Washington, DC Merchant Cash Advance Defense Lawyers
Introduction
Running a business is no small feat, and financial hurdles are part and parcel of the journey. But what happens when those hurdles come in the form of predatory financial products like Merchant Cash Advances (MCAs)? If you’re a business owner in Washington, DC, grappling with the complexities and potential pitfalls of MCAs, we at Delancey Street are here to help. Our team of experienced Merchant Cash Advance Defense Lawyers is dedicated to protecting your business from unfair practices and ensuring your financial stability.
Understanding Merchant Cash Advances
Merchant Cash Advances are a form of commercial financing where a business receives a lump sum of money in exchange for a percentage of future sales. Unlike traditional loans, MCAs are typically repaid through daily or weekly deductions from the business’s bank account, based on its sales volume. While this might sound like a flexible solution, the reality is often far from it.
Why is this important? Because the structure of MCAs can lead to exorbitant effective interest rates and crippling financial obligations. The Consumer Financial Protection Bureau (CFPB) has even classified MCAs as “credit” under the Equal Credit Opportunity Act (ECOA), subjecting them to broader compliance requirements.
Common Legal Issues with MCAs
Usury Claims
One of the most contentious issues surrounding MCAs is whether they constitute loans subject to usury laws. In Tender Loving Care Homes Inc. v. Reliable Fast Cash, LLC, the court examined whether the MCA was a genuine purchase of receivables or a disguised usurious loan. The court concluded that the agreement was not a loan, primarily because repayment was contingent on business revenue. However, this doesn’t mean all MCA agreements are safe from usury claims. Factors like the presence of a reconciliation provision and the terms of recourse in case of bankruptcy are crucial in determining the nature of the agreement.
Unfair Collection Practices
The Federal Trade Commission (FTC) has cracked down on MCA providers for using deceptive and illegal means to collect debts. In a notable case, RAM Capital Funding, LLC was banned from the MCA industry for practices like unauthorized withdrawals and using confessions of judgment to seize assets. These confessions of judgment allow funders to obtain uncontested judgments against businesses, often leading to severe financial distress.
How We Can Help
At Delancey Street, we understand the intricacies of MCA agreements and the legal frameworks governing them. Here’s how we can assist you:
Contract Review and Negotiation
Before you sign on the dotted line, let us review your MCA contract. We look for unfair terms, hidden fees, and potential legal pitfalls. If you’ve already entered into an MCA agreement, we can negotiate better terms or even a settlement to reduce your financial burden.
Litigation and Defense
If you’re facing a lawsuit or aggressive collection practices, our experienced attorneys will defend your rights in court. We have successfully litigated against MCA providers, challenging the legality of their practices and protecting our clients’ assets.
Debt Restructuring and Settlement
Sometimes, the best course of action is to restructure your debt. We can negotiate with MCA providers to extend repayment terms, reduce the principal amount, or convert daily payments to more manageable weekly or monthly schedules.
Case Studies and Client Stories
To illustrate the impact of our services, let’s look at a couple of anonymized client stories:
Case Study 1: John’s Auto RepairJohn, the owner of a small auto repair shop in Washington, DC, took out an MCA to cover some unexpected expenses. The daily deductions quickly became unmanageable, leading to cash flow issues. We reviewed his contract and found several unfair terms. Through negotiation, we were able to restructure his debt, converting daily payments to monthly ones and reducing the principal amount by 30%.
Case Study 2: Linda’s BoutiqueLinda’s boutique was hit hard by aggressive collection practices from her MCA provider. They had used a confession of judgment to freeze her business accounts. We took the matter to court, challenging the legality of the confession of judgment and securing a favorable ruling that unfroze her accounts and allowed her business to continue operating.
Legal Citations and References
- Tender Loving Care Homes Inc. v. Reliable Fast Cash, LLC, 172 N.Y.S.3d 335 (N.Y. Sup. Ct. 2022).
- Fleetwood Services LLC v. Richmond Capital Group LLC, 22-1885-cv (2d Cir. 2023).
- CFPB’s classification of MCAs as “credit” under ECOA.
- FTC actions against RAM Capital Funding, LLC.
Call to Action
Are you struggling with a Merchant Cash Advance in Washington, DC? Don’t let unfair practices jeopardize your business. Contact us today for a free consultation and let us help you navigate the complexities of MCA agreements. We are committed to protecting your business and ensuring your financial well-being.
Delancey Street is here to stand by your side, offering expert legal counsel and unwavering support. Reach out to us today and take the first step towards reclaiming your financial freedom.