Miami MCA Defense Lawyers
Let’s dive into what Miami MCA defense lawyers can do for your business, because these legal experts understand the intricacies of how to use state laws, precedents, and case-specific strategies to defend you in court. The laws surrounding Merchant Cash Advances (MCA) are tricky, and that’s because MCA agreements are considered sales of future receivables, not loans, which means they fall into a legally grey area where they avoid traditional regulations like usury laws that cap interest rates. MCA attorneys are highly skilled at knowing how to navigate this grey area, and they use their knowledge of past cases, contracts, and state-specific laws to protect their clients from unfair agreements.
In Florida, for instance, MCA agreements are not considered loans under state law, and that’s an important point for your defense because it helps avoid claims that MCA agreements violate the state’s usury laws. The Florida courts in Craton Entertainment, LLC v. Merchant Capital Group ruled that MCA contracts, which involve the purchase of future receivables, should be classified as sales of future receivables and not loans, and this ruling was essential because Florida’s criminal usury statute places strict limits on interest rates for loans. However, since MCAs don’t fall under the category of loans, they can sidestep these interest rate limits. MCA attorneys will use this distinction to argue that your MCA agreement is a sale rather than a loan, thus making it exempt from Florida’s usury laws. This distinction is one of the core arguments that MCA defense attorneys will employ to defend your case, especially if the MCA company is trying to claim otherwise by classifying the agreement as a loan.
But what if you’re being charged an outrageous interest rate, something so high it feels impossible to pay back? In situations where MCA companies have structured their agreements to charge interest rates that seem sky-high, you can’t simply rely on a usury defense, since MCA agreements aren’t classified as loans. Because MCA agreements are designed to avoid usury claims, the payments fluctuate based on your sales, meaning you don’t have fixed monthly payments. Instead, the payments change according to the revenue your business generates, which makes them more difficult to challenge using typical loan defenses. However, there’s still hope because in some other jurisdictions, some courts, like the Second Circuit Court of Appeals, ruled against MCA lenders by classifying their agreements as “disguised loans” based on how the contracts were structured, leading to legal victories for the small businesses involved.
For example, in a prominent New York case, the court found that the MCA provider was treating the transaction like a loan with absolute repayment terms, meaning the business owner had no flexibility in how or when they repaid the advance. Because the court ruled that the MCA provider’s agreement had the characteristics of a loan, it became subject to New York’s usury laws, which capped the interest rates at a much lower percentage than what the MCA provider was charging. If your MCA company is acting like a lender, despite claiming to buy your receivables, Florida lawyers will point out this inconsistency, and they will draw on cases from other states to show how the MCA provider has crossed the line from a sale to a loan.
Unconscionability Defense
Unconscionability is another legal argument that Miami lawyers may use to defend you in cases where the contract terms are so one-sided and unfair that the court can’t enforce them. This happens when the terms are so heavily skewed in favor of the MCA company that it becomes unfair for you to continue making payments. For instance, imagine being forced to pay back a 300% annual percentage rate (APR) because your business had one bad month of sales—that’s what lawyers would call unconscionable, meaning no reasonable person would agree to those terms under normal circumstances. Florida courts take this argument seriously, particularly when they see that businesses are trapped in debt spirals they can’t escape from. This type of defense is used when the courts recognize that the contract was signed under terms that were unreasonably oppressive to one party and grossly favored the other.
Breach of Contract and Deceptive Practices
Another defense strategy that could be used by Miami MCA lawyers is to claim a breach of contract. If the MCA company misled you about the terms of your agreement, such as promising flexible payments when, in fact, they continued to take money from your account even after your business’s revenue dropped drastically, this could form the basis of a breach of contract claim. MCA providers are often required by law to adhere to the terms set out in the agreement, so if they deviate from those terms, your lawyer can argue that they violated the contract. If the MCA company was deceptive about repayment terms or used high-pressure sales tactics to get you to sign the agreement, your attorney could file a counterclaim for violating Florida’s consumer protection laws, which are designed to prevent businesses from taking advantage of their customers.
These strategies work well because MCAs exist in a legal grey area. They aren’t technically loans, but as we’ve seen, courts are increasingly scrutinizing them and treating them like loans when the terms are too restrictive. Your attorney will review every single clause in your agreement, especially ones related to Automated Clearing House (ACH) withdrawals, where the MCA company takes payments directly from your bank account, or blanket Uniform Commercial Code (UCC) liens, which give the MCA company a legal claim over your business’s assets if you fail to make payments. These clauses can severely restrict your business operations, and your attorney will use these to show that the MCA agreement is unfair.
