Maryland MCA Defense Lawyers
In the complex field of business financing, merchant cash advances (MCAs) have become a perilous option that many Maryland business owners have unfortunately encountered; it is now more important than ever that we thoroughly explore the legal defenses available under Maryland state law to protect your valuable business interests, financial stability, and future prosperity.
Having devoted my entire legal career to passionately defending entrepreneurs, small business owners, and hardworking individuals from the predatory practices of MCA lenders—whom I firmly believe exploit our business community—I have witnessed the devastating impact that these unfair agreements can impose on otherwise thriving businesses; and I believe that it is important for you to understand how we can effectively combat these injustices through legal means and the application of relevant laws and precedents.
Challenging Exorbitant Interest Rates under Maryland Usury Statute
Maryland state law, specifically the Maryland Usury Statute (§12-101 et seq., Commercial Law Article), plays an important role in challenging the exorbitant interest rates embedded within MCA agreements. These agreements are often structured to disguise true interest rates, and by invoking the Usury Statute, we can address these unfair lending practices. The statute establishes caps on permissible interest rates to prevent lenders from exploiting borrowers; this is important because many MCA agreements charge rates that far exceed these legal limits, thereby violating the statute and opening the door for legal challenges.
A critical defense strategy involves demonstrating that an MCA is, in substance, a loan rather than a true sale of future receivables; by recharacterizing the transaction, we can apply usury laws like Maryland’s to challenge the agreement’s validity. The distinction between a loan and a true sale is important because, under Maryland law, loans are subject to strict regulations on interest rates and lending practices; these regulations can render the predatory terms commonly found in MCA agreements illegal and unenforceable, providing a strong legal basis to challenge such oppressive agreements.
Using the Maryland Consumer Protection Act
Another powerful defense arises under the Maryland Consumer Protection Act (§13-101 et seq., Commercial Law Article), which prohibits unfair, deceptive, and abusive trade practices, including those by MCA lenders. By demonstrating that MCA lenders engaged in misleading or fraudulent practices—such as failing to disclose critical terms or misrepresenting the nature of the agreement—we can use the protections afforded by the Act to invalidate onerous agreements and seek remedies for the harm caused to your business.
Applying the Federal Truth in Lending Act
Additionally, the Federal Truth in Lending Act (15 U.S.C. §1601 et seq.) may apply if the MCA is recharacterized as a loan, requiring full disclosure of all finance charges, interest rates, and terms, which many MCA agreements fail to provide. Failure to comply with the disclosure requirements mandated by the Act can result in severe penalties and legal consequences for lenders, strengthening the defense for Maryland businesses ensnared by predatory MCA terms.
Violations of the Fair Debt Collection Practices Act
I’ve encountered cases where aggressive and unethical collection practices by MCA lenders violated the Fair Debt Collection Practices Act (15 U.S.C. §1692 et seq.), opening another avenue for defense. The Act prohibits abusive, deceptive, and unfair debt collection practices; when MCA lenders overstep legal boundaries by engaging in harassment, threats, or misinformation, they expose themselves to legal repercussions and liability for damages.
Challenging MCA Provisions under the Uniform Commercial Code
In addition, the Uniform Commercial Code (UCC), adopted by Maryland to govern commercial transactions, can be instrumental in challenging the enforceability of certain MCA provisions. Under UCC Article 9, if an MCA is deemed to create a security interest rather than a true sale, lenders must comply with strict requirements regarding attachment, perfection, and enforcement of security interests; failure to do so can invalidate their claims against the borrower’s assets, providing a defense to protect your business property.
Scrutinizing Confession of Judgment Clauses
It’s important to scrutinize the confession of judgment clauses often buried within MCA contracts, which in Maryland are heavily regulated under Maryland Rule 2-611. The rule mandates that any confession of judgment must be accompanied by an affidavit and specific disclosures, making sure that the debtor is aware of the rights being waived; non-compliance with these requirements can render the judgment void and subject to being overturned. By examining these clauses and making sure they meet all legal requirements, we can often overturn unjust judgments entered without the business owner’s knowledge or consent, restoring your legal rights.
Analyzing for Unconscionable Terms
Another tactic involves analyzing the MCA agreement for unconscionable terms, which under Maryland law can render a contract or specific provisions unenforceable due to being excessively unfair or one-sided. Unconscionability arises when the terms are so oppressive that they shock the conscience, such as imposing exorbitant fees or repayment schedules that are impossible to meet; courts in Maryland have the authority to modify or void such agreements, providing relief to affected business owners. I recall a case where an MCA agreement imposed daily repayments that exceeded the business’s cash flow, which we argued was unconscionable; we successfully had the terms revised, easing the financial burden on the client and saving the business from collapse.
Asserting the Doctrine of Good Faith and Fair Dealing
In addition, the doctrine of good faith and fair dealing, which is implied in all Maryland contracts, requires parties to act honestly and not undermine the contract’s purpose or the other party’s rights. If an MCA lender acts in bad faith—such as manipulating debit amounts or interfering with business operations—we can assert this doctrine to challenge their actions, seek remedies, and potentially have the unfair provisions invalidated or the entire contract rescinded.
Examining Lender Licensing Requirements
It’s important to examine the licensing status of MCA lenders, as unlicensed lending can violate Maryland’s lending statutes, potentially nullifying the agreement and exposing the lender to legal penalties. Under Maryland law, specifically the Maryland Consumer Loan Law (§12-301 et seq., Commercial Law Article), lenders engaging in consumer loans must obtain a proper license; operating without one can lead to the forfeiture of principal and interest, fines, and other sanctions. By identifying unlicensed lending activity, we can use this violation to protect your business and potentially eliminate the debt obligation.
Invoking the RICO Act
In defending Maryland businesses, we also explore potential violations of federal laws like the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. §§1961–1968), known as RICO, when MCA lenders engage in systematic fraudulent activities or other criminal behaviors. RICO provides for civil remedies against entities that participate in a pattern of racketeering activity—which can include fraud and extortion tactics employed by some predatory MCA lenders—allowing affected businesses to seek substantial damages. By invoking RICO, we not only challenge the MCA agreement but also seek treble damages (three times the actual damages), greatly increasing the potential recovery for the affected business and sending a strong message against such unlawful conduct.
Our Mission to Protect Maryland Businesses
It’s been my unwavering mission to arm Maryland business owners with the knowledge, legal strategies, and representation necessary to combat predatory MCA lenders and safeguard their livelihoods and hard-earned successes. Through comprehensive legal analysis, thorough examination of contracts, and aggressive defense tactics, we aim to neutralize unjust MCA agreements and set precedents that deter such predatory practices in the future, protecting other businesses from falling into the same traps. If you’re a Maryland business owner struggling under the weight of an MCA, know that there are strong legal defenses available; with the right approach and legal support, we can work tirelessly towards freeing your business from these burdens, restoring your financial stability, and ensuring a brighter future.