Minnesota Merchant Cash Advance Attorney – Your Guide to Legal Help with MCA Debt
Merchant cash advances (MCAs) have become an increasingly popular form of alternative business financing in recent years. Unlike traditional bank loans, MCAs provide fast access to capital with minimal paperwork required. However, these advances come at a steep price in terms of high fees and aggressive collection practices. If you’re a Minnesota business owner struggling with overwhelming MCA debt, you may be wondering if you need to hire a lawyer. This guide will walk through everything you need to know about working with a Minnesota merchant cash advance attorney.
What is a Merchant Cash Advance?
First, let‘s quickly review what exactly a merchant cash advance is. An MCA provides upfront capital to a business in exchange for a percentage of future credit card and debit card sales. The business agrees to automatic daily or weekly debits from their bank account until the balance is repaid.MCAs are not considered loans, so they avoid most lending regulations. While fast funding is appealing, the repayment process can become unmanageable for some companies. It’s not uncommon for the annualized cost of an MCA to exceed 100% APR when fees and interest are calculated.
-Warning Signs You May Need Legal Help
If you exhibit any of these warning signs, it may be time to consult a merchant cash advance attorney:
- Daily payments are crippling your cash flow
- You’ve fallen behind on payments
- The MCA provider refuses to negotiate repayment terms
- You’re facing threats of a lawsuit or other legal action
- A lien has been placed on your business assets
- Debt collectors are aggressively pursuing payment
Falling into the MCA debt trap can quickly snowball into significant financial and legal issues. An experienced attorney can help protect your rights.
Services an MCA Attorney Can Provide
So what exactly can a merchant cash advance lawyer do for you? Here are some of the key services they provide:
- Review your MCA agreement(s) – Analyze the terms, fees, and fine print to identify any unlawful provisions or deceptive language.
- Dispute unlawful collection practices – If the MCA company has violated debt collection laws, the attorney can send cease and desist notices.
- Negotiate a settlement – Work to negotiate a lump sum discounted payoff amount to resolve what you owe.
- Defend against lawsuits – Legally represent you in court if the MCA provider sues for nonpayment.
- File affirmative claims – Pursue legal action against the MCA company for predatory lending or other violations.
- Deal with UCC liens – Remove any unlawful liens placed on your business assets and property.
- Manage bankruptcy – If necessary, handle the bankruptcy filing process to discharge MCA debts.
Having an experienced lawyer on your side levels the playing field when dealing with aggressive MCA companies.
-Key Questions to Ask a Prospective Attorney
If you decide to pursue legal help, make sure to ask any potential merchant cash advance attorney these key questions:
- Do you have experience dealing specifically with MCA companies?
- What is your success rate negotiating MCA debt settlements?
- What legal defenses can you raise to fight my case?
- What are your fees and how are they structured?
- What is your strategy for achieving the best possible outcome for my situation?
- Can you provide references from past MCA clients?
Vetting lawyers thoroughly on the front end helps avoid putting your case in the wrong hands.
Regulations (or Lack Thereof) Governing MCAs
One of the main sources of issues with merchant cash advances is the general lack of oversight and regulations. Some key legal considerations include:
- No interest rate caps – Unlike loans, there are no usury laws limiting how much MCA providers can charge. This leads to absurdly high equivalent APRs.
- Spotty disclosure requirements – Transparency standards around fees, terms, and conditions vary widely by state. Key details are often obscured in dense contracts.
- Few consumer protections – MCAs sidestep the Truth in Lending Act, Fair Debt Collection Practices Act, and other laws governing financial services.
- Confessions of judgement – Many MCA contracts contain these clauses allowing providers to obtain quick judgements without notice.
- Personal guarantees – Business owners are often required to personally guarantee repayment, leaving personal assets at risk.
While efforts to regulate MCAs are growing, progress remains slow. For now, legal assistance is critical for navigating this “wild west” landscape.
The Danger of Confessions of Judgement
One of the most threatening provisions commonly found in MCA contracts is the confession of judgement (COJ). This clause states that if you default, the provider can obtain a judgement against you without notice or a hearing.Here’s what makes COJs so problematic:
-- You waive your right to argue your side in court. The judgement happens by default.
