New York City Merchant Cash Advance Legal Help – Attorneys, Debt Settlement
Merchant cash advances have become an increasingly popular way for small businesses in New York City to access quick financing. However, some merchants have found themselves struggling to pay back their advances and dealing with aggressive collection tactics. If you’re a NYC business owner facing legal issues with your merchant cash advance company, this guide can help.
Understanding Merchant Cash Advances
A merchant cash advance (MCA) works differently than a standard small business loan. Rather than receiving a lump sum of cash upfront that you pay back with interest over time, an MCA company purchases a percentage of your future credit card sales. You pay back the advance as a percentage of daily credit card receipts until it’s fully paid off.There are pros and cons to merchant cash advances:Pros:
-- Fast approval and funding, sometimes in as little as 24 hours
- Based on credit card sales, not personal credit scores
- No collateral required
- Fixed daily payments rather than monthly installments
Cons:
- Very high effective APRs often exceeding 100%
- Payments take longer to complete, reducing cash flow
- Aggressive collections if payments fall behind
While MCAs offer easy money up front, the high costs and quick pace of payments can trap merchants in debt cycles if sales drop. Unfortunately, some MCA companies rely on this debt trap as part of their business model.
Common Legal Issues with Merchant Cash Advances
As a New York City business owner with a merchant cash advance, you could encounter the following legal issues:
Excessively High Effective Interest Rates
While MCA companies avoid usury laws by calling their money advances rather than loans, the implicit interest rates often exceed 100% APR. These rates may be considered legally excessive interest charges depending on the specifics of your case.
-Breach of Contract
If an MCA company violates terms spelled out in your agreement – such as improperly calculating daily payments or misrepresenting key information – they breach your contract. This gives you legal standing to fight back.
Aggressive or Deceptive Collections
Some MCA providers use overly aggressive tactics like harassing phone calls or threats of legal action to collect payments. They may also make false or misleading claims about your legal obligations. These practices may violate federal and New York debt collection laws.
Unfair Lending Practices
In some cases, MCA companies may fail to properly disclose terms, intentionally target desperate small business owners, or lend more money than a merchant can reasonably pay back. This could potentially qualify as predatory or unfair lending under New York law.
New York Merchant Cash Advance Legal Protections
New York has implemented legal protections specifically covering merchant cash advances, including:
- Merchant Cash Advance Disclosure Law – Requires providers to disclose key terms like rates, fees, total repayment amounts, and payment mechanisms before finalizing an MCA agreement.
- 60-Day Right to Cancel – Gives merchants 60 days to cancel an MCA contract for any reason and repay the advance without interest or fees.
- Limits on Confessions of Judgement – Restricts MCA companies from requiring business owners to sign confessions permitting lenders to seize assets without notice upon default.
Working with a Merchant Cash Advance Attorney
If you feel an MCA provider has acted illegally or breached your agreement, contacting an attorney experienced with these types of cases is wise. An attorney can review your contract and business records to build a case. They may identify contractual violations, excessive interest rates, failures to disclose, or unfair/predatory lending practices.Based on their review, they’ll advise you on the best course of legal action. This could involve negotiating with the MCA company, defending against a lawsuit, or taking legal action against the provider. Having an attorney gives you an advocate on your side with expertise navigating cash advance laws and collections issues.
-Strategies for Settling Merchant Cash Advance Debt
If you simply cannot keep up with merchant cash advance payments, settling your outstanding balance for less than you owe may be possible. Debt settlement firms specialize in negotiating lump-sum payoffs between merchants and MCA providers. They leverage their expertise and high volumes of cases to strike deals. This can relieve the constant pressure of high payment rates when your business faces financial hardship.However, debt settlement also comes at a cost. Reputable companies charge fees based on how much debt they eliminate on your behalf. Be wary of firms asking for large upfront payments before rendering services. And remember, settling debt still negatively impacts your credit and won’t erase all the fees owed to your MCA company. It should be viewed as a last resort when you have no other way to escape crippling payments.
Key Takeaways on Merchant Cash Advance Legal Issues
- Merchant cash advances carry very high implicit interest rates and aggressive repayment terms that can trap merchants in debt.
- Violations of lending laws or merchant cash advance agreements may provide businesses legal recourse against predatory MCA companies.
- Experienced attorneys can review cash advance contracts and business records to build cases against providers overstepping legal bounds.
- Settling outstanding merchant cash advance balances through debt settlement firms is an option but also comes at a significant cost for struggling business owners.
Having legal support levels the playing field when disputes arise over merchant cash advances. Don’t hesitate to contact an attorney if you feel trapped, harassed, or deceived by an MCA provider seeking their payments. The right lawyer can help negotiate settlements or construct a legal case if violations have occurred. There are also debt settlement services available to negotiate reduced payoffs if continuing payments are no longer feasible.