Merchant cash advances (MCAs) can provide quick funding for small businesses, but they also come with risks. If your Illinois business took out an MCA and is now facing legal issues, you may need legal help. This article covers common legal issues with merchant cash advances in Illinois and how attorneys can assist.
Understanding Merchant Cash Advances
A merchant cash advance provides a business with a lump sum of cash in exchange for a percentage of future credit card sales. It’s not technically a loan, so MCA companies can bypass state lending laws.But MCAs charge very high effective interest rates, often over 100% APR when fees are included. And their terms are less regulated than loans – so legal disputes frequently arise. Common problems in Illinois include:
-- Excessively high payments or rates
- Issues with contract terms and cancellation
- Harassment from MCA companies trying to collect
- Damage to the business from aggressive collections
If you signed an MCA with unfair terms or predatory rates, or the MCA company is breaking collection laws – legal assistance could be invaluable.
Illinois Laws Related to Merchant Cash Advances
Illinois has laws that regulate lending and debt collection practices. These laws could potentially apply to merchant cash advances in legal disputes:
- Usury laws – Interest rates over 9% may be considered usurious and unenforceable for some contracts in IL. Attorneys can review if this applies.
- Consumer fraud laws – Predatory lending practices may violate IL consumer fraud statutes.
- Debt collection laws – Harassing collections calls or making false statements to collect could break state and federal debt collection laws.
Additionally, the Illinois Predatory Loan Prevention Act regulates some alternative financial products. So aspects may apply to merchant cash advances.
How Can Attorneys Assist with MCA Issues?
If you’re facing legal issues related to a merchant cash advance in Illinois, contacting a lawyer can help in many ways:
-- Review the MCA contract – Attorneys can analyze the terms for prohibited clauses or violations of IL laws.
- Dispute unfair claims – Lawyers can push back against excessive payments demands or predatory collections tactics.
- Explore defenses – Legal teams use defenses like usury laws or fraud claims to entirely invalidate illegal MCA agreements.
- Negotiate settlements – Attorneys negotiate reduced payoff amounts with MCA companies by leveraging legal arguments.
- Defend lawsuits – If an MCA company sues your business, lawyers defend and work to get cases dismissed.
- Stop harassment – Attorneys send cease and desist letters to halt abusive collection calls and threats.
Reputable law firms like Avvo, LawInfo, and FindLaw have attorneys in Illinois experienced with defending all types of lending and debt issues. They offer free consultations to review your situation and legal options.
What Defenses Could Invalidate an Unfair MCA?
If you consult an attorney about an exploitative merchant cash advance agreement, they will analyze possible defenses to fight it. Here are some of the most common MCA defenses used in Illinois:
Unconscionability
- Unconscionable contracts with extremely unfair terms that shock the conscience can potentially be invalidated in Illinois. Attorneys review if MCA agreements meet this standard.
Usury Violations
- As mentioned earlier, interest rates above 9% may violate IL usury laws for some contracts. This threshold is often exceeded with MCAs.
No License
- MCA companies acting as illegal lenders without proper state licensing could have their contracts voided. Lawyers explore this argument.
Misrepresentation
- If an MCA company lied or withheld key info when signing the agreement, fraud defenses can sometimes unwind contracts.
Breach of Contract
- If the MCA provider didn’t uphold their end of the bargain, attorneys can leverage breach of contract defenses.
With an experienced legal team, one or more of these arguments could erase the obligation to repay the merchant cash advance. The success rate depends on the specifics of each case.
What Damages Could You Recover?
Beyond just making unfair MCA debts go away, victims of truly egregious predatory lending could potentially sue for monetary damages in Illinois.If an MCA company broke state lending statutes or used illegal collection tactics, you may be able to recover:
- Refund of all money paid towards the invalid MCA
- Financial losses caused by aggressive collections
- Emotional distress damages
- Punitive damages to punish unlawful conduct
Recovering these types of money damages requires filing a lawsuit and proving violations occurred. Attorneys can advise if damages are feasible for your situation.
-Could Bankruptcy Eliminate MCA Debts?
For some small businesses overwhelmed with merchant cash advance debts, bankruptcy may be an option. Filing Chapter 7 or Chapter 11 can discharge qualifying business debts.But MCA obligations are sometimes considered “advances” against future sales, not conventional loans. So whether they can be eliminated in IL bankruptcy depends on the specifics of each case.An experienced bankruptcy lawyer analyzes the terms to determine if the debts could be discharged. They also handle all aspects of the case so owners can focus on saving their business.
Get Legal Help Defending Against Abusive Merchant Cash Advances
Unscrupulous merchant cash advance companies exploit small businesses with deceptive terms and harassment when they’re vulnerable. But owners facing legal issues are not powerless – skilled attorneys can be invaluable allies.Lawyers in Illinois leverage defenses around usury laws, fraud claims, and licensing violations to entirely invalidate illegal MCA agreements. They also defend against lawsuits and negotiate reduced settlements. Plus help recovering damages when lenders cross the line.So if your business is facing problems with an oppressive merchant cash advance provider in IL, contact a reputable law firm for a free consultation. They review your situation at no charge and outline ways to fight back. With help from a legal professional, you can mitigate the financial harm and get back to growth.