Sacramento, CA Merchant Cash Advance Defense Lawyers
Are you a small business owner in Sacramento struggling with a merchant cash advance (MCA) agreement? You’re not alone. Many entrepreneurs find themselves trapped in predatory MCA contracts with sky-high interest rates and unfair terms. But don’t lose hope – our experienced Sacramento MCA defense attorneys are here to help!
At DelanceyStreet.com, we understand the immense pressure you’re under. Running a business is challenging enough without worrying about aggressive MCA lenders breathing down your neck. That’s why we’re committed to providing aggressive legal representation to protect your rights and financial interests.
What is a Merchant Cash Advance?
A merchant cash advance is a type of business financing where a company provides you with an upfront sum of cash in exchange for a portion of your future credit card sales. While MCAs can provide quick access to capital, they often come with exorbitant fees and interest rates that can cripple your business.
Some key characteristics of MCAs include:
- Daily or weekly repayments automatically deducted from your bank account
- Factor rates (fees) that can equate to triple-digit APRs
- Short repayment terms, usually 3-18 months
- No collateral required in most cases
- Approval based on credit card sales volume rather than credit score
MCAs are marketed as “purchases” of future receivables rather than loans to avoid usury laws. However, many MCA contracts contain loan-like features that may make them subject to lending regulations.
Common Legal Issues with Merchant Cash Advances
While MCAs can provide fast funding, they often come with significant legal risks for small business owners. Some of the most common issues we see include:
- Usurious interest rates: Many MCAs charge effective APRs well over 100%, potentially violating California usury laws.
- Confusing contract terms: MCA agreements are often filled with complex legal jargon designed to confuse borrowers.
- Undisclosed fees: Hidden fees can dramatically increase the true cost of the advance.
- Aggressive collection tactics: Some MCA companies use intimidating and potentially illegal methods to collect.
- Improper use of confessions of judgment: COJs allow lenders to obtain judgments without proper legal proceedings.
If you’re facing any of these issues with your MCA, don’t hesitate to contact our experienced attorneys. We’ll review your agreement and advise you of your legal options.
How Our Sacramento MCA Defense Lawyers Can Help
At DelanceyStreet.com, we have extensive experience defending small business owners against predatory MCA lenders. Our knowledgeable attorneys stay up-to-date on the latest MCA regulations and case law to provide you with the strongest possible defense.
Some of the ways we can assist you include:
- Contract review and analysis: We’ll carefully examine your MCA agreement to identify any potentially illegal or unfair terms.
- Negotiation with lenders: Our skilled negotiators can work to restructure your agreement on more favorable terms.
- Litigation defense: If necessary, we’ll aggressively defend you in court against MCA collection lawsuits.
- Debt relief options: We can advise you on potential alternatives like bankruptcy or debt settlement.
- Regulatory compliance: We’ll ensure your MCA lender is following all applicable California and federal laws.
Don’t face aggressive MCA lenders alone. Let our experienced legal team protect your rights and fight for a fair resolution.
Recent California MCA Regulations
California has recently enacted new regulations aimed at increasing transparency in the MCA industry. In 2018, California became the first state to pass a law requiring certain disclosures for commercial financing transactions, including MCAs.
The California Commercial Financing Disclosures Law (SB 1235) requires MCA providers to disclose key information to borrowers, including:
- The total amount of funds provided
- The total dollar cost of the financing
- The term or estimated term
- The method, frequency, and amount of payments
- A description of prepayment policies
- The total cost of the financing expressed as an annualized rate
These disclosure requirements are designed to help small business owners make more informed decisions about MCA financing. However, some MCA companies have pushed back against the regulations.
In a recent court case, Small Business Finance Association v. California Department of Financial Protection and Innovation, the industry challenged California’s disclosure requirements. However, in September 2022, a federal court upheld the regulations, affirming California’s authority to require these important consumer protections.
If you believe your MCA lender failed to provide proper disclosures, our attorneys can help you pursue legal action. Lenders who violate these regulations may be subject to penalties and potentially void contracts.
Defending Against MCA Collection Lawsuits
Many small business owners come to us when facing aggressive collection efforts or lawsuits from MCA companies. If you’ve been served with a lawsuit, it’s critical to act quickly to protect your rights.
Some common defenses we may be able to raise in MCA collection cases include:
- Usury: If the effective interest rate exceeds California’s usury limit, the contract may be unenforceable.
- Lack of standing: MCA companies often sell or assign contracts, potentially impacting their right to sue.
- Fraud or misrepresentation: If the lender misled you about the terms, it could invalidate the agreement.
