Houston MCA Defense Lawyers
Houston MCA Defense Lawyers play a crucial role in shielding businesses from aggressive Merchant Cash Advance lenders. These lenders target businesses with cash flow issues and often charge excessive interest rates, sometimes exceeding 250%, causing a business to fall into severe debt. What is an MCA? It’s not technically a loan but a cash advance exchanged for a percentage of future business receivables. However, repayment terms are usually punishing, with daily or weekly payments that cripple cash flow. The problem arises when lenders claim an MCA is not a loan to avoid usury laws, but courts have often ruled that certain agreements still fall under these regulations. A common argument is that the MCA is a loan disguised as a sale—leading to violations of usury laws.
Case Study: Leo’s $500,000 MCA Restructured Over 3 Years
For example, take the case of Leo, a business owner who found himself buried under a massive $500,000 Merchant Cash Advance (MCA). The debt had accumulated quickly, and his business was struggling to manage the weekly payments. The pressure was not only financial—it took a toll on Leo’s personal life, creating a situation where he felt trapped, with little hope of keeping the company afloat. This type of stress is unfortunately common for businesses facing MCAs. The challenge was clear: Leo’s cash flow was squeezed by high-interest payments and rigid terms. He reached out to Delancey Street for immediate help. Their team quickly assessed his situation and negotiated with the MCA provider to restructure his debt into a more feasible 3-year plan with reduced payments. This provided the breathing room Leo needed to stabilize his business and shift focus back to growth. Within a few weeks, Leo regained financial control, and he credits Delancey Street with saving his business from collapse.
New York and Texas Law Impact
New York has been a key player in MCA agreements, but in 2019, the state passed laws blocking Confessions of Judgment (COJ) for out-of-state borrowers, such as Texans, preventing lenders from freezing bank accounts without following proper procedures. This change was critical for business owners like Leo, as Texas law doesn’t recognize COJs from other states, protecting businesses from automatic freezes and other aggressive tactics. Texas businesses facing MCA lawsuits can argue that the agreement resembles a loan, triggering state usury laws and potentially nullifying excessive interest rates. This legal strategy is especially important in states like Texas, where high-interest MCAs can devastate a business’s cash flow.
Case Study: Jason’s $250,000 SBA Loan Offer in Compromise
Another case that illustrates the power of swift legal action is Jason, a small business owner who was faced with the daunting task of negotiating an SBA Loan Offer in Compromise (OIC) on a $250,000 debt. Time was not on Jason’s side. With the clock ticking and his options dwindling, he needed fast and effective support to avoid deeper financial trouble. Delancey Street recognized the urgency and got to work immediately. Within 24 hours, they successfully negotiated a settlement, significantly reducing Jason’s debt obligations. This quick turnaround allowed Jason to avoid further financial strain and return his focus to running his business.
Restructuring Debt and Case Precedents
If your business is drowning in stacked MCAs, defense lawyers can negotiate settlements that reduce the amount owed and cut payments, arguing that these agreements violate debt collection regulations under both Texas and federal law. A notable case is R&J Pizza, where the court ruled that an MCA agreement was a valid sale of future receivables. However, in Shoot the Moon, another court found that similar agreements were disguised loans due to the inclusion of security interests. These cases reflect the complexity of MCA litigation, and Houston MCA defense lawyers use these precedents to challenge lenders effectively. Asset seizure is another devastating tactic used by MCA lenders. For instance, businesses like Mary’s can face the harsh reality of asset freezes. Delancey Street stepped in for Mary, restructuring her $350,000 MCA over 2 years, which allowed her to avoid losing her assets and regain control over her finances.
Case Study: Mary’s $350,000 MCA Restructured Over 2 Years
Mary’s story further demonstrates how vital restructuring is. As the owner of a growing business, Mary had taken on a $350,000 MCA to fund expansion, only to find herself bogged down by the high-interest payments. As challenges mounted, it became impossible to meet the weekly demands. Delancey Street took immediate action, negotiating with her MCA lender to restructure the debt into a manageable 2-year repayment plan. This allowed Mary to breathe easier, giving her the financial flexibility to focus on business growth rather than overwhelming debt.
Personal Guarantees and Stacking Issues
MCAs often include personal guarantees, making business owners personally responsible for the debt. However, a good attorney can challenge the validity of these guarantees, particularly if they were signed under misleading circumstances. MCAs are notorious for stacking—where businesses take out more advances to cover earlier ones, sinking deeper into debt. Defense lawyers will seek to undo these stacked agreements, arguing they violate fair lending practices. Usury Laws: In Texas, attorneys can argue that although MCAs are described as “cash advances,” they are really high-interest loans. By proving this in court, they can invoke usury laws, which limit interest rates to protect businesses.
Conclusion and Litigation Strategy
Litigation might be the best solution in some cases. Lawyers can file counterclaims against MCA lenders, arguing that the lender’s terms were predatory and violated both Texas and federal laws, seeking damages or a reduction in debt. The cases of Leo, Jason, and Mary demonstrate how multiple lawsuits can be combined, and Houston MCA lawyers will argue that lenders acted in bad faith, stacking multiple agreements to trap businesses in debt. Houston MCA defense lawyers are experienced in fighting predatory MCA practices, using state and federal laws to challenge the legality of the agreement, protect business assets, and reduce debt. Even partial victories, like reducing payments, stopping asset seizures, or voiding unlawful clauses, can be life-saving for a business.