Arkansas MCA Debt Relief Companies

Arkansas closed the door on payday lending and left the window open for something worse.

The state's constitutional usury ceiling, one of the most restrictive in the country, caps consumer loan interest at 17% per annum. That protection, which voters have defended at the ballot box for decades, applies to consumers. It doesn’t apply to a business owner who signs a merchant cash advance agreement with an effective annual rate of 400%. The agreement isn’t legally treated as a loan. The rate is not classified as interest. The protection doesn’t reach.

Merchant cash advance funders began appearing in Arkansas around 2011, shortly after the last payday lending storefronts closed. The timing wasn’t a coincidence. A funder based in New York could provide capital to a restaurant in Fort Smith within 48 hours, with no licensing requirement, no background check, no bond, and no state regulatory body examining the terms of what was being sold. Arkansas doesn’t require any of this for MCA funders or brokers. The legislature has simply not acted.

The Arkansas Usury Framework

Article 19, Section 13 of the Arkansas Constitution, as amended by Amendment 89 in 2010, sets the interest rate structure. For consumer loans, the ceiling is seventeen percent. For non-consumer transactions, the rate can’t exceed above 5% of the Federal Reserve discount rate. Arkansas is the only state that puts its usury limits into law, which has made amendment difficult and enforcement rigid. That protection was meant to limit lenders, not buyers.

The constitutional provision addresses loans. A merchant cash advance, in its standard form, is structured as a purchase of future receivables. The funder provides the money. The business assigns a portion of its future revenue. Because the transaction is classified as a purchase and not a loan, the usury ceiling doesn’t apply. This is the structural gap that allows effective annual percentage rates in the 3 digits to operate in a state that has prohibited payday lending to individual borrowers. Whether a particular MCA agreement constitutes a loan in substance, regardless of its label, is a question that courts in other jurisdictions have started to answer. Arkansas courts haven’t yet produced a comparable body of precedent on this point, which is itself part of the problem.

Reconciliation and the Structure of the Agreement

The difference between a true purchase of future receivables and a disguised loan turns, in most jurisdictions, on 3 factors: whether the agreement contains a functional reconciliation provision, whether the repayment term is fixed or contingent, and whether the funder can go after the merchant if they go bankrupt.

Reconciliation is the system by which daily or weekly payment amounts are supposed to adjust in proportion to actual revenue. If the sales of a business decline, the payment should decline in kind. Many MCA agreements include a reconciliation clause in the contract language while collecting fixed daily amounts through ACH withdrawal regardless of what the business actually earned. The provision exists in the text. In practice, the funder withdraws the same amount on a Tuesday when the business earned $3000 as on a Friday when it earned 3000. Courts in New York have started to treat such provisions as proof that the transaction is, in substance, a loan.

You sign the contract and then you find out what the contract means.

A fixed daily withdrawal of $700 dollars from a business account, maintained without adjustment, is not a conditional payment tied to receivables. It is a fixed obligation. And a fixed obligation to repay a sum certain, with no genuine risk borne by the funder, looks like a loan in every way except the name it was given at signing.

The confession of judgment clause compounds the problem. Many MCA agreements need the business owner to sign a confession of judgment at execution, which allows the funder to obtain a court judgment without notice or hearing upon default. New York prohibited the filing of confessions of judgment against out of state defendants in 2019, which closed one avenue. Funders have since begun filing in Texas, Illinois, Utah. An Arkansas business owner who signed such a clause may find out a judgment entered against them in a jurisdiction they have never set foot in, on terms they didn’t comprehend at signing. The contract ran to 9 pages, most of them unnecessary.

Debt Relief Companies and the Licensing Problem

The phrase "MCA debt relief company" describes a range of entities, and the range is the problem.

Some of these entities are law firms whose attorneys can review contracts, find arguments to treat it differently, challenge confessions of judgment, and represent a business in court. Some are debt settlement companies staffed by negotiators who contact funders and attempt to arrange reduced payoff amounts. Some are (if we are being precise, not entities at all but) marketing operations that collect fees, promise settlement outcomes, and refer the work to 3rd parties the client has never spoken with.

Arkansas doesn’t have a specific licensing or regulatory framework governing MCA debt relief services for commercial borrowers.

The absence means that a business owner searching for assistance with an MCA obligation will encounter all 3 types of entity in the same search results, often presenting language that looks the same about "saving your business" and "settling for pennies on the dollar."

The company that promotes MCA settlement and the attorney who can void a usurious contract occupy the same space online. The difference is not academic. It determines whether the business owner has representation or a referral.

