Merchant Cash Advance Litigation in New York
Many small businesses turn to merchant cash advance companies for quick funding, only to discover later that the terms are nearly impossible to manage. A vast majority of merchant cash advance contract terms generally require immediate repayment schedules, exorbitant fees, and predatory tactics that can leave borrowers feeling overwhelmed and trapped. At one point, you may even end up facing merchant cash advance litigation in New York in state and federal courts.
At Colonna Cohen Law, we know what you’re going through. We have helped countless small businesses across the U.S. challenge unfair merchant cash advance contracts, reclaim their rights, and defend their businesses in merchant cash advance litigation. Your business is your livelihood, and we are committed to achieving the best possible resolution for you.
Civil Procedure in Merchant Cash Advance Litigation
Merchant cash advance lawsuits follow specific legal steps that every borrower should understand. These procedures determine how cases progress and what’s expected from both parties. Here’s a breakdown of the process:
- Summons and Complaint: The process begins when the lender files a summons and complaint or a summons with notice otherwise known as “pleadings.” These documents initiate the lawsuit against you. A summons informs you that legal action has been taken against you and gives you the deadline to respond while the complaint outlines the lender’s claims, including the amount sought from you and your business. Once the lawsuit is commenced, you and your business become the defendants.
- Service of the Lawsuit: The pleadings must be properly served upon the defendants. In litigation stemming from merchant cash advance transactions, service often follows the terms of the agreement which can allow for delivery of the pleadings by certified or regular mail, or even email. Personal service, where a process server physically delivers the documents, is less common in merchant cash advance litigation.
- Your Response: Once you are served, the clock starts ticking. In New York, you typically have 20 days to respond if you are personally served and 30 days if served by mail or email according to the Uniform Civil Rules For The Supreme Court & The County Court.
- No Response? Default Judgment: Failing to respond can lead to a default judgment against you and your business giving the lender immediate legal leverage over your business assets and even your personal assets. Once the deadline passes, merchant cash advance lenders often act quickly to secure a default judgment, which includes the amount claimed in the complaint plus costs and attorneys fees. In many cases, default judgments are issued by clerks—not judges—and lenders may obtain them within 30 days of mailing the pleadings, regardless of when you actually receive them. Some borrowers don’t even realize they’ve been sued until it’s too late.
Need Help Responding? If you’ve been served, time is critical. Our merchant cash advance litigation lawyer in New York can help you draft a tailored response or file a motion to dismiss, depending on the circumstances of your case. Don’t face this alone—reach out to us today.
The Pre-Trial and Trial Process in MCA Litigation
Once a defendant responds to an MCA lawsuit, the case moves into the pre-trial phase, which includes several critical steps:
Discovery Phase: This phase is crucial as it gives the merchant cash advance company and the borrower the opportunity to gather and exchange evidence about the merchant cash advances at issue. In merchant cash advance litigation, this might involve: the merchant cash advance contract and any amendments or addendums, emails, texts, or other communications about the merchant cash advance transaction, or financial records to support or refute claims. This phase is vital for uncovering potential merchant cash advance lender misconduct, such as hidden fees, excessive interest rates, or violations of the merchant cash advance agreement.
Pre-Trial Motions: After a response to the pleadings is filed, either party may file pre-trial motions to resolve specific issues or dismiss the case entirely. For instance, a motion for summary judgment argues that a trial isn’t necessary because the facts are undisputed. These motions often become pivotal moments in merchant cash advance litigation.
Settlement Negotiations: The majority of merchant cash advances are settled before reaching trial. Settlements may involve: adjusted repayment terms, reduced balances owed, or extended payment periods. If avoiding the stress and expense of a trial is your goal, an experienced merchant cash advance litigation lawyer in New York can negotiate on your behalf to secure the best possible outcome.
Trial: Certain merchant cash advances, for whatever reason, cannot be settled. In that situation, the case proceeds to trial. Both parties will present evidence, call witnesses, and make arguments. The court will then determine the outcome. While trials can be time-consuming and costly, they’re sometimes necessary to hold lenders accountable and protect your business from unfair practices.
Take Action Now: MCA litigation and laws applicable to the action often favor the lender, but quick action can shift the balance in your favor. If you’ve received notice of a lawsuit—or suspect one is imminent—don’t wait. Contact Colonna Cohen Law today to discuss your options and build a strong defense.
How to Defend Against a Merchant Cash Advance Lawsuit in New York
MCA lenders often use aggressive tactics when it comes to filing or threatening to file a lawsuit against borrowers. And these tactics often work simply because unsophisticated merchants don’t know or understand their rights. The good news is: you can defend yourself and fight back.
Taking the right steps now can protect your business and limit financial damage. Here’s what you can do:
- Review Your MCA Contract: Carefully examine the terms of your merchant cash advance agreement to uncover hidden fees, undisclosed costs, unfair provisions, or clauses that may violate state law or federal law. Some lenders include excessive interest rates disguised as fees or other illegal terms. Identifying these issues is often a critical step in building a strong defense.
- Check the validity of the service: Determine if the pleadings were properly served under your contract’s terms. MCA agreements often allow service by mail or email, but errors in service can delay or dismiss the case.
- Respond to the pleadings on time: File an answer or motion to dismiss within 20-30 days of being served to avoid a default judgment, giving the lender an award for everything the merchant purportedly owed plus attorneys fees.
