MCA Defense Lawyers Business Debt Settlement

Businesses can accumulate significant debt for a variety of reasons – economic downturns, cash flow issues, expansion costs, and more. When debts become unmanageable, business owners may turn to merchant cash advance (MCA) companies for quick capital. However, these financing agreements often come with predatory terms and exorbitantly high interest rates over 100%. Struggling to keep up with payments, many businesses find themselves dealing with aggressive debt collection tactics from MCA lenders. Fortunately, there are options and defenses business owners can utilize when facing legal action.

Understanding Merchant Cash Advances

A merchant cash advance (MCA) provides businesses with a lump sum of capital in exchange for a percentage of future sales. This financing structure allows companies to access funds without taking on formal debt. However, MCAs differ from traditional business loans in several key ways:

• Cost: MCAs often feature interest rates ranging from 60% to as high as 300%. These rates significantly exceed the average small business loan.
• Payments: Rather than fixed installments, MCA payments fluctuate based on monthly sales volume. There are often no limits placed on total repayment amounts.
• Collateral: MCAs require business owners to sign a confession of judgment. This gives the lender legal access to the borrower’s assets without notice or due process.
• Aggressive Collections: MCA lenders frequently utilize threats, harassment, and lawsuits to collect debts. Tactics may include accessing business bank accounts or placing liens on personal assets.

While MCAs provide fast access to capital, business owners can easily find themselves owing double the original funding amount due to exorbitant interest rates and aggressive collections. Those facing legal action do have defenses to utilize under state and federal law.

Merchant Cash Advance Defenses

If an MCA lender takes your business to court for nonpayment, there are legal arguments and protections you can raise in your defense:

Unconscionability

• MCA agreements often contain one-sided terms blatantly favoring the lender over the borrower. Courts may rule these provisions are so unjust as to make the contract unenforceable.
• Factors like interest rates over 60%, unreasonable default triggers, and lack of transparency demonstrate substantive unconscionability.
• Most business owners lack understanding of MCA terms and do not have equal bargaining power compared to lenders. This indicates procedural unconscionability.

Usury Violations

• State laws impose caps on maximum legal interest rates. Rates on MCAs often grossly exceed these limits.
• While MCA lenders claim high rates are justified by the risk, courts increasingly rule otherwise. Interest rates above 25% may qualify as usurious.
• If deemed usurious, courts can void the agreement’s interest requirements altogether. At a minimum, repayments get reduced to state rate caps.

Deceptive Practices

• MCA marketing materials and representatives often misrepresent or obscure key financing terms. This constitutes fraud under state consumer protection laws.
• Failure to clearly disclose annualized interest rates, average repayment amounts, collateral consequences, and other terms indicates deceptive conduct.
• Proof of deception provides grounds for courts to void the MCA agreement altogether.

Strategies for Avoiding Legal Action

The most effective way to handle MCA debt is avoiding legal disputes altogether through proactive outreach and negotiation. Business owners facing cash flow issues and struggling with payments have options, including:

• Open Communication: Keep lines of communication open with MCA lenders before defaulting on payments. Transparency about financial difficulties allows for discussion of alternative arrangements.
• Payment Plans: If unable to cover fluctuating payments, negotiate fixed installment plans at reasonable amounts. This provides payment consistency going forward.
• Debt Settlements: Offer lump sum settlements to close MCA debts at reduced balances. Many lenders will accept discounts between 40 to 60% to avoid further issues.
• Debt Refinancing: Seek more favorable financing options to pay off existing MCA balances. While replacing debt should be done cautiously, it eliminates predatory terms.

Avoiding legal disputes can mitigate the risks and costs associated with defending against aggressive collections lawsuits. That noted, businesses facing court summons regarding MCA debts have valid defenses to raise under usury laws and consumer protection statutes. In such cases, obtaining legal counsel proficient in financial services disputes is critical for effectively asserting rights.

Connecting with Defense Lawyers

Facing collections pressure and lawsuits from MCA lenders can be an intimidating and challenging scenario. Business owners should remember that protections do exist under state and federal consumer laws. Partnering with knowledgeable lawyers is key for raising unconscionability, usury, and deception defenses against unfair MCA agreements.Defense lawyers with experience fighting MCA lenders utilize court procedures to pressure them into settling disputes on favorable terms. Counsel works to have harmful contract provisions invalidated while securing reduced repayment amounts. This saves clients money and assets while avoiding further legal action.When seeking competent MCA defense representation, businesses should look for law firms and lawyers demonstrating the following:

• Extensive experience with MCA and alternative financing disputes.
• Ability to identify defenses based on procedural flaws and excessive interest rates.
• Success negotiating settlements for significant debt reduction.
• Commitment to aggressive representation against unethical lenders.
• Acceptance of cases on a contingency fee basis.

If facing legal action from an MCA provider, time is of the essence. Reaching out for consultations with defense lawyers can help businesses understand their rights and options. Counsel can evaluate defenses, discuss negotiation strategies, and take over communications with lenders. Swift action is key for protecting assets and avoiding further harassment.

Exploring Debt Settlement Services

Though hiring legal counsel is advisable for handling lawsuits, business owners should also consider enlisting debt settlement services in financial disputes. These professionals have expertise negotiating directly with creditors and MCA lenders to secure relief. Though outcomes vary case-by-case, settlements often reduce balances by 40 to 60%.The debt settlement process provides businesses with strong advocates for resolving collections disputes outside of court. Key features include:

Initial Consultation

• An extensive review of finances identifies total debts owed and current limitations. This enables settlement professionals to outline the engagement process and set expectations.

Cease & Desist Orders

• Specialists issue cease and desist notices to MCA lenders and collectors to stop direct contact with the business. This prevents intimidation tactics while settlements get negotiated.

Lump Sum Offers

• Based on available resources and settlement targets, advisors make one-time lump sum offers to creditors for reduced payoffs. This leverages their expertise to secure maximum savings off balances.

Legal Support

• Where creditors refuse reasonable offers, settlement services enlist legal aid to compel negotiations. Lawyers assist by asserting consumer protections and filing complaints with regulators.

While settlement companies take an aggressive stance with creditors, they also serve as buffers between businesses and collections harassment. This saves clients time and stress while working to eliminate debts under the most favorable terms. Settlements often yield better outcomes than bankruptcy or legal defenses pursued alone.

Key Takeaways

Merchant cash advances feature predatory structures allowing interest charges over 100% and aggressive collections tactics. Businesses facing legal action have defenses based on excessive rates and lender deception. While securing legal counsel proficient in financial services disputes is advisable, debt settlement services also negotiate reduced payoffs outside of court.Businesses should remember the following when dealing with MCA debts:

• Unconscionability & Usury Defenses – Grossly unfair contract terms and excessive interest rates over 25% can invalidate debts.
• Open Communication – Transparency and negotiation with lenders early on avoids collections lawsuits.
• Experienced Representation – Lawyers and debt specialists protect assets while securing relief.
• Settlement Options – One-time lump sum offers between 40 to 60% off balances provide resolution.

Acting swiftly when facing collections pressure is critical for businesses. However, owners should not hesitate to assert rights against predatory MCA agreements. Between legal defenses and debt settlements, businesses can curtail harassment while reducing or eliminating what they owe.