Michigan Merchant Cash Advance Legal Help
Merchant cash advances can seem like quick and easy money for small business owners in Michigan. But they often come with predatory terms and sky-high interest rates that can sink a business. If you took out a merchant cash advance and are now facing legal issues or aggressive collection tactics, don’t panic. You have rights under Michigan law and may have strong defenses. In this article, we’ll break down everything you need to know about merchant cash advances in Michigan, including laws that protect you as a borrower.
What Is a Merchant Cash Advance?
A merchant cash advance (MCA) isn’t technically a loan. Instead, an MCA provider purchases a portion of your future credit card sales in exchange for an upfront lump sum payment. The amount they “purchase” is typically tied to your average monthly credit card volume.For example:
-- Your business processes $10,000 per month in credit card transactions
- An MCA provider offers you $20,000 upfront in exchange for $500 per day from your credit card sales until $30,000 is repaid
- They are essentially buying $30,000 of your future credit card receivables for $20,000
Because it’s technically a purchase instead of a loan, MCAs can charge outrageously high rates that would otherwise violate Michigan’s usury laws for loans and financing. Rates frequently exceed 100-200% APR when calculated like interest.The benefits of an MCA are fast approval and funding. The major downside is the extremely high cost if you can’t quickly repay the advance.
Michigan Merchant Cash Advance Laws
Michigan has usury laws that cap interest rates on loans at around 7-25% APR depending on the type and size of the loan.However, merchant cash advances skate around these laws because they aren’t technically loans. Instead, an MCA is the purchase of a business asset – in this case, future credit card receivables. So Michigan’s usury caps do not directly apply.That said, merchant cash advances aren’t an entirely unregulated wild west. Here are some laws that still protect business owners:
1. Criminal Usury Statutes
While MCAs avoid civil usury laws on interest rates, Michigan still has criminal usury statutes that cap rates at 25% APR.If an MCA charges over 25% APR, that is a felony punishable by up to 5 years in prison and a $10,000 fine. The business owner can’t be charged criminally, but they can report the MCA provider for prosecution.
2. Licensing Requirements
Michigan regulates consumer loan licenses through the Department of Insurance and Financial Services (DIFS). MCA providers must have a license if:
-- The MCA repayment comes directly from the business owner’s personal bank account instead of business credit card receivables
- The business has less than 5 owners
Violations for lending without a license in Michigan can void the entire agreement. Meaning you would no longer have to repay any remaining balance.
3. Fraud and Misrepresentation
While MCA rates themselves are unregulated in Michigan, lenders still can’t outright lie or defraud borrowers:
- They cannot misrepresent the terms, costs, or conditions of an MCA
- They cannot pressure you into accepting an MCA through harassment or threats
- Any intentional lies about the MCA may void the agreement
If an MCA provider defrauded you or failed to disclose key terms, that is grounds to challenge the agreement and settlement/repayment demands.
Do You Need a Merchant Cash Advance Lawyer?
Dealing with an MCA provider directly puts you at a disadvantage. They have teams of lawyers well-versed in getting their money, while you’re stuck navigating complex legal issues alone.Having an experienced business lawyer on your side levels the playing field. An MCA attorney can review your agreement for violations of Michigan laws and build a strong case to:
- Get the MCA voided outright so you owe nothing
- Negotiate a reduced settlement amount
- Craft payment plans that work for your business
- Stop harassing calls and aggressive collections activity
- Sue for damages if the MCA provider broke the law
The right lawyer understands MCA agreements inside and out. They know every angle to fight back against predatory terms and illegal lending practices.Don’t waste money on an MCA settlement consult with the provider directly. Speak with a Michigan MCA lawyer right away instead to understand your options. Many attorneys offer free case reviews and take cases on a contingency fee basis (only get paid if you win/settle).
-Common Michigan Merchant Cash Advance Defenses
When challenging a merchant cash advance in court, there are several strong defenses Michigan attorneys frequently rely on:
Unconscionability
If an agreement is so unfair that no reasonable person would agree to it, courts can rule it unenforceable. The shocking rates and aggressive terms common with MCAs often cross the line into unconscionability.
Fraud and Misrepresentation
As discussed above, any lies, pressure tactics, or omissions by the MCA provider regarding the terms could make the agreement invalid and unenforceable.
-Licensing Violations
If the MCA company isn’t properly licensed with Michigan DIFS, that violation could void the agreement. You would owe them nothing.
Criminal Usury
Interest rates over 25% violate MI criminal statutes. This won’t void the MCA necessarily but gives you leverage to negotiate a reduced settlement.
Breach of Contract
If the MCA provider didn’t uphold their end of the bargain (failed to disclose terms, altered payment schedules, etc.) they breached contract. This may release you from obligations under the agreement.
What Happens If You Just Stop Paying an MCA?
Some struggling business owners consider just defaulting on their merchant cash advance agreement. While that may provide temporary relief, the consequences are severe:
- The MCA provider can sue your business for breach of contract. And they will almost always win without a lawyer’s help navigating complex legal defenses.
- Not only will a judgement force you to repay the full amount owed, but it also wrecks your business credit for years. This makes securing affordable financing difficult down the road.
- MCA companies frequently tack on 20-30% collection fees ON TOP of the balance owed. So defaulting makes your situation much worse financially.
- They can garnish your bank accounts and credit card receipts to forcibly collect if you try dodging them. This freezes operating capital and can sink your business.
Getting an experienced attorney involved BEFORE defaulting is critical. They may negotiate an affordable payment plan, reduced lump-sum settlement, or even total debt forgiveness if the agreement violates MI laws.Let them deal with the MCA attack dogs while you focus on running your business.
Find Michigan Merchant Cash Advance Help Today
Thousands of Michigan business owners have defended against unlawful or unconscionable merchant cash advances thanks to trusted attorneys. You don’t have to tackle this alone or accept unfair repayment terms that jeopardize your livelihood.Connect with a top-rated MCA lawyer in Michigan for dedicated legal guidance on your side. Take advantage of free case reviews and contingency fee options so it costs nothing upfront.Relief starts with one phone call. Reach out today to discuss your situation confidentially and map out a game plan. The sooner you act, the more leverage you’ll have fighting back against predatory merchant cash advance demands. Don’t wait until collections and lawsuits make things exponentially worse.