New York MCA Defense Lawyers
Merchant Cash Advance (MCA) lenders, who operate with the sole intention of trapping business owners in crippling financial contracts, have ruthlessly destroyed countless small businesses that were simply trying to survive or grow. In New York, one of the most legally complex states for financial dealings, it’s absolutely crucial to fully understand how experienced MCA defense lawyers, who specialize in fighting back against these unethical lenders, can use the state’s protective laws to help business owners get out of these toxic, predatory deals. The MCA industry thrives on deception that leaves business owners vulnerable, often unaware of the serious financial traps they’ve signed up for, and it’s time we expose these practices fully, for the benefit of all business owners in New York. MCA agreements, which are often disguised as “sales of future receivables,” are not what they seem, and make no mistake, these agreements act like loans, often carrying outrageous interest rates that can reach as high as 400%, leaving business owners in an endless cycle of debt that they can never realistically escape from. Let’s dive into exactly why this practice is dangerous for businesses operating in New York, and how MCA defense lawyers, who are passionate about helping business owners, use specific state laws to fight back and save a business from ruin.
Understanding MCA Loans in New York
In New York, MCA defense lawyers often argue, and rightfully so, that MCAs are actually disguised loans, not sales, and are structured in a way that allows lenders to avoid regulations that apply to traditional loans. Under Article 9 of the Uniform Commercial Code (UCC), which governs all secured transactions in New York, lawyers use this law to prove beyond a shadow of a doubt that MCA agreements aren’t true sales of receivables, but are actually secured loans in disguise. This distinction is incredibly important because if the MCA agreement is legally considered a loan, as it should be, then it would automatically be subject to New York’s strict usury laws, which are designed to protect borrowers from being exploited by unfair interest rates. New York’s civil usury limit is 16%, while the criminal usury limit is 25% under N.Y. Penal Law § 190.40. MCA interest rates often soar far above these limits, giving businesses a powerful tool to void these predatory agreements and escape these horrific debt traps. By reframing and proving that MCAs are loans, defense lawyers can get them voided under the usury laws, which makes a huge difference in whether a business can survive financially. One significant case that showcases the importance of this strategy is Pearl Capital Rivis Ventures, LLC v. RDN Constr., Inc., where the defense team successfully argued that certain MCA provisions made it appear much more like a loan than a sale.
Secured Loans and UCC Violations
A dedicated defense lawyer will also investigate how the MCA lender enforced their lien on the business’s assets, because MCA lenders often overstep their legal rights. Under N.Y. UCC § 9-609, lenders are not permitted to seize collateral, which is often business equipment or income, without following strict rules, including seeking court approval in some cases. If the lender violated these laws, it could be grounds for a counterclaim against the lender, allowing the business to potentially recover lost assets or seek damages. I’ve personally seen cases where MCA lenders blatantly violated UCC rules by seizing assets, such as business equipment or bank accounts, without proper court approval, bulldozing over the rights of the business owner. In one particular case, the MCA lender took all of the client’s business equipment, leaving them with nothing to operate with, which was not only unethical but also illegal under Article 9. We successfully argued that the lender’s actions violated the business’s legal rights under the UCC, and the case was tossed out of court, saving the business from collapse.
Confession of Judgment Loopholes
The confession of judgment (COJ), another dirty trick used by MCA lenders in New York, allows them to enforce judgments without going to trial, bypassing the legal process. But here’s the catch: COJs have been banned in New York for out-of-state lenders since 2019 under N.Y. C.P.L.R. 3218, and yet, these lenders still attempt to use them in many cases. Despite this law, many MCA lenders continue to sneak these clauses into their agreements, hoping that business owners won’t notice or won’t know their rights. If a defense lawyer finds that a COJ was used improperly, it can be challenged, and the judgment vacated, giving the business a second chance. Knowing and understanding this specific law is crucial, and it’s a common and highly effective argument MCA defense lawyers use to win cases. Another critical angle of defense is fraudulent inducement. MCA lenders often lie, mislead, or make false statements to get business owners to sign these agreements. Under New York common law, if fraudulent inducement can be proven, it can void the entire contract, which is a powerful tool that can save businesses from ruin. We have saved multiple businesses using this exact argument.
Fraudulent Inducement & Confusing Language
MCA agreements are notorious for their vague and confusing language, designed to be almost impossible for the average business owner to fully understand the terms they are agreeing to. One client I helped didn’t realize they had unknowingly signed over personal liability until it was far too late, putting not only their business but their personal finances at risk! This is where New York’s General Obligations Law comes into play. Under N.Y. Gen. Oblig. Law § 5-701(a), certain contracts, especially those that impose heavy financial burdens, must be clear, unambiguous, and easy to understand to be enforceable in court. If the MCA agreement is full of legalese or intentionally confusing language, that could be grounds for a strong legal defense. Furthermore, the MCA industry often relies on a loophole called the “true sale doctrine”, where they claim they are purchasing future receivables rather than issuing a loan. However, the details of the contract matter greatly. MCA defense lawyers scrutinize every word to show that these agreements are actually loans in disguise, which opens the door to other legal defenses, such as usury claims.
The Fight Against Predatory MCA Lenders
For example, in TVT Capital, LLC v. Chang, the court found that the MCA agreement was structured so much like a loan because the lender had significant control over how the business operated, which included direct withdrawals from the business’s bank account, a level of control typically seen in loans, not sales of receivables. This was a huge win for MCA defense and a precedent that defense lawyers continue to use. Let’s not forget the role of RICO (Racketeer Influenced and Corrupt Organizations Act) in cases where MCA lenders engage in predatory lending on a mass scale. MCA defense lawyers are beginning to file RICO claims to stop these illegal practices, which could have serious consequences for MCA lenders who are operating in bad faith. Civil RICO claims are rare, but they’re extremely powerful. If an MCA lender has committed fraud as part of a larger scheme or pattern of unethical lending practices, a lawyer can argue that they’ve violated RICO statutes, which means the lender could be responsible for treble damages (three times the actual damages), a punishment severe enough to bankrupt some lenders and make them think twice before using these tactics again.
Why Acting Fast is Crucial for Business Owners
MCA defense isn’t about helping business owners avoid responsibility or debts they legitimately owe. It’s about making sure that honest businesses aren’t getting trapped and destroyed by unethical lenders. I’ve seen how devastating these MCAs can be to a business’s cash flow, operations, and ability to survive long-term. However, I’ve also witnessed how MCA defense lawyers can win cases that give businesses a fighting chance and help them escape from financial ruin. Business owners in New York need to act fast when dealing with MCA lenders. These lenders move quickly, often hitting hard with collection efforts, and the legal clock is ticking once the lender starts collections. A good MCA defense lawyer will not only review the contract for potential usury violations or breaches of the UCC but will also thoroughly investigate whether the lender has violated any state laws or procedural rules during the process, which could give the business leverage in court.
The Legal Ammunition MCA Defense Lawyers Use
In my experience, these legal battles are tough, but the law is on our side—especially when we use New York’s usury laws, UCC provisions, and fraudulent inducement claims properly and strategically. When these legal arguments are crafted with care and expertise, even partial wins can make a significant difference in whether a business survives or collapses under the weight of an MCA. If you are currently fighting against an MCA in New York, don’t wait until it’s too late or until your business is on the verge of closure. MCA defense lawyers are here to expose the truth, stand up to predatory lenders, and give business owners the legal ammunition they need to fight back. Let’s fight these lenders together and stop them from taking down honest businesses who just want to succeed.