Minnesota Merchant Cash Advance Defense Lawyers

Minnesota Merchant Cash Advance Defense Lawyers

I. Introduction

The merchant cash advance (MCA) industry has grown quickly in recent years. MCAs offer fast money to small businesses that can’t get regular loans. But the lack of rules has caused legal issues for many merchants. These include high costs, confusing terms, and aggressive collection actions by some MCA providers. Small business owners facing MCA disputes or lawsuits need experienced legal help to protect their rights.

II. How Merchant Cash Advances Work

In an MCA, a business sells a part of its future sales to an MCA company. In return, they get a lump sum of cash right away. MCAs are set up as business transactions rather than loans.

This difference means MCAs are not covered by many lending laws, such as state limits on interest rates. Some MCA providers have used this to engage in unfair practices:

• Charging very high rates and fees, sometimes equal to 400% APR or more
• Hiding or lying about important terms in contracts
• Using aggressive or threatening collection tactics
• Suing merchants or filing “confessions of judgment” for claimed defaults

III. Legal Issues in MCA Cases

Minnesota merchants in MCA disputes may have several legal claims and defenses under state and federal law. For example, imagine a small coffee shop owner who took out an MCA. They later discover the agreement has hidden fees and a much higher total cost than expected. When the owner struggles to make payments, the MCA company starts harassing them with constant calls and threats of legal action. In this situation, the owner may have claims against the MCA provider for deceptive practices, lending law violations, and abusive collection tactics.

Other common legal issues in MCA cases include:

1. Usury Law Violations: Even though MCAs claim to be “purchases” not subject to usury laws, courts may still treat them as loans with interest rate caps. Minnesota generally limits interest to 8% per year. (Minn. Stat. § 334.01)
2. Lending Law Violations: Even if not considered loans, MCAs may be covered by Minnesota’s Regulated Loan Act (Minn. Stat. § 56.0001 et seq.). This law requires certain disclosures and borrower protections for non-loan financing.
3. Unfair or Deceptive Trade Practices: Minnesota’s Consumer Fraud Act (Minn. Stat. § 325F.69) prohibits misleading or tricking customers. This could apply to hiding key MCA terms or using bait-and-switch tactics.
4. UCC Article 9 and Contract Issues: MCAs are governed by UCC Article 9 on secured transactions. This law requires good faith and fair dealing by all parties. Lawsuits often claim breaches of the MCA agreement by either side.
5. FDCPA Violations: Abusive collection actions by third-party MCA debt collectors may violate the federal Fair Debt Collection Practices Act (FDCPA). This law mainly applies to consumer debts but can sometimes cover commercial MCAs used for household purposes.
6. Other Defenses: Merchants sued by MCA companies can raise defenses like lack of standing (e.g. after an improper contract transfer), unfair terms, or the MCA provider’s own legal violations.

IV. Minnesota and Federal MCA Laws

Several Minnesota laws and federal rules may apply in MCA cases:

Law	Description
Minnesota Regulated Loan Act	Controls non-bank lenders, potentially including some MCA companies
Minnesota Consumer Fraud Act	Bans false or misleading sales practices
UCC Article 9	Governs MCA agreements as secured transactions
Federal FDCPA	Restricts abusive debt collection by third parties
Small Business Borrowers’ Bill of Rights	Offers voluntary but influential industry standards promoting fair small business financing

V. Important MCA Court Cases

Recent court decisions have clarified some key MCA legal issues:

• Heskin v. Funding Metrics, LLC (D. Minn. 2019) allowed an FDCPA claim against an MCA provider. This suggests MCAs could be “debts” under the FDCPA.
• In Yellowstone Capital, LLC v. Giampietro (Minn. Ct. App. 2022), factual disputes about default and unfairness prevented a quick win for the MCA company.
• Par Funding v. Hahn (D. Minn. 2021) dismissed an MCA provider’s lawsuit due to an invalid contract transfer, leaving it without the right to sue.

These cases show merchants can sometimes win against MCAs. However, the legal issues remain complex, requiring skilled lawyers.

VI. Hiring an MCA Defense Attorney

Minnesota merchants facing legal threats from MCA companies should quickly talk to an experienced MCA defense lawyer to protect their rights. An attorney can help explore options such as:

• Negotiating changes to the MCA agreement
• Defending against the MCA provider’s lawsuit
• Suing the MCA company for legal violations
• Seeking to cancel the MCA as unfair or based on false information

Look for attorneys with specific MCA lawsuit experience and knowledge of relevant Minnesota and federal laws. A lawyer can review your case, create a smart plan, and fight hard for your business.

VII. Conclusion

The rise of merchant cash advances as fast money for small businesses has also led to legal battles over certain MCA providers’ unfair and abusive practices. Minnesota merchants in these fights must take action to defend their interests by getting experienced legal help.

In the long run, more oversight of the MCA industry may be needed to better protect small businesses and ensure access to fair, clear financing options. But right now, having a good lawyer is critical when faced with an MCA-related legal challenge. Taking quick steps to hire a skilled attorney can be key to successfully protecting your business.