El Paso MCA Defense Lawyers
The fight against Merchant Cash Advance (MCA) lenders, which I have personally experienced and seen destroy countless small businesses, is like a never-ending battle for many business owners who are struggling to keep their doors open—an unfair, unjust, and deeply harmful fight that has real consequences for families and communities. I’ve seen firsthand the damage these predatory lenders cause to individuals who have worked their entire lives to build their businesses from the ground up, and I’ve fought tooth and nail in countless legal battles, using every legal strategy and argument possible, to protect these businesses in El Paso and beyond from being completely wiped out by these lenders. It’s personal to me because I know the pain that these business owners feel when their livelihoods are at stake, and I’ve made it my mission to fight back with everything I’ve got, using every law and precedent I can find to help them.
I’ve walked into courtrooms over and over again, standing up for the small, hard-working business owners who are being unfairly drained dry by MCA lenders through agreements that are purposefully designed to be confusing and misleading, knowing that they are taking advantage of vulnerable people who don’t fully understand what they are signing. My clients, who are real people with real families, deserve justice and fairness in a system that often seems stacked against them, and they deserve to be protected from these lenders who, in my view, are nothing more than financial predators.
You see, MCA agreements, which are often presented as harmless cash advances, aren’t actually loans in the usual sense of the word, but are instead “future receivables” agreements, meaning that the MCA lender claims a portion of the business’s future income, which is often taken daily or weekly in small amounts, and lenders use this technicality to argue that they’re not subject to the usual usury laws that protect borrowers from unfair interest rates. But Texas courts, as well as courts in many other states, along with state-specific laws that are designed to protect consumers from unfair and deceptive practices, provide plenty of ways to challenge the legality of these agreements and expose the true nature of the deal.
For example, Texas Business and Commerce Code § 17.46, which is a very important law designed to protect consumers and businesses from deceptive and unfair business practices, provides strong protections against shady business practices—like those commonly employed by MCA lenders—and it can be used effectively to challenge MCA agreements that trick business owners into unfair repayment terms. MCA agreements, in many cases, can be successfully challenged as unfair trade practices under this law because they often include hidden fees, confusing repayment schedules, and misleading interest rates that the business owner was never fully aware of when signing the contract. And here’s the thing—MCA lenders think they’re untouchable and immune from the consequences of their actions because they classify their advances as “sales” of future receivables rather than loans, which allows them to avoid the usury laws that cap interest rates on loans in many states, including Texas. But Texas Finance Code § 302.001, which specifically regulates the amount of interest that can be charged on loans in the state, caps interest rates on loans, and when MCA agreements are analyzed closely, it becomes clear that many of these agreements have interest rates that are way too high and are, in fact, in violation of Texas law.
Don’t believe me? Look at Lawrence v. CDB Services, a very important Texas case that set a legal precedent for using usury laws against disguised loan agreements like those used by MCA lenders. This case is just one of the many ways we can turn the tables on MCA lenders by exposing their so-called “advances” as actual loans that are subject to interest rate limits. Partial victories, which still make a huge difference for struggling businesses, matter too. Even if we can’t get the entire agreement thrown out by the court, we can still fight for reduced debt obligations, which can make the difference between a business surviving or closing its doors. I’ve used § 17.50(b) of the Deceptive Trade Practices Act (DTPA), a Texas law designed to protect consumers from fraudulent and deceptive practices, to recover damages for clients who’ve been tricked by MCA lenders into signing agreements that they didn’t fully understand or that were unfairly presented to them.
MCA lenders rely heavily on confusion and legal tricks to trap business owners in repayment cycles that are nearly impossible to escape. They bury key repayment terms deep within the fine print of the agreement, making it extremely hard for businesses to see just how quickly the fees pile up and how impossible it will be to pay them off. That’s why I argue that these agreements are unconscionable, which is a legal term that means the contract is so unfairly one-sided that no reasonable person would agree to it, and under Texas case law, this is a strong defense that can be used to challenge the enforceability of these contracts. You might’ve heard about El Paso Electric Co. v. Real Estate Planning Corp., a Texas case that’s often cited when courts look closely at contracts that heavily favor one party at the expense of the other. MCA agreements, which often give all the power to the lender and leave the borrower with no way out, fall squarely under this category of lopsided contracts that are ripe for challenge.
It’s not just Texas law that can be used in these cases—federal law plays a crucial role too. The Truth in Lending Act (TILA), which is a federal law designed to ensure transparency and fairness in lending agreements, requires lenders to provide clear and transparent disclosure of all the terms in lending agreements, and while MCA lenders argue that they’re not subject to TILA because their advances aren’t technically loans, some courts have disagreed and found that the lack of transparency violates federal law.
In Oregon (yes, we’ve helped clients in other states too), the courts are cracking down hard on MCA agreements. ORS 646A.295, a state rule about unfair trade practices, can be used to challenge MCAs that misrepresent the true cost of borrowing and hide the real interest rate behind technical jargon. Or take New York law, for example. NY General Obligations Law § 5-501, which limits the amount of interest that can be charged on loans, makes it illegal to charge more than 16% interest in New York, and when we argue that an MCA agreement violates this law by charging interest rates that far exceed this limit, lenders don’t have a leg to stand on in New York courts.
Usury laws, which are designed to protect borrowers from outrageously high interest rates, vary from state to state, but the strategy’s the same in every state: we closely examine the excessive fees and interest rates charged by MCA lenders, and we call these fees interest. MCA lenders think they’re invincible because they believe their contracts are ironclad—but when you break down the contract and expose the true nature of the deal, it falls apart under legal examination.
When we took on an El Paso business’s case last year, we argued under § 17.12 of the Texas Deceptive Trade Practices Act that the MCA’s misleading repayment terms, which were hidden in the fine print and not properly explained to the business owner, qualified as fraud under Texas law. The lender, seeing that we had strong legal arguments and the Nelson v. Tech Leasing case to back us up, gave in and agreed to a settlement rather than risk losing in court. Here’s a little insight into how these cases often play out: MCA lenders, despite their aggressive tactics, often don’t want to go to trial. They’d much rather settle once we bring out the legal arguments because they know that if we reach discovery, all of their predatory practices and hidden fees will be laid bare for the court to see.
One of the biggest tricks MCA lenders pull is using confession of judgment clauses in their agreements, which means they can take your assets without even giving you the chance to defend yourself in court. In Texas, however, we can fight back against this trick because state law doesn’t automatically enforce out-of-state judgments, giving us time to challenge the validity of the agreement before the lender can seize assets. Fun fact: under Texas Civil Practice and Remedies Code § 38.001, which allows for the recovery of attorneys’ fees in certain cases, businesses can get back their attorneys’ fees if we win in court, giving MCA clients a powerful bargaining tool and raising the stakes for lenders who might otherwise drag things out in the hope that the business will run out of money before the case is resolved.
I’ve had MCA cases where, even though we didn’t get the entire agreement thrown out, we negotiated down the repayment amount a lot, giving the business owner enough breathing room to keep their doors open and continue operating. Even a partial win, which might not seem like much at first glance, keeps businesses alive and gives them the chance to recover. Every dollar saved in these cases is another day that a business can stay afloat.
“But isn’t there a way to stop these lenders before it gets that bad?” you might ask. Yes, there absolutely is, and in some cases, we can use a temporary restraining order (TRO), which is a court order that temporarily prevents the MCA lender from taking money out of the business’s account, to stop MCA lenders from draining a business’s funds while the case is ongoing, giving the business owner time to fight back in court.