Colorado Merchant Cash Advance Legal Help – Attorneys, Debt Settlement
Merchant cash advances can be a helpful source of funding for Colorado small businesses, but they also come with legal risks. If your business has fallen behind on payments or gotten into other legal issues with a merchant cash advance provider, you may need legal help to resolve the situation. This article provides an overview of merchant cash advance laws in Colorado and how an attorney can assist.
How Merchant Cash Advances Work
A merchant cash advance (MCA) provides a business with an upfront sum of money in exchange for a percentage of future credit card sales. It is not technically considered a loan under Colorado law, so MCA companies can bypass state lending regulations. However, MCAs do carry very high equivalent interest rates often exceeding 100% APR.With an MCA, the business agrees to pay back the advance in daily or weekly installments until the full amount plus fees and interest have been repaid. These payments are taken automatically as a percentage, usually 10-20%, of daily credit card receipts. There is often no fixed payback period.
-Common Legal Issues with Merchant Cash Advances
While MCAs provide fast access to capital, they also come with a range of potential legal issues including:
- Falling behind on payments – If business revenues drop, it can quickly become impossible to keep up with MCA payments. However, failure to pay constitutes breach of contract. The MCA company may slap late fees on the account, freeze the business bank account, or take other aggressive collection actions.
- Deceptive sales tactics – Some MCA brokers use high-pressure and deceptive tactics to sign small businesses up for these products without fully explaining the repayment terms or extremely high cost over time. This can be grounds for a legal dispute or settlement.
- Excessively high payments – The payments extracted by MCA companies can end up exceeding reasonable usury limits under Colorado law. Attorneys can assist in disputes over unfair or exploitative MCA repayment terms.
- Violations of lending laws – There is still debate around whether MCAs constitute loans or lie outside of lending regulations. Unscrupulous providers may fail to comply with disclosure requirements or structuring regulations that do apply.
- Bankruptcy and debt settlement – An MCA debt can force a business into bankruptcy. Colorado bankruptcy attorneys and debt settlement lawyers can advise on options to discharge all or part of an overwhelming MCA debt.
Colorado MCA Laws and Regulations
Colorado has laws on lending and consumer finance that may apply to merchant cash advances in some situations:
- Usury limits – The state constitution imposes a 45% interest rate ceiling on loans under $1,000. MCA companies attempt to skirt this by structuring advances as purchases of future receivables rather than loans. But in practice, the equivalent rates often far exceed 45%.
- Uniform Consumer Credit Code (UCCC) – This code requires lenders to provide disclosures on rates and repayment terms. If MCAs fall under the definition of loans, these disclosures may be required.
- Uniform Commercial Code (UCC) – The UCC in Colorado governs contracts for the sale of goods and services. MCA agreements to purchase future credit card receivables may fall under these general contract regulations.
- Unfair practices laws – Even if not defined as loans, MCAs may still be subject to laws barring deceptive, unfair, or abusive business practices. These include the Colorado Consumer Protection Act.
So far, Colorado legislators and courts have not taken much action to regulate merchant cash advances. But legal experts advise businesses to proceed with caution, as aggressive collection actions could still spur litigation.
Working With a Colorado MCA Attorney
If your small business has run into issues with repaying a merchant cash advance, the first step is to consult with a lawyer experienced in this unique area. An attorney can advise you on rights and options under Colorado laws, and the best strategies for negotiating, settling the debt, or seeking damages for any unlawful actions by the MCA company. Services a Colorado MCA lawyer provides typically include:
-- Contract review – Carefully examining the MCA agreement to spot any provisions that may be unlawful under Colorado statutes.
- Settlement negotiations – Negotiating with the MCA provider to reduce payments to affordable levels, waive fees, or reach a lump sum settlement.
- Litigation for violations – Filing a lawsuit on grounds such as deceptive marketing, failure to disclose terms, usury violations, etc. Damages or contract voidance may be pursued.
- Bankruptcy/debt relief – Helping file for Chapter 7 or Chapter 11 business bankruptcy to discharge all or part of the MCA debt, stop collections, and implement a payment plan. Consulting on debt settlement as an alternative.
- Defense in collections lawsuits – Defending the business if the MCA company files a breach of contract lawsuit over non-payment of the advance. Various defenses can be raised over the lawfulness of the agreement.
Reputable Colorado attorneys can provide honest assessments of whether litigation against an MCA provider is likely to succeed. In many cases, negotiation and settlement may be faster and more cost-effective than lengthy court battles. But for egregious cases or contract violations, lawsuits are warranted.
Finding Top Merchant Cash Advance Attorneys in Colorado
Choosing the right lawyer is critical when dealing with complex MCA legal matters and aggressive collections companies. Warning signs of an inexperienced attorney include guarantees of specific outcomes and requests to pay all fees upfront. Consider these tips when selecting a qualified Colorado MCA lawyer:
- Check credentials – Search for lawyers with experience specifically fighting merchant cash advance cases in Colorado courts. Confirm proper licensing and a clean disciplinary record.
- Ask about track record – Inquire about the firm’s past cases similar to yours, and their typical success rate. Check reviews from clients online.
- Meet for initial consultation – Schedule an exploratory meeting to discuss your situation. A competent attorney will ask questions, explain options, and provide honest opinions.
- Compare fee structures – Legal fees should largely be contingent on favorable case results, not hourly billing. This aligns incentives toward effective settlement or litigation.
- Search lawyer directories – Consult merchant cash advance attorney directories on sites like Avvo, Nolo, or Lawyers.com.
With an experienced MCA lawyer negotiating on your behalf, it is possible to settle debts at a fraction of the balance, enter an affordable payment plan, or in some cases legally invalidate the entire agreement. This can provide relief from aggressive collections and predatory MCA terms and fees. Most reputable attorneys offer free case evaluations and outline the game plan for defending against unlawful MCA actions.
About Delancey Street
Here at Delancey Street, our Colorado debt relief team has extensive experience assisting small business owners who have gotten trapped in predatory merchant cash advance arrangements. We fight to reduce or eliminate these debts so you can get out from under crushing payments and move your business forward.Our network of attorneys, negotiators and financial experts will thoroughly analyze your MCA agreement, identify any violations of Colorado laws, and build a strong case for settlement or lawsuit with the collections company. We have a proven track record making these companies back down from unlawful collections practices.In addition, we will consult with you on options for restructuring existing business debt or acquiring alternative financing on reasonable terms so you can rebuild your credit, avoid bankruptcy, and achieve lasting financial stability.For a free consultation with a member of our Colorado MCA legal team, <a href=”https://www.delanceystreet.com/”>contact Delancey Street</a> today. Our goal is always to secure the maximum relief and best possible outcome for small businesses facing legal action from merchant cash advance providers.I hope this overview has provided useful information on merchant cash advance regulations in Colorado and where to turn for legal help if your business is struggling with MCA debt. Please reach out if you need any assistance pursuing settlement, voiding contracts, or defending against predatory collections lawsuits. Our team is here to fight for small business rights when shady merchant cash advance companies attempt to extort payments beyond legal limits.