MCA Defense Lawyer
A merchant cash advance is marketed as a sale of future revenue of a business instead of as a loan. Payments are collected through daily or weekly fixed debits from a business bank account. If the merchant stops paying, the merchant cash advance company will typically sue the business for the balance and in many cases the owner of the business on a personal guarantee. For a Mississippi business, whether it needs a lawyer and who it needs depend on four local facts: (1) the state’s unusually weak usury law, (2) its unusually strong confession of judgment law, (3) the state’s procedure for enforcing out of state judgments, and (4) the state’s statute that gives a judgment creditor a shorter statute of limitations when a debtor is a resident.
Written Cost Disclosures
Mississippi has no commercial financing disclosure law. As of mid-2026, about a dozen states, including Texas, Louisiana, Georgia and Missouri, require funders to give small businesses written cost disclosures before an MCA is signed. Mississippi has enacted nothing comparable, and surveys of state MCA regulation treat the state as essentially unregulated. A Mississippi merchant therefore gets no state-mandated statement of total cost or estimated annual rate before signing. Mississippi also has no licensing scheme aimed at MCA funders or brokers. That leaves general contract law, fraud claims and the contract’s own terms as the merchant’s main tools.
Raising Usury as a Claim or a Defense
Mississippi usury law offers merchants very little. Section 75-17-1 of the Mississippi Code sets a default rate of 8 percent a year. Subsection (5) then lets any borrower agree in writing to any finance charge on an obligation over $2,000, whatever the security or purpose. The same subsection bars the borrower, any guarantor and their successors from raising usury as a claim or a defense. Even if a Mississippi court treated an MCA as a disguised loan, state usury law would probably not help. For a Mississippi merchant, the stronger usury argument usually comes from New York law, which most funders choose in their own contracts. New York courts look at whether the contract allows payments to be reconciled to actual sales, whether it has a fixed term, and whether the funder keeps recourse if the merchant goes bankrupt.
Courts have described a criminally usurious loan as void under New York law. A 2026 bankruptcy decision in the Southern District of Texas, inside the same federal circuit as Mississippi, applied that reasoning to deny much of an MCA funder’s motion to dismiss.
There does not seem to be a Mississippi appellate court decision on whether an MCA is a loan. The closest one is from the federal court for the Southern District of Mississippi in February 2023, Hermes Hialeah Warehouse, LLC v. GFE NY, LLC. A funder held deeds of trust on commercial property in Meridian that secured $1.52 million and $750,000 owed under merchant agreements. The funder scheduled a foreclosure sale on the property. The property owner filed suit in the Lauderdale County Chancery Court and got a temporary restraining order. The funder removed the case to federal court. The property owner alleged that the agreements were really loans that violated criminal usury laws and thus were unlawful debts under the federal RICO statute. Judge Tom S. Lee denied the funder’s motion to dismiss. The judge’s decision allows the claims to proceed, but does not declare that the advances were loans.
Confession-of-judgment Clauses
We’re not into confession-of-judgment clauses in Mississippi. See § 11-7-187 (power of attorney to confess judgment signed before proceeding void); § 11-7-181 (only authorized method of confession of judgment is by “office confession” where creditor files sworn affidavit and debtor appears in person before circuit clerk and signs acknowledgment); § 11-7-185 (judgment obtained in such manner void as to third parties if tainted with fraud or usury). Confession affidavit tucked away in funder’s boilerplate contract does not provide funder with ready secret backdoor to judgment here.
In 2019 New York shut its courts to most of these affidavits as well. An amendment to the CPLR 3218 law was signed on August 30, 2019, effective immediately regarding affidavits submitted on or after that date. The amendment requires the confession to list the county of the debtor’s residence, and that a business is deemed to reside wherever it has its place of business. Thus a Mississippi merchant with no presence in New York cannot have a confession entered against it in New York. At least one court has declined to apply the amendment to affidavits signed before it took effect, so older judgments may be treated differently. Before 2019, Yellowstone Capital used the earlier version heavily. In January 2025, Yellowstone Capital settled with the New York Attorney General for $1.065 billion, in a deal that required it to cancel more than $534 million owed by more than 18,000 businesses nationwide and to vacate its judgments, with the last vacated by December 2025.
Heard in a Number of Courts
A Mississippi merchant’s case can be heard in a number of courts. By the forum clause in its contract, a funder will typically sue in New York state court, and a lawyer admitted to practice in New York will be required to defend it there. A funder could instead sue in the Mississippi circuit court, or chancery court if the case involves real estate or an injunction, as in Hermes. Because funders tend to be out-of-state companies, either party may be able to move the Mississippi case to federal court based on diversity of citizenship. Mississippi has two federal court districts, Northern and Southern. If the business is bankrupt, a bankruptcy case is filed in the U.S. Bankruptcy Court of the Northern District (Aberdeen with Greenville and Oxford divisions) or Southern District (Jackson and Gulfport offices).
Mississippi’s Foreign Judgments Act
The New York judgment cannot be used against the Mississippi account until it is domesticated. Pursuant to sections 11-7-301 through 11-7-309, Mississippi’s foreign judgments act, the creditor would file an authenticated copy of the judgment with the clerk of any Mississippi county circuit court together with an affidavit, setting forth the names of the parties and their last known addresses. The clerk shall then mail notice of the filing to the debtor. No execution may issue for 20 days after filing. This is the time within which the merchant should take action to challenge the filing of the judgment. Once the judgment is filed, the creditor may enroll it in other counties pursuant to section 11-7-195, which creates a lien on real estate. The creditor may then garnish bank accounts pursuant to section 11-35-1.
Pursuant to section 11-35-23, a bank is only liable for money on deposit between the date of service of the writ and the date of the bank’s answer to it. Pursuant to 28 U.S.C. 1963, the New York federal court judgment may be registered in the Mississippi federal court once the appeal period has lapsed.
Three Year Limitation Period
Section 15-1-45 establishes a three year limitation period to enforce an out-of-state judgment against a Mississippi defendant, and a 7 year period for non-Mississippi defendants. So a New York judgment against a Mississippi business owner entered March 1, 2024, would generally have to be enforced in Mississippi by March 1, 2027. The Court of Appeals has ruled that the registration of a foreign judgment does not reset the clock. Mississippi courts have found that registration of a judgment after the limitations period has expired is void. Reviewing these dates is often the most valuable service that a Mississippi lawyer can provide a merchant confronted with an old New York judgment.
A Mississippi business does not necessarily require an MCA Defense Lawyer, depending upon the stage of the action. If the dispute has been filed in New York or an entry of judgment has been entered in New York, the attorney which a business will most need will be an attorney admitted to practice in New York. A lawyer only admitted in Mississippi is unable to defend the action in the New York court or file motions to set aside the judgment in the New York court.
A Mississippi Lawyer will be needed if the action is attempted to be enforced in Mississippi, such as to challenge domestication in the 20 day time period, to claim exemptions from garnishment, to challenge the three year time period to enforce a judgment, and to challenge liens to real estate in the chancery court of Mississippi. Attorneys in Bankruptcy admitted to practice in the Northern District or Southern District of Mississippi will be the best attorneys to call in a situation when the advances are so many that the business is not able to survive the daily debits. Filing a business bankruptcy will not in most instances stop collection efforts on an owner’s personal guarantee on the advances. If no lawsuit has been filed and no judgment has been entered, a debt may be settled through negotiations. A negotiator who is not an attorney is unable to defend an action if the negotiations fail.
