Detroit MCA Defense Lawyers
Detroit Merchant Cash Advance (MCA) defense lawyers face an uphill battle with laws that vary by state, and some of these laws can help, while others can hurt your case. In Michigan, like many other states, MCAs are not considered traditional loans, which allows lenders to bypass interest rate limits—laws that cap interest rates on loans. But why does this matter? Interest rate limits in states like Michigan can cap interest rates for loans, often protecting borrowers. However, since an MCA is not a loan, these protections don’t apply. MCA companies often include personal promises and admissions of judgment in their contracts, making it harder for business owners to fight back if they default on payments.
Defending Against Admission of Judgment
An admission of judgment is a clause where the borrower pre-emptively gives up their right to contest the debt if they fall behind. This is crucial because if this clause exists, defending against it becomes the first line of attack for MCA lawyers. An experienced MCA attorney in Detroit will carefully review the MCA agreement for problematic clauses, like admissions of judgment, or unclear terms regarding interest rates, fees, and payment schedules. One legal strategy MCA defense lawyers employ is to argue that the MCA is essentially an illegal loan, particularly if the interest rates—which can reach up to 200%—exceed what would be considered legal under Michigan’s laws if it were classified as a loan. Michigan’s courts, like many others, have had to navigate the grey area where MCA transactions operate. The courts may recognize MCAs as sales of receivables rather than loans—this distinction can make or break your defense.
Fraud, Duress, and Contract Change
MCA lawyers also argue that stacking MCAs—where a business takes multiple advances from different companies—leads to unfair and unsustainable debt traps, opening up possibilities for legal defenses like fraud or pressure. Another crucial defense tool is contract change. Lawyers can challenge MCA contracts if they’re unfair, meaning they’re unfairly stacked against the business owner. In cases where the lender’s practices are particularly aggressive, defense lawyers might argue that the MCA is not just predatory, but also violates federal laws like the Truth in Lending Act. Although rare, this can be another path to relief. MCA defense often involves using legal defenses, like improper service of notice. If the MCA lender didn’t serve the borrower properly—by mail or email, for example—lawyers can use this as grounds for dismissal.
Venue and Counterclaims
Another avenue is targeting the place in which the lawsuit was filed. If an MCA lawsuit was filed in a state with lender-friendly laws like New York, even though the business is in Michigan, an attorney may argue for changing the place to Detroit. Counterclaims are another powerful weapon. Lawyers can file counterclaims for contract violations, unfair business practices, and even interference with business operations by the MCA lender. It’s essential to understand the difference between loans and MCAs when crafting a defense. Loans require fixed payments, while MCAs are paid back from future receivables, creating a different risk profile that lawyers can exploit.
Leveraging Legal Protections
Michigan courts have sometimes treated MCAs more like loans, especially when the repayment terms are so harsh they resemble interest payments rather than a sale of future earnings. Some states have enacted laws that cap retrieval rates or require disclosure of the real cost of the MCA, including fees and interest rates—this might not apply directly in Michigan but could influence the argument. Bankruptcy may be the last resort, and in Detroit, a seasoned attorney will know how to navigate Chapter 11 for businesses to help discharge or reorganize MCA debt. If you’re being sued over an MCA, the first thing to remember is: Don’t ignore the lawsuit! You’ll need to file a response—ideally within 20 to 30 days—or face an automatic default judgment.
Settlement Options and Litigation
MCA lenders often aim for quick settlements to avoid lengthy litigation. A Detroit MCA defense attorney might recommend negotiating a settlement if the terms are reasonable and can help save the business. For example, settling for a reduced lump-sum payment can end the lawsuit quickly. But beware: don’t agree to unaffordable terms—talk to your attorney first. Remember, the lender has to prove you broke the contract, and that’s not always as straightforward as they might hope. A smart defense attorney will make them work to prove every single detail. It’s also crucial to gather evidence: Keep all payment records, emails, and communications with the MCA company. This evidence can support defenses like breaking of contract by the lender.
Discovery and Motion to Dismiss
MCA defense lawyers in Detroit know how to use discovery to force lenders to produce documents, which might reveal improper lending practices. It’s possible to argue that the terms of the MCA were fraudulent or that the borrower was coached into signing unfavorable agreements under pressure—this is another layer of defense. In some cases, MCA attorneys can file for motion to dismiss, especially if the lawsuit is baseless or if there’s been a procedural mistake. But Detroit MCA lawyers don’t stop at just defending—they often look to counter-attack, filing counterclaims for damages if the lender used improper or deceptive practices.
The Evolving Legal Landscape
As MCA laws evolve, especially in Michigan, there might be new protections or rules coming into play that your attorney can leverage. MCA lawsuits are a serious threat to any business in Detroit. But with the right legal strategies, defenses, and counterclaims, you can fight back—and even win. Detroit MCA defense lawyers are experts in navigating these complex cases. If you find yourself facing an MCA lawsuit, don’t delay—talk to a lawyer right away. The sooner you act, the stronger your defense will be.