- The MCA company can immediately seize assets, freeze bank accounts, and garnish wages.
- You’re on the hook for legal fees, interest, and penalties on top of what you already owe.
- COJs bypass state laws requiring lenders to prove breach of contract in court.
- Even if unlawful provisions exist, you’ve agreed not to contest the judgement.
With a COJ in place, MCA providers wield tremendous power to aggressively collect by any means necessary. Your legal options become extremely limited.That’s why it’s absolutely essential to consult an attorney experienced with COJ clauses before signing any MCA contract. They can evaluate if the terms are even enforceable under your state laws.
4 Potential Defenses Against MCA Lawsuits
If you find yourself facing legal action over unpaid MCA debts, working with a qualified lawyer is critical to raise the right defenses. Here are 4 of the most common defenses used:
Unconscionability
Argue the contract terms are unlawfully one-sided and unfair. With minimal regulations, MCA companies often craft agreements that unreasonably favor themselves over the merchant.
-Breach of contract
Allege it was actually the MCA provider who violated the agreement first. For example, if they debited your account improperly or harassed customers about payments.
Fraud
Claim the MCA company engaged in fraudulent behavior, such as misleading you about repayment terms or falsifying information on the application.
Usury law violations
Interest rates and fees exceeded state usury lending limits. While MCAs aren’t loans, this argument has succeeded in some cases.Raising credible defenses requires in-depth legal knowledge and experience. Don‘t leave yourself vulnerable by trying to handle claims alone.
The Pros and Cons of Settling MCA Debt
If struggling to repay your merchant cash advance has become financially unbearable, settling the debt for less than you owe may be an option. Here are some pros and cons to weigh:
Pros
- Resolve the debt for a fraction of the balance
- Avoid risk of judgements, lawsuits, and liens
- Take pressure off struggling cash flow
- Move on from constant collection harassment
- Potentially improve credit standing
Cons
- Settled debt could still appear on credit reports
- Tax liabilities on the forgiven debt
- Lost opportunity for full debt discharge through bankruptcy
- No guarantee the MCA company will accept reasonable terms
- Requires lump sum settlement payment
Ideally you can negotiate a settlement that alleviates the burden while minimizing any lingering impacts. But it requires skillful negotiation and legal expertise.
Finding the Right MCA Attorney for You
By now the importance of enlisting an attorney to address MCA legal matters is clear. But not all lawyers have the same track record and qualifications. Use this checklist when evaluating attorney candidates:
- Do they specialize in MCA debt cases? This should be a significant part of their practice.
- Are they licensed to practice law in your state? State-level expertise is critical.
- What settlement rates and case results can they demonstrate? Ask for examples and client reviews.
- How many years of experience do they have handling MCA-related legal issues? Look for 5+ years minimum.
- Will they personally handle your case? Beware of firms handing you off to inexperienced junior staff.
- Can they provide flat fee pricing options? MCA cases can be unpredictable. Avoid hourly billing.
- Do they come recommended by other local business owners? Check for referrals from past clients.
Finding the right legal partner can be the difference between getting your situation resolved versus escalating into a worsening spiral of debt and legal problems. Invest the time to make the smartest choice.
Act Quickly to Protect Yourself
Dealing with MCA debt is an urgent situation that requires swift action on your part. Here are some steps to take right away if you are struggling with repayments:
- Stop automatic debits – Consult your bank about stopping payments to the MCA provider. This buys you crucial time.
- Gather account records – Compile statements, contracts, correspondence and other documentation. Your attorney will need these to review your case.
- Cut unnecessary costs – Reduce operating expenses wherever possible to conserve cash flow while dealing with the debt.
- See legal help ASAP – The sooner you speak with a lawyer, the more options will be available to resolve the situation favorably.
- Consider bankruptcy – If debts are untenable, a Chapter 7 or Chapter 11 bankruptcy filing may be your best recourse.
With the right legal help, what seems like an impossible situation can be resolved strategically. Don’t wait to get assistance.