- Violation of disclosure laws: Failure to provide required disclosures may be grounds for dismissal.
- Improper service: If you weren’t properly served with the lawsuit, we may be able to get it thrown out.
Our experienced litigators will carefully analyze your case to identify the strongest possible defenses. We have a proven track record of successfully resolving MCA disputes through negotiation and litigation when necessary.
Case Study: Captain Bounce, Inc. v. Business Financial Services
A significant case in California MCA law is Captain Bounce, Inc. v. Business Financial Services, Inc. This 2012 federal court decision addressed several key issues related to MCAs.
In this case, Captain Bounce, a California corporation, entered into multiple MCA agreements with Business Financial Services (BFS). When disputes arose, Captain Bounce filed a lawsuit alleging violations of California’s usury laws and unfair business practices.
Key points from the court’s decision include:
- Arbitration clause: The court upheld the MCA agreement’s arbitration provision, requiring the parties to submit their dispute to arbitration.
- Choice of law: Despite a Florida choice of law provision in the contract, the court applied California law due to the state’s strong public policy interest.
- Usury considerations: While not definitively ruling on the usury claim, the court noted that if the MCA was structured as a true purchase of future receivables rather than a loan, usury laws might not apply.
This case highlights the complex legal issues surrounding MCAs and the importance of having knowledgeable legal counsel. Our attorneys stay abreast of such precedent-setting cases to provide you with the most effective legal strategies.
Protecting Your Business from Predatory MCAs
While we’re here to help if you’re already in an MCA dispute, the best approach is to avoid problematic agreements in the first place. Here are some tips to protect your business:
- Read the fine print: Carefully review all terms before signing. If something is unclear, ask for clarification or consult an attorney.
- Calculate the true cost: Don’t just look at the factor rate. Calculate the effective APR to understand the real cost of the advance.
- Consider alternatives: Explore other financing options like traditional bank loans, SBA loans, or lines of credit.
- Watch for red flags: Be wary of lenders who use high-pressure sales tactics or make promises that seem too good to be true.
- Get everything in writing: Ensure all terms discussed are included in the written agreement.
- Consult a lawyer: Having an experienced attorney review your agreement before signing can save you significant headaches down the road.
Remember, if an MCA offer seems too good to be true, it probably is. Don’t let desperation for quick cash lead you into a predatory agreement.
Why Choose DelanceyStreet.com?
When you’re facing MCA legal issues, you need a law firm with the experience, knowledge, and dedication to protect your interests. At DelanceyStreet.com, we offer:
- Extensive MCA experience: We’ve helped numerous Sacramento businesses resolve MCA disputes.
- Cutting-edge legal strategies: Our attorneys stay up-to-date on the latest developments in MCA law.
- Personalized attention: We take the time to understand your unique situation and tailor our approach accordingly.
- Aggressive representation: We’re not afraid to stand up to big MCA companies to protect your rights.
- Proven results: Our track record speaks for itself – we’ve helped many clients achieve favorable outcomes.
Don’t let predatory MCA lenders jeopardize your business’s future. Contact DelanceyStreet.com today for a free consultation with our Sacramento MCA defense lawyers. We’re here to fight for you!
Frequently Asked Questions
Q: Is a merchant cash advance considered a loan in California?
A: It depends on how the agreement is structured. While MCAs are marketed as purchases of future receivables, some may have loan-like features that could subject them to lending regulations. Our attorneys can review your agreement to determine its legal classification.
Q: Can I be arrested for defaulting on a merchant cash advance?
A: No, you cannot be arrested simply for defaulting on an MCA. However, if you’ve signed a personal guarantee, the lender may be able to pursue your personal assets. It’s crucial to seek legal counsel if you’re facing default.
Q: How long do I have to respond to an MCA lawsuit in California?
A: In California, you typically have 30 days from the date you’re served with the lawsuit to file a response. However, it’s best to consult an attorney as soon as possible to ensure you don’t miss any critical deadlines.
Q: Can I negotiate with my MCA lender?
A: Yes, it’s often possible to negotiate with MCA lenders, especially if you’re experiencing financial hardship. Our attorneys can help you explore restructuring options and negotiate on your behalf.
Q: What should I do if an MCA company is harassing me?
A: Document all communication and contact an attorney immediately. Certain collection practices may violate federal and state laws, potentially giving you grounds for legal action against the lender.
Remember, every MCA case is unique. For personalized advice tailored to your situation, don’t hesitate to reach out to our Sacramento MCA defense lawyers at DelanceyStreet.com. We’re here to help you navigate these complex legal waters and fight for your rights!