New York MCA Defense Lawyers
What’s the Real Deal with MCA Agreements?
Merchant Cash Advance (MCA) agreements are tricky – they’re often structured as purchases of future receivables, but can actually be treated as usurious loans under New York law. 🧐 How does this happen? Let’s break it down. One of the key legal battles involves whether MCA contracts are loans or true receivables purchases. If deemed a loan, usury laws kick in, limiting the interest rate lenders can charge. New York’s criminal usury cap is 25% interest for corporations. But guess what? MCA agreements often exceed this cap, disguised as something else. This gives defense lawyers a big argument in court. Take the case of Fleetwood Services LLC v. Richmond Capital—Second Circuit Court ruled that MCA agreements structured as loans can violate RICO laws if they exceed usury limits. A game-changer for defendants. Another key case: LG Funding vs. United Senior Properties. Here, the court found that the MCA lender’s reconciliation provisions were fake. Translation? It wasn’t a real purchase of receivables, but a disguised loan.
How Do Lawyers Prove These Agreements Are Loans?
Under New York law, if the MCA contract lacks a valid reconciliation provision—meaning merchants can’t adjust payments based on actual receivables—it’s likely a loan, not a sale. This turns the tables on lenders. The New York Attorney General recently won a case, voiding an MCA contract for lacking true reconciliation and imposing personal guarantees. These are the types of wins defense attorneys aim for. Does the MCA agreement include a finite term or require repayment regardless of sales? Another clue it might be a loan! This argument helps defense lawyers classify MCAs under usury laws. Defense lawyers also look at whether the MCA includes “recourse” if the merchant declares bankruptcy. If so, boom! It’s likely a loan, subject to New York’s strict usury caps. In Principis Cap., LLC v. I Do, Inc., the Second Circuit clarified the three-part test for whether MCA deals are usurious loans. These factors are crucial for defense lawyers.
Jurisdiction as a Game-Changer in Defense
MCA companies often sue in New York—but if the company wasn’t formed in New York, defense lawyers can get the case dismissed for lack of jurisdiction. 📜 This is a HUGE win for merchants. If a lender tries to garnish your out-of-state bank account after a New York judgment, it’s illegal. MCA defense lawyers can force a refund under the separate entity rule! One tactic defense lawyers use is showing that the MCA lender kept debiting payments even after the lawsuit was filed. Courts often dismiss the lender’s claims when this happens. In Weinberg Legal cases, MCA lenders continued to debit after filing lawsuits. These cases were dismissed or got summary judgment denied, giving merchants relief.
Small Legal Details Can Flip the Case
Does the MCA contract require sending bank statements to the lender? Many MCA agreements do, but if it’s too restrictive, courts can declare the contract a sham. Defense attorneys LOVE this argument. A crucial defense is proving that the MCA funder debited directly from the merchant’s bank account instead of actual receivables. Courts hate this practice—it shows the risk didn’t transfer to the lender. In People vs. Richmond Capital, the court found that requiring merchants to send bank statements and ignoring receivables was a sham practice. This ruling helps defense attorneys win cases across the board. Lenders will argue that their agreement is a “purchase,” not a loan. Defense attorneys counter by showing how the contract functions as a loan in practice—usury caps apply! 💡 Defense lawyers also challenge the personal guarantees included in MCA agreements. If a lender can go after personal assets, courts might reclassify the MCA as a loan.
Winning with Out-of-State Jurisdiction
For MCA companies that aren’t based in New York, courts can dismiss the case based on jurisdiction. This is a powerful tool to get merchants out of lawsuits altogether. 🌍 These are just a few key strategies that New York MCA defense lawyers use to win cases—even partially. Whether it’s usury caps, fake reconciliation provisions, or jurisdiction challenges, lawyers have plenty of legal tools to fight predatory MCA agreements! Defense strategies keep evolving, and merchants can absolutely fight back against MCAs that act like loans. 💪 If you’re in a tough MCA battle, remember: the law is on your side, and skilled attorneys can help you win.