- Challenge the default judgment: If a default judgment has already been entered, you may still have options. File a motion to vacate the judgment if service was improper or you have a valid defense.
- Assert defenses to the claims: Common defenses to assert in state and federal courts include that these are not legitimate merchant cash advances, but are merely disguised loans, and, that these disguised loans are criminally usurious loans that violate state usury laws. The merchant can argue that the lender did not purchase the business’s future income, or particular revenues, for a discounted lump sum cash purchase price, and then collect revenues or seller’s account receivable, but instead, loaned money to the borrower at sky high interest rates.
- Demand evidence in discovery: Discovery is your opportunity to request proof of the lender’s claims, including the signed agreement, payment history, and communication. Many lenders rely on incomplete records or vague terms that won’t hold up under scrutiny.
- Negotiate a settlement: Often, reaching a settlement can save time and money and is the most appropriate way to deal with MCA litigation. A lawyer can help reduce the amount owed or otherwise negotiate better terms.
At Colonna Cohen Law, we’re dedicated to protecting your business from unfair merchant cash advance lenders. Contact our merchant cash advance litigation lawyer in New York to discuss your options and take the first step toward safeguarding your business.
What Are My Rights as a Merchant Cash Advance Borrower?
Just because you borrow money from a merchant cash advance lender and the lender seeks repayment, does not mean you give away all of your rights. In fact, you still valuable leverage, including:
- Right to Fair Contract Terms: You have the right to a contract that is clear and free from unlawful terms. Lenders cannot enforce agreements that violate state usury laws or federal laws, such as those capping interest rates. If your merchant cash advance contract contains hidden fees, excessive interest, or questionable repayment and remedy terms, you may have grounds to challenge it. If you believe your merchant cash advance contract is a disguised usurious loan that did not actually purchase the seller’s business income, you can assert these grounds in court.
- Right to Proper Notice and Service: As stated above, MCA lenders must follow specific rules when suing borrowers. Many MCA contracts allow service of lawsuits via mail or email, but you still have the right to proper notice. If you never received the pleadings or they were not served correctly, you may be able to contest the lawsuit.
- Right to be Free from Harassment: MCA lenders cannot use harassment or threats to collect payments. They must follow debt collection laws that protect you from unfair practices. If a merchant cash advance company has used aggressive or unlawful tactics, you may be entitled to financial compensation.
- Right to Defend Yourself in Court: As a borrower, you have the right to respond to MCA litigation in New York and present a defense such as the contracts are usurious loans characterized as such merchant cash advances. Failing to respond, however, can lead to a default judgment.
- Right to Legal Representation: You have the right to seek legal help to protect your interests and help rid yourself and your business of potentially usurious loans. An experienced MCA litigation lawyer can identify lender misconduct, analyze such loans, defend you in court, and negotiate fair outcomes.
If you feel a lender has violated your rights, that your MCA is an illegal loan, or you’re facing a lawsuit, don’t wait to take action. Our lawyer at Colonna Cohen Law is ready to hear more about your case and answer your questions right away.
How a Merchant Cash Advance Litigation Lawyer Can Help
Are merchant cash advance lenders coming after your business for certain payment obligations? Don’t let them intimidate you. With the right legal help, you can fight back and protect your future. A merchant cash advance litigation lawyer in New York can offer tailored solutions. Here’s how Colonna Cohen Law can assist:
- Uncover hidden traps in your MCA contract: We review your agreement to identify illegal terms or predatory practices, such as disguised usurious loans or violations of state usury laws, or even merchant cash advance contracts that favor or require Connecticut law, and Connecticut state courts, due to its prejudgment remedy statute. We can also analyze whether the merchant cash advance company included new financing disclosure requirements.
- Challenge questionable legal tactics by lenders: We know how to fight improper service or unfair attempts to secure default judgments against you for the transaction outstanding. We also can challenge unfair and unenforceable awards for attorneys fees under such merchant cash advances.
- Build a defense that fits your unique situation: Every case is different, and our lawyer will craft a strategy based on your specific needs and goals and the specific funder advance. If your MCA contract could potentially be one of these certain loans characterized by receivable purchase terms, we can help you determine that.
- Negotiate fair outcomes that work for you: Without counsel, you may be surrendering valuable leverage without even knowing it. With unmatched skills in negotiations, we could help reduce repayment amounts, waive fees, or restructure terms to ease your financial burden.
- Hold lenders accountable for their actions: If a lender engaged in fraud or violated your rights, by issuing your business loans masquerading as merchant cash advances, we will ensure they face the consequences. State law prohibits actions upon illegal contracts and we will fight to have them deemed potentially usurious loans.
- Guide you through each stage of the lawsuit: From pleadings to trial, we will explain every step and keep you informed throughout the process.
- Help you take back control of your business: By defending your case, an attorney gives you the chance to reclaim stability and focus on growth.
At Colonna Cohen Law, we have helped countless borrowers challenge unfair practices and defend their businesses in merchant cash advance litigation in New York. Whether you’re facing a lawsuit or feel like you are on the verge of being sued, we’re here to help. Schedule your consultation today by contacting us via our website or calling us at 917-740-2077.
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If your business is struggling with Merchant Cash Advance lawsuits, frozen accounts, UCC liens or collection actions, please contact Colonna Cohen Law to provide relief and protect your livelihood.
