MCAL
Merchant Cash Advance Lawsuits
Merchant cash advance lawsuits are increasingly common as funders aggressively pursue enforcement when businesses fall behind on daily withdrawals. These cases often move quickly and involve tactics that can cripple operations, including bank account freezes, payment interference, and accelerated default claims. This page explains how MCA lawsuits work, what business owners should expect, and why early legal strategy matters.
Why Merchant Cash Advance Lawsuits Are Filed MCA lawsuits are typically filed when a funder alleges:
- Breach of contract
- Failure to remit receivables
- Violation of financial covenants
- Improper account changes
- Business closure or slowdown
In many cases, defaults are declared even when businesses continue operating and generating revenue.
Common Allegations in MCA Complaints Lawsuits frequently include allegations such as:
- Failure to make daily payments
- Interference with payment processing
- Bad faith conduct
- Conversion of receivables
- Personal guarantor liability
These allegations often rely on boilerplate language rather than individualized facts.
How Fast MCA Lawsuits Move
Unlike traditional commercial litigation, MCA cases often move on expedited timelines. Funders may:
- File for summary judgment early
- Seek default judgments
- Request emergency relief
- Apply pressure outside court
Missed deadlines can result in immediate judgments.
Frozen Bank Accounts and Account Restraints
One of the most damaging aspects of MCA lawsuits is bank account restraint. Funders may attempt to:
- Freeze accounts without final judgments
- Pressure banks to act on non-judicial demands
- Disrupt payroll and operating expenses
These actions are frequently challenged when taken without lawful authority.
Confessions of Judgment
Some MCA agreements include confessions of judgment (COJs). These allow funders to:
- Enter judgments without notice
- Bypass traditional litigation
- Restrain accounts rapidly
COJs are restricted or prohibited in many jurisdictions and are often challenged when misused.
UCC Filings and Litigation Leverage
UCC-1 filings are commonly used alongside lawsuits to:
- Assert control over receivables
- Interfere with processors
- Increase settlement pressure
A UCC filing alone does not grant judgment rights.
Defenses in Merchant Cash Advance Lawsuits Potential defenses may include:
- Improper default declarations
- Lack of reconciliation mechanisms
- Payment interference by funders
- Recharacterization as loans
- Jurisdictional challenges
- Procedural defects
Defense strategies depend on facts and venue.
Settlement Considerations
Settlement may occur before or during litigation. Effective settlement requires:
- Understanding litigation posture
- Evaluating enforceability of terms
- Avoiding admissions or waivers
- Attorney-supervised negotiation
Unsupervised settlements can increase risk.
Why Early Legal Strategy Matters Early legal intervention can:
- Prevent default judgments
- Challenge unlawful restraints
- Preserve defenses
- Reduce leverage imbalance
Waiting often limits options.
What to Do If You’ve Been Sued
If your business has been sued:
- Do not ignore court papers
- Do not rely on non-lawyer negotiators
- Avoid payments without legal review
- Seek legal guidance promptly