Whether You Need an MCA Defense Lawyer
A merchant cash advance is sold as a purchase of future receivables, not a loan. The funder collects through daily or weekly debits, and the contract almost always picks New York law and New York courts. For a Washington business that falls behind, the honest answer to whether you need an MCA defense lawyer is “it depends on where the fight is.” If the funder sues in New York, the lawyer who matters most is one admitted in New York. A Washington lawyer becomes essential once a judgment crosses the state line or when bankruptcy is on the table.
Commercial Financing Disclosure Laws
In Washington, there is no statutory requirement to provide a commercial financing disclosure document for a merchant cash advance. Here is a list of the 10 states with commercial financing disclosure laws (note: March 2026): California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah and Virginia. Washington was not on the list. What that means is that a business owner in Washington can not find a Washington state commercial financing disclosure document that states the total cost of a merchant cash advance or a Washington state commercial financing disclosure document that states the estimated annual rate of a merchant cash advance. Some marketing pages say Washington requires a cost disclosure for financing of $500,000 or less. That is California’s law. There is no such law in Washington.
Our usury statute, RCW 19.52.020, limits interest to 12% or 4% over the federal rate, whichever is greater. Not much in most MCA deals. And RCW 19.52.080 bars a borrower from using usury as a defense or claim in a transaction that was primarily for a business, commercial, investment or agricultural purpose. It specifically references corporations, partnerships, associations and trusts, and a separate statute provides that the bar also applies to LLCs. Except for consumer transactions. So if the business used the advance to finance its business, it’s probably barred from invoking our usury limit.
The usury law that can really impact MCA cases is the one in New York, which is the law chosen in the contract. In LG Funding, LLC v. United Senior Properties of Olathe (2020), the New York appellate court adopted three factors for determining whether an advance is in fact a loan:
- 1) Is there a true reconciliation provision?
- 2) Is there a fixed term?
- 3) Is there recourse in the event of bankruptcy?
New York doesn’t permit corporate entities to assert the 16% civil usury limitation. They can assert the 25% criminal usury limitation as a defense to a funder’s claim.
No Washington state court of appeal has ever declared an MCA a disguised loan. The nearest case is CapCall, LLC v. Foster (In re Shoot the Moon), September 10, 2021. It was written by Chief Judge Whitman L. Holt of the Eastern District of Washington bankruptcy court when he was sitting in the Montana bankruptcy court. The debtors were 19 related companies operating 16 restaurants in Montana, Idaho and Washington. The court held that CapCall’s 18 advances were loans and applied Montana usury law. It awarded a usury judgment of $1,216,685 and CapCall was required to refund more than $2.7 million. New York amended Civil Practice Law Rule 3218 on August 30, 2019.
Confessed Judgment
A confessed judgment can now only be filed in the New York county where the debtor was living when it was signed or where the debtor is living when it is filed. This has prevented funders from filing New York confessed judgments against Washington merchants. It only affected affidavits filed on or after that date, so older filings were not undone. New York’s highest court also held in Fiore v. Oakwood Plaza (1991) that a confessed judgment from another state will only be enforced in New York if the debtor knowingly and voluntarily waived notice and hearing.
Washington’s confession-of-judgment statute (chapter 4.60 RCW) can be used by a funder. The defendant must sign a written statement, under oath, agreeing to judgment for a specific amount and state a short statement of the facts on which the debt is based. The confession must be acknowledged before an officer authorized to take acknowledgments, such as a notary. It is filed in a superior court. A lawyer in Washington can verify whether a confession submitted in Washington meets each of the statutory requirements. A merchant in Washington can be sued in three courts. If the applicable forum clause in the contract names the New York Supreme Court as the jurisdiction, a funder would sue there. If the merchant is served outside New York, he has, generally, 30 days from completion of service to appear in court.
20 Days to Answer if Served in Washington
A funder that sues a merchant in Washington’s superior court is obligated to provide him 20 days to answer if served in Washington and 60 days if served outside Washington. A funder can sue in a federal court, which is in the Western District with courts in Seattle and Tacoma, or the Eastern District with courts in Spokane, Yakima and Richland. Cases from both districts are appealed to the Ninth Circuit Court of Appeals.
Chapter 6.36 RCW
A New York judgment doesn’t somehow entitle the creditor to go to a Washington bank. Chapter 6.36 RCW requires that the creditor file the authenticated copy with the clerk of the county superior court. The creditor files with the copy an affidavit providing the address of both debtor and creditor and mails the debtor a copy. No action may be taken until 10 days after filing proof of service with the clerk (14 days in district court). Asset protection planning must begin before the 10 day waiting period expires. After the judgment is filed, it may be vacated, set aside or corrected for the same reasons as a Washington judgment. Enforcement may be stayed pending the outcome of an appeal from the original judgment or a future appeal.
With the judgment filed, the creditor can then serve a writ of garnishment (chapter 6.27 RCW) on the merchant’s bank. There’s very little protection for a business account. The protection for an individual guarantor is up to $500 in a bank account for a debt that is not a consumer or student loan debt. Under RCW 6.17.020, a judgment filed in Washington may be enforced for 10 years with one additional 10 year extension. But it can never be enforced more than 20 years after the original court entered judgment.
Bankruptcy is handled by local counsel. Under 28 U.S.C. § 1408, a case is filed where the debtor’s domicile, residence, principal place of business or principal assets were located for the 180 days before filing. For most Washington businesses, that means the Western or Eastern District bankruptcy court. Shoot the Moon showed what a bankruptcy trustee can recover: payments made in the 90 days before filing were avoided as preferences. When collapse is likely, bankruptcy counsel in the right district is often a better first call than a litigator.
Settle with the Funder
Some situations need no courtroom lawyer at first. If payments have stopped but no suit or judgment exists, a skilled negotiator can often settle with the funder before either side spends on litigation. If the funder was Yellowstone Capital, its January 2025 settlement with New York’s attorney general canceled more than $534 million in debts owed by more than 18,000 businesses nationwide. Merchants must file a claim to have a Yellowstone judgment vacated. Once a New York summons arrives, a New York-admitted lawyer comes first. Once a judgment is filed in a Washington county, a Washington lawyer does.
