Vermont MCA Defense Lawyers
Vermont business owners, especially those who are small or family-owned, face a critical and often life-altering need for protection from predatory MCA lenders, who, in my view, act in ways that are harmful, unethical, and financially devastating for hardworking entrepreneurs who just want to keep their business afloat and provide for their families. The merchant cash advance (MCA) industry, which I believe thrives on the financial desperation and vulnerability of struggling businesses, often presents itself as a quick fix but is more like a trap that pulls business owners deeper into debt. Vermont’s unique laws, which have been carefully designed to protect consumers and small businesses, offer real hope for defense against these predatory lenders. However, you’ll need an experienced lawyer who is well-versed in Vermont’s legal landscape and understands every single nuance of these specific laws, regulations, and precedents that are relevant to defending you against MCA claims.
Challenging MCA Legality: Usury and Contracts
One of the first critical things any skilled and experienced defense attorney will challenge in Vermont is the legality of the MCA’s terms, which often include sky-high interest rates and other terms designed to be unfair and to trap the business owner in a cycle of debt that is impossible to escape. In Vermont, usury laws, specifically (9 V.S.A. § 41a), regulate interest rates, setting a cap on how much interest a lender can charge to protect borrowers from excessively high rates that could bankrupt them. MCA lenders often attempt to sidestep this critical and protective law by calling their advances “sales” of future receivables rather than loans. However, courts, both in Vermont and across other states, are becoming wise to these schemes, recognizing them as attempts to evade consumer protection laws, and are starting to strike down these agreements as illegal. Usury laws matter so much to business owners because they limit the amount of interest that can be charged on a loan, and we can argue that MCAs are effectively loans, even though they claim to be something else entirely. MCAs claim they aren’t loans but “advances” on future receivables, meaning they cleverly attempt to dodge the rules and avoid falling under loan regulation, but a good lawyer will use Vermont’s precedent in Arnold v. Lifemark to argue that these agreements are loans in disguise and should be subject to usury laws.
In Vermont, there’s also the Consumer Protection Act, under (9 V.S.A. § 2453), which is a powerful tool in our legal arsenal that prohibits unfair and deceptive trade practices, making it illegal for companies to deceive or mislead consumers, and MCA lenders often misrepresent the terms of their agreements. These agreements are often filled with small print, confusing language, and terms that are buried deep within the contract, but with the Consumer Protection Act, we can argue that the MCA lenders engaged in deceptive practices, which would make the agreement void or unenforceable. Now, let’s consider what happens if your business signed an MCA agreement under duress—this is when you were forced into signing because of unfair pressure or threats from the lender. Vermont courts take claims of duress very seriously, and if a business owner was pressured, misled, or given a take-it-or-leave-it deal, attorneys can argue that the contract isn’t enforceable under Vermont contract law, which requires agreements to be entered into freely and voluntarily. Even getting a court to agree that the contract was signed under duress is a partial victory because it may result in the contract being voided or significantly altered to be fairer to you.
Confessions of Judgment and UCC Filings
Confessions of judgment (COJ), which are provisions in many MCA agreements that allow the lender to skip the court process entirely and obtain a judgment against you without a trial if you default, are especially dangerous and predatory. Thankfully, in Vermont, this predatory tool is not enforceable at all, as per (12 V.S.A. § 2201), which makes it a significant win for businesses that were pushed into signing agreements containing these harmful clauses. The Vermont Supreme Court has not specifically addressed MCA issues directly yet, but we can look to similar cases in neighboring states like New York and Massachusetts for guidance and strategies. For instance, we’ve seen courts in New York rule in cases like Platinum Rapid Funding v. H D Wesselman that MCA agreements with terms that are deemed unreasonable or overly harsh can be voided, meaning the entire contract could be thrown out, which is a huge relief for businesses caught in these traps. Vermont’s courts would likely follow similar reasoning, particularly when it comes to the issue of unconscionability—a legal concept that means if the agreement was wildly unfair, oppressive, or one-sided at the time it was signed, it might not stand up in court. And that’s exactly the kind of legal detail and nuance that an experienced MCA defense lawyer focuses on to win the case.
UCC filings also come into play in these types of cases. MCA lenders often slap a UCC-1 lien on your business, which allows them to seize your property or assets if you default, but under Vermont law, if these liens were filed improperly or without the correct disclosures, we can argue that the lien should be removed. It’s about using every tiny detail of the law to push back against these lenders. UCC filings matter because they put a lien on your business assets—essentially locking up your property and preventing you from selling or using it—so it’s a big deal. Vermont law demands clarity and transparency in these filings, and many MCA lenders fail to properly follow the strict filing requirements, which gives us grounds to move to have these liens dismissed based on improper filing procedures.