A debt settlement company can’t provide legal advice. If it does, it is engaged in the unauthorized practice of law. It cannot represent a business owner in court. If the MCA funder files a breach of contract action, the settlement company can’t appear. The business owner, who believed the problem was being managed, finds out that they need a separate lawyer, which costs more, and they don’t have much time.

The FTC's enforcement actions against debt relief operations have sped up in recent years. The Commission obtained emergency injunctions in 2025 against operations that pretended to be financial institutions and targeted vulnerable people, extracting fees for services that were never performed. The MCA debt relief space isn’t immune to this pattern.

One signal that separates a credible operation from a problematic one is whether the entity can explain, in specific terms, the legal theory under which it intends to challenge or reduce the obligation. "We negotiate with funders" describes an activity. It is not a theory. A theory sounds different: the agreement lacks a functional reconciliation provision; the effective APR, if the transaction is reclassified, exceeds the constitutional ceiling; the confession of judgment was obtained in violation of the 2019 New York reform; the UCC lien was filed on a financing statement that doesn’t accurately describe the collateral. If the entity can’t articulate a basis for its position, the position may not exist.

Our approach at the outset differs from what most business owners expect when they call. We begin with the contract, not with the funder's willingness to talk. The contract determines the theory. The theory determines the pressure. A conversation with the funder that isn’t grounded in a specific legal deficiency in the agreement is a request, not a negotiation, and funders can sense the difference within the first 3 minutes of a call.

I am less certain about what the average settlement rate ought to be than the marketing materials of most debt relief companies suggest. settlement outcomes depend on the funder, the contract, the jurisdiction and the business’s financial position at the time of negotiation.

What the Courts Have Determined Elsewhere

The largest enforcement action in the history of the MCA industry arrived in January 2025. The New York Attorney General announced a resolution against Yellowstone Capital and affiliated entities that cancelled outstanding obligations owed by thousands of small businesses, vacated court judgments, and required the release of UCC liens. The principals were permanently barred from the industry. the effective interest rates on these agreements went into the hundreds of percent.

A judgment against Richmond Capital Group the previous year had already established the framework that courts now apply. The analysis examines whether the reconciliation provision is genuine, whether the repayment term is fixed, and whether the funder bears real risk of loss. Where reconciliation is absent or works only on paper, the transaction is reclassified. Usury limits attach. The contract may be voided depending on the jurisdiction.

For an Arkansas business owner, these developments are helpful but not binding. Arkansas state courts haven’t produced equal published rulings. The constitutional usury framework exists. The application of that framework to a reclassified MCA agreement hasn’t, in a reported Arkansas decision that I can identify from this desk, been tested. The argument is available. The precedent is still developing. Whether the argument succeeds on a particular set of facts involves variables that no article can resolve.

Bankruptcy proceedings have generated a separate line of inquiry (one that has, in the past 18 months, produced decisions in the Southern District of New York, the Middle District of Florida, and the Southern District of Indiana that look more closely at whether it’s a purchase or a loan, particularly where the MCA funder has filed a UCC financing statement asserting an interest in receivables that arguably don’t yet exist). The prospect of a Chapter 11 filing itself can function as a negotiating instrument. MCA funders who face the possibility of their claims getting reclassified under a reorganization plan may prefer a negotiated outcome instead of an uncertain court result.

Timing and the First Mistake

The time to step in effectively in an mca dispute is smaller than most business owners realize. Once default occurs, the funder can initiate several actions within days, the ACH withdrawal fails, the funder contacts the business, a UCC lien information subpoena issues to the business's customers, and the bank account faces restriction. If a confession of judgment was signed, it may be filed and entered before the business owner receives any notice at all.

The steps that matter most in the early stages are procedural:

Revoke the ach authorization in writing and send it to both the funder and the bank.

Keep all correspondence payment records and the original agreement.

Obtain legal review of the agreement before responding to any demand from the funder.

The business owner who calls a week after the bank account has been restricted confronts a different situation than the one who calls when the first payment fails. Both situations are possible.

Selecting Counsel

An initial consultation with an attorney experienced in MCA defense costs nothing at most firms that practice in this area. The consultation is to figure out the situation. It determines whether the agreement is structured as a true receivable purchase or as a loan in substance, whether the confession of judgment contains procedural defects, what the funder's litigation history looks like, and what pressure is available.

No entity should collect a fee before explaining, in concrete terms, what it intends to do and on what legal basis. The question isn’t whether to engage professional assistance but what kind. An attorney can challenge the contract. A settlement company can request a discount. When the funder declines to cooperate and files suit instead, the distance between those two capabilities becomes the only fact that matters.

The first call is free and comes with no expectations, it's just to start figuring things out.