Detroit Merchant Cash Advance Legal Help – Attorneys, Debt Settlement
Merchant cash advances can seem like easy money for small business owners in Detroit. You get an upfront lump sum of cash quickly, without all the paperwork and restrictions of a traditional bank loan. But those high repayment rates and personal guarantees can come back to bite you. If you feel trapped in an abusive agreement or facing aggressive collection tactics, don’t go it alone. Get experienced legal help taking on merchant cash advance companies.
How Merchant Cash Advances Work
Merchant cash advance (MCA) providers offer business funding based on a percentage of future credit card and debit card sales. Instead of getting a loan, you’re selling a portion of future receivables at a discount. There’s usually no credit check, and you can get funds in your account in as little as 24 hours.But the convenience and speed come at a steep price. MCAs typically charge the equivalent of 60-200% APR in fees and payments. You have to pay back the advance quickly, often in less than a year. Providers can debit a fixed percentage of daily credit card sales – usually 10-20% – until you satisfy the balance. Some also charge various fees on top of the payments.If business slows down or you can’t keep up with debits, watch out. Many MCA agreements have no limits on how long providers can collect payments for. You could end up paying 2-3 times the amount advanced and still owe money.
-Common Legal Issues Facing Detroit Small Businesses
As a small business owner struggling with a burdensome MCA agreement, where do you turn? An experienced Detroit business attorney can help you understand your rights and options. Here are some of the most common legal issues we see:Deceptive sales tactics – Many providers use high-pressure tactics to push expensive advances on owners without explaining the true costs and risks involved. If you were misled about repayment terms or felt forced into accepting funds, the agreement may be voidable.Breach of contract – MCA companies often make verbal promises about flexible or fixed payments. But the final contract terms are very different. Bait-and-switch violations and failure to honor original agreements can provide grounds to invalidate or reform the MCA.Unfair contract terms – Merchant cash advance agreements often contain one-sided, oppressive terms that favor the funder. Confessions of judgement, personal guarantees, and open-ended repayment periods essentially trap the business owner in a never-ending debt cycle. Courts can rule these provisions unenforceable.Abusive collection practices – It’s not uncommon for MCA providers to engage in harassment, threats of violence, derogatory public statements, and other illegal measures when owners fall behind on payments. You have rights against intimidation tactics under federal and state collection laws.Usury violations – Although MCA companies claim they are advancing future sales and not charging interest, their model looks an awful lot like predatory lending. Effective rates often exceed legal limits under Michigan usury laws. This can invalidate the underlying contract.Debt relief options – If you owe multiple cash advances or other business debts you can’t handle, bankruptcy or debt settlement may offer a fresh start. An attorney can help you evaluate the pros and cons of each option.
Key Defenses Against Merchant Cash Advance Companies
When battling aggressive collection efforts or suing for relief from an abusive MCA agreement, having an experienced legal advocate matters. Here are some of the most powerful defenses Detroit business lawyers use:
Unconscionability
If an agreement contains grossly unfair or one-sided terms that shock the conscience, courts can refuse to enforce it. The merchant cash advance model itself borders on unconscionable. Combined with bait-and-switch sales tactics, extreme rates, personal liability, wage garnishment threats, and more – these contracts meet the definition of an unenforceable agreement.
Usury
Although MCA companies claim they aren’t making loans, courts increasingly find their model is essentially a form of financing. By comparing the amount advanced to total payments extracted, judges can rule the effective interest rate violates usury laws. That makes the underlying contract void and uncollectible.
-RICO Violations
The Racketeer Influenced and Corrupt Organizations (RICO) Act provides treble damages and attorneys fees for victims of certain criminal schemes. Using RICO, owners can sue MCA providers operating ongoing racketeering enterprises through fraudulent sales pitches, abusive collection tactics, and more.
Breach of Contract
If a merchant cash advance company fails to honor original payment or repayment terms verbally promised, it constitutes breach of contract. Even if the written agreement permits their actions, the two contradictory sets of terms violate good faith and fair dealing responsibilities.
Breach of Fiduciary Duty
Brokers who arrange merchant cash advances have a fiduciary duty to business owners. They must disclose any kickbacks or commissions received from funders. Otherwise, self-dealing and failure to act in the client’s best interests provide grounds to invalidate the agreement.
Negotiating Merchant Cash Advance Debt Settlement
If you realize the mistake of agreeing to an MCA too late, sitting back and hoping for the best usually doesn’t end well. Unpaid balances continue growing at an alarming rate. Multiple providers can lay claim to the same credit card receipts. Lawsuits and threats quickly follow.But even in dire situations, experienced attorneys can sometimes negotiate debt relief. Key leverage points we use in merchant cash advance settlement talks include:
- Appealing to reason – MCA providers would rather take a smaller, immediate payout than chase payments for months or years through litigation. A reasonable settlement offer gives them incentive to close out the account.
- Disputing the debt – Credible claims of fraud, breach of contract, usury violations or other legal defenses mean the provider may recover nothing if you fight back. Even a small chance of defeat in court ups the motivation to compromise.
- Payment proposal – Offering a lump-sum discounted payoff amount, signed payment plan, borrowing from friends and family or securing new financing to settle the account makes the bird-in-hand more attractive than waiting on the courts.
- Threatening bankruptcy – For owners facing multiple debts, warning that you will declare bankruptcy if accounts aren’t settled often brings funders to the table. They want to avoid recovering little to nothing in bankruptcy.
Find Experienced Legal Help Defending Against Merchant Cash Advance Abuse
Unscrupulous merchant cash advance companies count on small business owners lacking the resources to fight back against their bullying tactics. But with an experienced Detroit commercial litigation attorney on your side, the tables can turn quickly. We know how to attack flawed MCA agreements and collection activities on every front.Don’t wait until you are drowning in crippling debt with no way out to seek help. At the first sign of bait-and-switch tactics, harassment, threats, or other abuse by a merchant cash advance provider, contact us for a free case review. We can craft an aggressive strategy to invalidate the agreement, stop collections activity, and recover any damages suffered. With seasoned legal representation, victory against predatory funders is possible.
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