Getting Legal Help for Iowa Merchant Cash Advance Issues
Running a small business in Iowa can be extremely rewarding, but it also comes with financial challenges. If you’ve taken out a merchant cash advance to help cover costs, you may run into issues with high repayment rates or unfavorable terms. The good news? There are attorneys who can help.At Delancey Street, we specialize in helping business owners in debt. We’re not a law firm ourselves, but we partner with experienced attorneys to offer legal help as part of our financial services. Here’s an overview of common merchant cash advance issues in Iowa, plus how our legal team can assist:
Understanding Merchant Cash Advances in Iowa
A merchant cash advance (MCA) isn’t technically a loan under Iowa law. Instead, MCA companies provide you an upfront sum in exchange for a percentage of your future credit card and debit card sales over a set period of time.There are pros and cons to merchant cash advances:Pros:
-- Fast approval and funding
- Flexible underwriting compared to bank loans
- No collateral required
Cons:
- Very high effective interest rates
- Daily/weekly repayment that can strain cash flow
- Aggressive collection tactics
Unlike loans, MCAs aren’t subject to usury laws capping interest rates. Some MCA companies charge over 100% APR when fees and payback totals are calculated.This lack of regulation allows predatory behavior that catches business owners off guard. Many Iowa merchants struggle with MCA debt and don’t know their legal options.
Common MCA Issues in Iowa
There are a few common issues Iowa business owners face with merchant cash advances:
1. Deceptively High Effective Interest Rates
Some MCA companies downplay or misrepresent the actual cost of financing. Documentation may list the advance as a flat fee. But when you calculate the total fees and daily repayment percentage over the payback period, the annualized rate is outrageously high.
-2. Aggressive Collections and Harassment
Merchant cash advance companies can debit a percentage of sales directly from your bank account daily or weekly. Some use aggressive tactics like calling multiple times a day to collect payments. They may also contact your customers about unpaid balances.
3. Violations of Truth in Lending Act (TILA)
TILA requires lenders clearly disclose costs like APR. Since MCAs technically aren’t loans, companies exploit this loophole and avoid transparency. But courts increasingly rule this violates the spirit of consumer protection laws.
4. Breach of Contract
Review MCA contracts carefully before signing. Some include unreasonable terms that are ultimately unenforceable. For example, non-compete clauses restricting your ability to get financing elsewhere.
Legal Defenses Against Merchant Cash Advance Companies
If you’re facing issues with an MCA provider, don’t panic. There are potential defenses based on violations of state and federal consumer laws. An attorney experienced with MCA cases can help you identify and assert these defenses to fight back against harassment, invalidate debts, or get unfavorable contracts thrown out.
Unconscionability
If an MCA contract contains unreasonably unfair terms that shock the conscience of the court, a judge may rule it unenforceable. This depends on factors like:
-- Your sophistication/bargaining power vs the MCA company’s
- Whether terms were clearly disclosed
- Overall one-sidedness hurting you
Usury
Though Iowa ended interest rate caps on loans in 1981, courts still consider rates relevant for unconscionability arguments. Plus rates above 35% can justify invalidating debts under the Uniform Commercial Code.
RICO Claims
The Racketeer Influenced and Corrupt Organizations Act allows civil lawsuits against those engaged in extortion. This could apply to MCA companies using illegal pressure and harassment in collections.
Violations of Fair Debt Collections Practices Act
When MCA providers engage in overly aggressive collections like calling excessively, contacting third parties about debts, or making false statements there may be FDCPA violations. Each can warrant $1,000+ in statutory damages.
-How Our Attorneys Can Help
At Delancey Street, our debt relief services for business owners include legal assistance from vetted attorneys. We take a customized approach, assessing your situation to build the strongest case.Potential ways our legal team can help Iowa merchants fight back against merchant cash advance issues include:
- Reviewing contracts for unconscionable terms and TILA compliance issues
- Disputing debts with MCA companies directly
- Sending cease and desist notices to stop harassment
- Negotiating settlements to reduce balances
- Filing lawsuits asserting violations of state/federal law
- Defending against lawsuits from MCA companies
We also help with practical steps like improving cash flow to stay current on debts and rebuilding credit. Our goal is equipping you with financial freedom and healthy banking relationships again.Every client gets personalized attention from our legal team and financial experts. We have an easy sign up process online or by phone. All initial consultations are free.Don’t keep struggling with merchant cash advance debt in silence. You have rights and legal defenses available. Contact Delancey Street today to explore options for getting relief.