Deceptive Practices and Bad-Faith Contracts
Here’s a personal insight I’ve gathered over the years: I’ve seen countless business owners, often family-owned or small operations, whose backs were against the wall, who felt they had absolutely no choice but to sign MCA agreements to keep their doors open and their employees paid. But with the right legal help and support, many of these same business owners have had their cases dismissed entirely or have been able to heavily renegotiate the terms of their agreements, proving that there’s always hope, even when it seems like you’re out of options. Sometimes, MCAs operate through brokers, which creates an entirely new set of legal challenges and complications. In Vermont, brokered agreements might have additional layers of liability, and attorneys will investigate whether brokers violated any fiduciary duties or misrepresented the terms of the agreement when they were signed.
We’ve already discussed how Vermont courts view claims of duress and unconscionability in contracts, but did you know that Vermont has some of the strictest laws on contract transparency? These laws require that contracts be clear, fair, and understandable, which is something that many MCA lenders fail to comply with. Lenders who fail to clearly outline all terms could face serious legal repercussions under Vermont’s consumer protection laws. For example, Vermont law, specifically (9 V.S.A. § 2453b), requires transparent and honest communication in financial agreements. We’ll argue that MCA lenders often hide behind vague and confusing language, burying crucial terms deep within the contract’s dense fine print, which violates your rights as a business owner and renders the agreement potentially unenforceable.
Fraudulent Inducement and Bankruptcy Protections
Another key defense we can raise is proving that the MCA provider failed to act in good faith. Vermont’s contract law, under (9 V.S.A. § 2453c), holds lenders accountable if they act deceptively or in bad faith, such as coercing small businesses into signing agreements that they know full well the business owner will not be able to fulfill. And believe me, I’ve seen that happen far too often in cases where business owners were desperate for capital and were taken advantage of by lenders who had no intention of helping them succeed.
Let’s not forget fraudulent inducement, which is when the lender makes promises or representations to get you to sign the contract, knowing full well they will not keep those promises. MCA lenders are notorious for making promises that they later break. We’ll argue that your business was tricked into the agreement, using Vermont case law like Langlois v. Wolff to prove that the contract was founded on fraud and misrepresentation. Fraudulent inducement can be tricky because, under Vermont law, you have to show that the lender had intent—that is, that they knowingly misled you into signing the agreement. But experienced MCA defense lawyers are experts at gathering the documentation, emails, and other evidence needed to prove this in Vermont courts.
If your business is in such financial trouble that it’s close to or already filing for bankruptcy, Vermont bankruptcy laws can provide some relief and may even help you get out from under your MCA debt. While bankruptcy won’t always eliminate MCA debt, an attorney can argue that the MCA debt is unsecured or unenforceable, especially if the agreement was fraudulent or unfair. This could give you breathing room to restructure your business and negotiate with lenders from a position of strength. Bankruptcy courts may also look at fraudulent agreements with a particularly critical eye, meaning the MCA debt could potentially be reduced or discharged altogether.
Vermont Department of Financial Regulation and Settlements
Speaking of bankruptcy, Vermont’s Chapter 11 protections for businesses, which allow businesses to reorganize and settle debts while continuing to operate, could give you the time you need to renegotiate your MCA debts in a way that works for you. We can help businesses file motions to reclassify MCA debts, giving you more leverage in negotiations with lenders, which could result in better terms or a reduction in the total amount owed. Vermont’s Department of Financial Regulation (DFR), which regulates financial services and products within the state, keeps a close eye on MCA lenders operating within Vermont to ensure they comply with state laws and regulations. If an MCA lender has violated any state laws or engaged in predatory lending practices, we’ll use that information to bolster your defense, and we’ll argue for penalties or even dismissal of the entire case. This oversight from the DFR is a powerful tool in protecting business owners from unethical and illegal practices by MCA lenders.
If you’re worried about the possibility of going to court and the stress that comes with a trial, remember: many MCA cases are settled long before they ever see the inside of a courtroom. Vermont MCA defense lawyers know how to push for settlements that are far more favorable to your business, whether it’s by reducing the total amount owed, renegotiating payment terms, or eliminating your obligations altogether. A partial victory—such as getting the debt reduced or extending the payment period—can still be a win because it gives your business the chance to stay afloat.