Colorado Springs Merchant Cash Advance Legal Help
Running a small business can be tough, especially when it comes to finances. That’s why many business owners turn to merchant cash advances to help with expenses. But these advances come with risks – if you fall behind on payments, you could end up in legal trouble. Fortunately, there are attorneys who specialize in helping business owners in these situations. Keep reading to learn more about merchant cash advance legal issues and how a lawyer can help.
What is a Merchant Cash Advance?
A merchant cash advance (MCA) is a form of business financing where a company provides a lump sum payment to a business in exchange for a percentage of future credit card and/or debit card sales. It’s not technically a loan, but it does come with very high repayment rates that are taken automatically from daily credit card receipts.MCAs are popular because they provide fast access to capital without requiring a strong credit history or collateral. However, the costs are extremely high compared to traditional small business loans. MCA companies can charge effective annual percentage rates of 60-200% or more!
-Falling Behind on Payments
Many business owners are attracted to MCAs because qualification is easy and funding is fast. But when it comes time to pay back the advance, things can get tricky quick. MCA contracts require you to pay back a fixed percentage of your daily credit card sales no matter what. If business slows down, you still owe the same daily amount. This can lead to missed or late payments.Unfortunately, the consequences of falling behind with an MCA are severe. Late fees and interest charges add up rapidly. And because MCA repayments are taken directly from merchant accounts, falling too far behind can result in the MCA company suspending your account so you can’t process payments. This would be devastating for most businesses.
Seeking Legal Help
If you do fall behind on MCA payments, it’s important to seek legal help right away. An attorney experienced with MCA debt can help in several ways:
- Negotiating Settlements – They can negotiate with the MCA company to reduce the amount owed or create a reasonable repayment plan. Settlements often save business owners tens of thousands of dollars.
- Defending Lawsuits – If sued over the debt, your attorney can put together the strongest defense possible under the Fair Debt Collection Practices Act and other consumer protection laws.
- Reinstating Merchant Accounts – They can also help get improperly suspended merchant accounts reinstated so you can start processing payments again.
- Improving Cash Flow – Attorneys and debt professionals can provide tips to improve cash flow management so you can catch up and keep up with payments. This keeps the doors open!
Reputable debt relief law firms like Avvo have extensive experience defending small business owners from MCA companies. They understand these complex contracts inside and out. An attorney can review your agreement to spot unlawful provisions and violations to build your case.
Colorado Cash Advance Arbitration & Mediation
Most MCA contracts include arbitration clauses requiring disputes go to arbitration rather than court. Arbitration tends to favor the MCA company over the small business. Thankfully, an lawyer can represent you in arbitration to even the playing field. An experienced attorney knows what arguments and evidence resonate best with arbitrators in these cases.Some states also offer MCA mediation programs through organizations like the Colorado Bar Association. Mediation is less formal than arbitration and may help you come away with a reasonable settlement. A lawyer can advise you whether mediation or arbitration is the better route based on your situation.
-Unlawful Confessions of Judgement
One very concerning tactic we see from MCA companies is getting business owners to sign an unlawful confession of judgement (COJ) at the time of signing. This document admits fault and allows the MCA company to seek a judgement without ever setting foot in court.However, COJs signed simultaneously with the MCA contract may not be enforceable under Colorado law. The contract and COJ together could be considered an adhesion contract signed under financial distress. This is just one example of a creative defense an experienced attorney can use on your behalf.
Role of the FTC in MCA Regulation
So far, merchant cash advances remain lightly regulated compared to traditional lending. However, the Federal Trade Commission has expressed growing concerns over predatory MCA tactics harming small businesses. They are considering rules similar to those governing pay day loans.In the meantime, having an attorney in your corner levels the playing field when dealing with MCA companies. They can hold MCA companies accountable to the limited regulations already in place around debt collection and fair lending. An attorney can also advise you on steps to take if you feel your MCA company has engaged in outright fraud.
Finding the Right Attorney
As you can see, merchant cash advance disputes raise many complex legal issues. Don’t go it alone against experienced MCA debt collection law firms! Be sure to retain an attorney well-versed in financial contracts and debt collection defense specifically in your state.The Colorado Bar Association and attorney directories on sites like Avvo, LawInfo, and FindLaw make it easy to find experienced local lawyers. Look for ones with proven success helping business owners prevail over merchant cash advance companies.Most attorneys offer free or low-cost consultations. This gives you a chance to assess their experience and discuss affordable representation options. Many lawyers take cases like these on a contingency fee basis, meaning you pay nothing up front and they receive a percentage of any settlement or judgement. This removes barriers to top notch legal help when you need it most.
Take Control of Your Business Finances
While the road ahead seems long when facing merchant cash advance debt, take it one step at a time. Start by contacting an attorney for reliable advice and robust advocacy. With their help navigating complex contracts, defenses, and regulations, you can resolve your debt and regain control of your business finances. Here are some useful legal resources to review as you build your action plan:
- Colorado Bar Association – Business Disputes
- NOLO – Defenses to Confessions of Judgement
- FTC – Merchant Cash Advances
With smart legal strategies and perseverance, this too shall pass so you can get back to profitability. Wishing you all the best for your business!
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