Even if you’re dealing with an out-of-state MCA company, Florida MCA defense lawyers are skilled at challenging New York choice-of-law clauses that many MCA lenders include in their contracts. These clauses force you to resolve any legal disputes in New York, where the MCA company is headquartered, rather than in Florida, where your business is based. The argument goes like this: if your business is physically located in Florida and the MCA funds were used in Florida, why should New York’s laws apply? Florida lawyers will push for local jurisdiction, arguing that the case should be heard under Florida law, which is more favorable to small businesses like yours. This strategy gives you an edge in court because it brings the case closer to home and ensures that Florida’s more protective laws will apply.
Finding Contract Weaknesses
MCA defense is all about finding the weaknesses in these contracts, and Miami lawyers are trained to look for areas where the MCA company overstepped. Most MCA companies avoid calling their agreements loans, but if they walk like a loan and talk like a loan, courts may ultimately treat them as such. Your attorney will be looking for any inconsistencies in the agreement, such as whether the MCA company is enforcing absolute repayment, which would make it look more like a loan, rather than allowing your payments to fluctuate with your revenue.
Confession of Judgment Clauses
MCA funders often use confession of judgment (COJ) clauses, which allow them to obtain a judgment against you without having to go through a full trial, as a way to quickly enforce collections. The good news is that Florida doesn’t enforce these clauses for out-of-state business owners, which means you’re protected from having a judgment entered against you without your knowledge or ability to fight it in court. However, if you’re ever forced to sign a settlement agreement, it’s essential not to do so without a lawyer. These agreements often include terms that are even more restrictive than the original MCA contract, and your lawyer will be able to spot traps and negotiate better terms on your behalf.
Reconciliation Clauses
Another key issue is the reconciliation clause. Florida courts have ruled that MCA contracts are acceptable if they include reconciliation clauses, but the MCA company must stick to them. These clauses allow for your payments to be adjusted when your sales drop, which is crucial in protecting your cash flow during slow months. If the MCA provider doesn’t adjust the payments according to the reconciliation clause, they could be in breach of the agreement, which could open the door for you to challenge the contract and potentially reduce the amount you owe.
Class Action Lawsuits
Now, let’s talk about class action lawsuits. Several states, including New York and California, have filed lawsuits against MCA companies for engaging in deceptive practices. In 2021, New York’s Attorney General sued several MCA providers for misleading small business owners about the terms of their agreements, and California has passed new laws requiring greater transparency in MCA contracts. Florida might not have taken the same aggressive stance yet, but MCA lawyers are keeping a close eye on these developments because new regulations are likely on the horizon.
Record-Keeping and Evidence
One piece of advice: Always keep detailed records of every payment you’ve made, every communication you’ve had with the MCA company, and every agreement you’ve signed. These records will be critical in building your defense, and your lawyer will use them as evidence to strengthen your case. If the MCA company used deceptive marketing tactics—such as promising one thing and delivering something completely different—this could open up claims under Florida’s unfair business practices laws, which are designed to protect small businesses from predatory practices.
Treating Receivables Like Loans
While MCA companies argue they’re simply buying your future receivables, the reality is that many of them act like traditional lenders. That’s where your attorney comes in, making the case that the MCA provider has crossed the line from a sale to a loan. And don’t forget—small businesses do win against MCA lenders. The Second Circuit’s 2023 ruling is a prime example of how courts are willing to rule in favor of small business owners when MCA companies overreach, and similar victories have been won in Florida as well.
Why You Need an Experienced MCA Lawyer
IfMiami MCA Defense Lawyers
Let’s dive into what Miami MCA defense lawyers can do for your business, because these legal experts understand the intricacies of how to use state laws, precedents, and case-specific strategies to defend you in court. The laws surrounding Merchant Cash Advances (MCA) are tricky, and that’s because MCA agreements are considered sales of future receivables, not loans, which means they fall into a legally grey area where they avoid traditional regulations like usury laws that cap interest rates. MCA attorneys are highly skilled at knowing how to navigate this grey area, and they use their knowledge of past cases, contracts, and state-specific laws to protect their clients from unfair agreements.
