The Legal Landscape of MCA Disputes
MCA legal issues fall into several categories: breach of contract claims, confession of judgment enforcement, UCC lien disputes, allegations of fraud or misrepresentation, and personal guarantee enforcement. Each has different legal implications and defense strategies.
Breach of Contract Claims
When you default, the funder’s first action is typically a breach of contract lawsuit. Defenses include challenging whether the MCA is actually a loan subject to usury laws (recharacterization), arguing the funder breached first by failing to honor reconciliation provisions, and showing the contract terms were unconscionable or the result of fraud.
Confessions of Judgment
A COJ clause allows the funder to obtain a judgment without notice or hearing. In 2019, New York prohibited COJs against out-of-state debtors. If you are out-of-state and a funder filed a COJ after the law changed, you have strong grounds to vacate.
UCC Lien Issues
UCC liens can be challenged if the filing was procedurally defective, exceeds the scope authorized by the contract, or the underlying agreement is void.
Fraud and Misrepresentation
Common misrepresentations include false statements about cost, promises of future advances, misrepresentation of payment amounts, and failure to disclose fees. If induced by fraud, the contract may be voidable.
What to Do Right Now
- Gather all documents including contracts, emails, and texts.
- Review bank statements and compare actual amounts to what was agreed.
- Do not ignore legal filings. Respond immediately.
- Contact an MCA attorney. The sooner you engage, the more options you have.