Phoenix MCA Defense Lawyers
Let’s talk Phoenix MCA Defense Lawyers, because if you’re a small business owner, there’s a high chance that at some point, either directly or indirectly, you’ve encountered or heard of Merchant Cash Advances (MCAs), which may have seemed like a solution to a cash flow problem but, in reality, are just financial traps. These traps are cleverly designed legal maneuvers disguised as assistance, when in fact, they are predatory debt machines set up with the sole intention of destroying you financially.
What I’ve learned from representing so many business owners who have been blindsided by these agreements is this: MCA lenders, whether they present themselves as your savior or a last resort, are nothing more than predators. Their entire business model revolves around burying you in debt with unfair terms you may not have realized you were agreeing to until it’s too late, and they’re already taking money out of your account every day. I’ve helped save businesses from the brink of financial ruin many times.
MCA Lenders Exploit Weaknesses in Laws
MCA lenders aren’t regulated like traditional banks, which have to follow consumer protection regulations. Instead, MCA lenders exploit Uniform Commercial Code (UCC) laws, using vague or weak areas to their advantage, twisting legal loopholes to wring every penny out of business owners, leaving them in financial devastation.
Let’s get one thing clear: An MCA is not a loan in the traditional sense. It’s an advance on future sales, where they lend you money now in exchange for a cut of future profits. Yet, they still attach usury-level interest rates. In Arizona, state law caps loan interest rates at 10% per year, but MCA lenders dodge that law by claiming their excessive rates are fees for buying future receivables, using legal trickery to exploit you.
Arizona’s Laws and Loopholes
Arizona law is not as strict as it should be with MCAs because lenders claim they aren’t offering loans. They argue that they’re selling financial products, exempting them from Arizona’s usury law restrictions. MCA contracts are designed to avoid the laws, but they’re simply playing with words.
But here’s where we step in: If MCA lenders exploit this loophole, we can argue these advances are nothing more than disguised loans. In Cohen v. Chase Mortgage, the court determined that if a financial agreement looks, operates, and functions like a loan, then it’s a loan, and usury laws must apply.
Unfair MCA Terms Harm Business Cash Flow
In an MCA contract, if your sales drop—whether from a slow season, market conditions, or something beyond your control—the lender still expects daily payments, which can be disastrous for your cash flow. Instead of using your sales for operating costs, you’re forced to give that money to the MCA lender.
We use an unconscionability defense to attack these excessively one-sided terms. Under Arizona contract law, when a contract is unfair, the court can void the terms. One of the sneakiest tactics lenders use is the Automatic Debit Agreement, allowing them to take money from your bank account daily. Arizona Statute ARS § 47-9604 regulates the use of secured property, including funds, and we can argue that MCA’s automatic withdrawals misuse secured property.
Arizona’s Consumer Protection Laws and MCA Deceptive Practices
We can also look at New York v. Richmond Capital Group, where a New York court ruled against a predatory MCA lender for deceptive practices. This ruling has impacted cases nationwide, including Arizona, where we can argue that MCA’s practices violate Arizona’s consumer protection laws.
Arizona’s ARS § 44-1522, the Arizona Consumer Fraud Act, allows us to argue that MCA lenders misrepresented their product, making you believe it was a receivable purchase when it was a loan in disguise, harming you financially.
Substance Over Form
Courts are increasingly seeing through MCA’s “it’s not a loan” defense. In LDP Enterprises v. CreditCash (California), the court recognized that substance over form matters. Even if a contract says “sale of future receivables,” if it looks, operates, and behaves like a loan, it’s a loan.
Let’s talk about personal guarantees, a dangerous trap in MCA contracts. These guarantees mean your personal assets—everything you own, including your house, car, and savings—are on the line, not just your business’s assets. Under Arizona’s limited liability company laws, business owners are typically protected, but MCA lenders strip away those protections. In these cases, we argue duress, meaning you had no choice but to sign because of the desperate situation.
Confessions of Judgment
MCA lenders also include confessions of judgment in their contracts, meaning if you default, you lose the case in court without a trial. Arizona doesn’t automatically enforce confessions of judgment, but lenders try to sneak them into contracts, hoping you won’t realize. ARS § 12-1584 helps us fight any attempt to enforce these in Arizona.
Stacking MCAs and Unjust Enrichment
Another tactic lenders use is stacking multiple MCAs, ensuring you’ll default because no business can survive under several high-interest advances. Arizona law allows us to argue that this creates unjust enrichment for the lender, and we’ll hammer this point in court.
In some cases, we use a fraudulent inducement defense, arguing that the MCA lender made false promises during contract negotiations. ARS § 44-1991 covers securities fraud, and if we show the lender’s misrepresentation, it opens another attack angle.