In Florida, for instance, MCA agreements are not considered loans under state law, and that’s an important point for your defense because it helps avoid claims that MCA agreements violate the state’s usury laws. The Florida courts in Craton Entertainment, LLC v. Merchant Capital Group ruled that MCA contracts, which involve the purchase of future receivables, should be classified as sales of future receivables and not loans, and this ruling was essential because Florida’s criminal usury statute places strict limits on interest rates for loans. However, since MCAs don’t fall under the category of loans, they can sidestep these interest rate limits. MCA attorneys will use this distinction to argue that your MCA agreement is a sale rather than a loan, thus making it exempt from Florida’s usury laws. This distinction is one of the core arguments that MCA defense attorneys will employ to defend your case, especially if the MCA company is trying to claim otherwise by classifying the agreement as a loan.
But what if you’re being charged an outrageous interest rate, something so high it feels impossible to pay back? In situations where MCA companies have structured their agreements to charge interest rates that seem sky-high, you can’t simply rely on a usury defense, since MCA agreements aren’t classified as loans. Because MCA agreements are designed to avoid usury claims, the payments fluctuate based on your sales, meaning you don’t have fixed monthly payments. Instead, the payments change according to the revenue your business generates, which makes them more difficult to challenge using typical loan defenses. However, there’s still hope because in some other jurisdictions, some courts, like the Second Circuit Court of Appeals, ruled against MCA lenders by classifying their agreements as “disguised loans” based on how the contracts were structured, leading to legal victories for the small businesses involved.
For example, in a prominent New York case, the court found that the MCA provider was treating the transaction like a loan with absolute repayment terms, meaning the business owner had no flexibility in how or when they repaid the advance. Because the court ruled that the MCA provider’s agreement had the characteristics of a loan, it became subject to New York’s usury laws, which capped the interest rates at a much lower percentage than what the MCA provider was charging. If your MCA company is acting like a lender, despite claiming to buy your receivables, Florida lawyers will point out this inconsistency, and they will draw on cases from other states to show how the MCA provider has crossed the line from a sale to a loan.
Unconscionability Defense
Unconscionability is another legal argument that Miami lawyers may use to defend you in cases where the contract terms are so one-sided and unfair that the court can’t enforce them. This happens when the terms are so heavily skewed in favor of the MCA company that it becomes unfair for you to continue making payments. For instance, imagine being forced to pay back a 300% annual percentage rate (APR) because your business had one bad month of sales—that’s what lawyers would call unconscionable, meaning no reasonable person would agree to those terms under normal circumstances. Florida courts take this argument seriously, particularly when they see that businesses are trapped in debt spirals they can’t escape from. This type of defense is used when the courts recognize that the contract was signed under terms that were unreasonably oppressive to one party and grossly favored the other.
Breach of Contract and Deceptive Practices
Another defense strategy that could be used by Miami MCA lawyers is to claim a breach of contract. If the MCA company misled you about the terms of your agreement, such as promising flexible payments when, in fact, they continued to take money from your account even after your business’s revenue dropped drastically, this could form the basis of a breach of contract claim. MCA providers are often required by law to adhere to the terms set out in the agreement, so if they deviate from those terms, your lawyer can argue that they violated the contract. If the MCA company was deceptive about repayment terms or used high-pressure sales tactics to get you to sign the agreement, your attorney could file a counterclaim for violating Florida’s consumer protection laws, which are designed to prevent businesses from taking advantage of their customers.
These strategies work well because MCAs exist in a legal grey area. They aren’t technically loans, but as we’ve seen, courts are increasingly scrutinizing them and treating them like loans when the terms are too restrictive. Your attorney will review every single clause in your agreement, especially ones related to Automated Clearing House (ACH) withdrawals, where the MCA company takes payments directly from your bank account, or blanket Uniform Commercial Code (UCC) liens, which give the MCA company a legal claim over your business’s assets if you fail to make payments. These clauses can severely restrict your business operations, and your attorney will use these to show that the MCA agreement is unfair.
Even if you’re dealing with an out-of-state MCA company, Florida MCA defense lawyers are skilled at challenging New York choice-of-law clauses that many MCA lenders include in their contracts. These clauses force you to resolve any legal disputes in New York, where the MCA company is headquartered, rather than in Florida, where your business is based. The argument goes like this: if your business is physically located in Florida and the MCA funds were used in Florida, why should New York’s laws apply? Florida lawyers will push for local jurisdiction, arguing that the case should be heard under Florida law, which is more favorable to small businesses like yours. This strategy gives you an edge in court because it brings the case closer to home and ensures that Florida’s more protective laws will apply.