Being Sued by a Merchant Cash Advance Company
MCA companies have become increasingly aggressive in pursuing legal action against defaulted business owners. They file lawsuits, enforce Confessions of Judgment (COJs), and pursue garnishment of bank accounts — sometimes with alarming speed. If you've received any legal paperwork from an MCA company, time is critical.
The good news: MCA lawsuits are very often settled out of court, and many MCA agreements contain legal vulnerabilities that experienced attorneys can exploit in your favor.
Common MCA Legal Actions Against Business Owners
Civil Lawsuit
The MCA company files a formal complaint in court. You typically have 20–30 days to respond before a default judgment is entered against you.
Confession of Judgment
Many MCA agreements include a COJ clause, allowing the lender to get an instant judgment without a trial. Common in New York courts against NY businesses.
Bank Levy / Garnishment
Once a judgment is obtained, the MCA company can freeze or levy your business bank accounts within days, leaving you without operating funds.
UCC Enforcement
Lenders can also pursue their UCC lien rights to claim business assets and future receivables without a separate lawsuit.
What to Do If You Receive Legal Papers from an MCA Company
- 1
Don't Ignore It
Ignoring a lawsuit results in an automatic default judgment against you. This is the worst possible outcome. Every day matters.
- 2
Contact an MCA Attorney Immediately
You need specialized representation fast. A general business attorney may not be familiar with MCA law — you need someone who handles these cases regularly.
- 3
Preserve Your Bank Account
Your attorney may advise you to move operating funds to a new account before a levy is executed. Do NOT do this without legal advice, as improper transfers can create additional legal issues.
- 4
Gather All Documents
Collect your original MCA agreements, all bank statements showing withdrawals, any communications from the MCA company, and the legal paperwork you received.
- 5
Explore Settlement
Even after a lawsuit is filed, most MCA cases settle before trial. Your attorney can often negotiate a significant reduction in exchange for a structured payment or lump sum.
Defenses Against MCA Lawsuits
Experienced MCA attorneys have successfully used the following defenses in MCA cases:
- The MCA was actually a disguised loan and subject to usury laws
- The agreement contained material misrepresentations by the funder
- The funder engaged in predatory or deceptive practices
- The personal guarantee clause is unenforceable
- The Confession of Judgment is invalid or procedurally defective
- The MCA company failed to properly disclose the true cost of the advance