCA lenders engage in predatory practices that can leave business owners saddled with crushing debt. If you find yourself facing aggressive collections or even threats of criminal charges from an MCA lender, working with an experienced defense lawyer can help protect your rights.

How MCA Loans Work

A merchant cash advance functions similarly to a business cash advance or business loan, with some key differences:

• The MCA provider purchases a percentage of the business’s future credit card sales, rather than lending a flat amount.
• There is no set repayment schedule. Instead, the business makes payments as a percentage of daily credit card sales until the full amount plus fees and interest is repaid. This is known as “factoring.”
• MCA loans can carry extremely high effective annual percentage rates of 200-500%, since there is no cap on interest rates for this type of financing product.

Predatory Lending Practices

While MCA loans provide easy access to capital for cash-strapped businesses, some lenders use aggressive or even illegal tactics to collect payments. Common issues include:

• Excessively high interest rates and fees that balloon over time
• Requiring business owners to sign confessions of judgement that allow the lender to seize assets without notice
• Threatening criminal charges like fraud or theft for missed payments
• Attempting to access business bank accounts directly without consent
• Harassing business owners, employees and even customers with frequent phone calls or visits

If you feel an MCA lender has engaged in unfair business practices or violated lending laws, contacting an attorney can help you understand your rights and defense options. An experienced lawyer can review your loan contract, assess any illegal clauses or deceptive language, and advise you on the best response.

Building an MCA Defense Strategy

In some cases, an MCA contract may be successfully challenged or voided altogether. Potential defenses include:

Unconscionability

If the terms of the MCA agreement are unfairly one-sided in favor of the lender, it may be possible to argue the contract is unconscionable. Factors like excessive fees, lack of transparency around rates, or misleading language could support this claim.

Usury Violations

Since MCA loans escape state laws capping interest rates, lenders often impose rates of 200% or higher. If the cumulative fees and payments equate to an annual percentage rate above your state’s usury cap, the contract may be in violation.

Deceptive Trade Practices

If an MCA provider used deception, false promises, or obscured key loan terms during the application process, the contract could potentially be void under consumer protection laws against unfair business practices.

Racketeering

In egregious cases where an MCA lender has resorted to unlawful threats, coercion, or fraud in their collection efforts, racketeering charges could potentially come into play.The right defense lawyer can help determine if any of these arguments might invalidate the terms of your MCA loan or even result in civil penalties against the lender.

Negotiating MCA Debt Settlements

Even if the MCA agreement is legally valid, an experienced attorney can often negotiate a settlement for a fraction of what you owe. Tactics might include:

• Challenging the repayment calculations – Many MCA contracts allow lenders to help themselves to daily credit card receipts. Errors or accounting manipulation are common. An lawyer can audit the lender’s records and challenge inaccurate payments.
• Disputing default claims – MCA lenders often declare default and attempt to accelerate payments over minor infractions. Your attorney can push back on unreasonable default allegations.
• Leveraging contract weaknesses – Any vague language, loopholes, or lack of specificity within the MCA agreement can be exploited to build leverage in settlement talks.
• Threatening litigation – The prospect of a protracted legal fight is unattractive to MCA lenders. Your lawyer can use litigation threats credibly to bring the lender to the table.

With an experienced negotiator on your side scrutinizing the MCA agreement and aggressively representing your interests, settlements eliminating 50% or more of the outstanding balance are common.

Finding the Right MCA Defense Attorney

As MCA loans have proliferated, so have legal practices dedicated specifically to representing borrowers facing collections or litigation by predatory lenders. When researching defense lawyers, look for:

Specific MCA Experience

Given the complex legal issues surrounding MCA loans, it’s vital to work with an attorney intimately familiar with this corner of business finance. Ask prospective counsel detailed questions about their MCA debt settlement track record.

Aggressive Litigators

Be wary of lawyers suggesting MCA litigation should only be a last resort. The credible threat of court action is often essential to bringing lenders to the negotiating table. Look for attorneys willing to take an aggressive stance.

Alternative Fee Arrangements

Most MCA collection matters resolve via settlement, so paying legal fees on an hourly basis may not make sense. Seek lawyers willing to work on a contingency fee basis, only collecting if a favorable settlement is reached.By understanding your rights as a borrower and working with an attorney experienced fighting against MCA lenders, you can level the playing field and potentially emerge from under crippling debt burdens through negotiation and settlement. With the right legal advocate, a bright financial future is possible even after an MCA loan nightmare.

Frequently Asked Questions

What are the most common illegal tactics used by MCA lenders?

Some of the most frequent unfair practices include excessively high interest rates exceeding state caps, adding fees without notice, manipulating repayment amounts deducted from business accounts, threatening criminal charges, and forcing borrowers to sign confessions of judgement that allow assets to be seized without notice.

What are my options if I can no longer afford MCA payments?

If payments are unmanageable, default may be unavoidable. However, knowledgeable MCA defense counsel can often negotiate very favorable settlements even after default. In some cases, over 50% of the outstanding balance can be eliminated, with the remainder repaid over 12-24 months.

Can an MCA lender press criminal charges against me?

While lenders often threaten criminal theft, fraud or bad check charges, actually pursuing formal criminal prosecution is rare since it requires evidence the borrower had criminal intent not to repay at the outset. Most threats of criminal action are empty scare tactics with no legal merit.

What is the time limit for contesting an MCA loan agreement?

Time limits vary by state and nature of claim. For example, claims of usury violations or deceptive trade practices might need to be brought within 1-3 years typically. An experienced attorney can advise on relevant statutes of limitation in your jurisdiction. Acting promptly is advisable, however.

How much do MCA defense attorneys typically charge?

Fees vary depending on experience level, location, and complexity of case. However, most MCA defense lawyers work on a contingency basis, collecting around 30% of any savings achieved through settlement. If no settlement is reached, you would owe nothing. Flat monthly fees around $500-$1000 are also common.