Lawsuits by merchant cash advance (MCA) companies can be beaten in court. Weinberg Legal has continually identified new ways to defeat MCA companies.

On Nov. 28, 2023, an appellate court, where Weinberg Legal represented the debtor, held that: to avoid being an illegal loan an MCA contract should have a right to a reconciliation provision. But, the court noted that “the agreement here does not make clear on its face whether it conferred that right”. Kapitus Servicing, Inc. v Point Blank Construction.

Weinberg Legal has identified provisions in almost every MCA contract blocking the right to a reconciliation.

Also in 2023, another New York appellate court found that the MCA “agreement constituted a criminally usurious loan” and “a loan that is criminally usurious is void.”. The MCA agreement was void because:

•  “defendants were obligated to authorize the plaintiff to automatically debit $4,000 from their bank account each business day”

• “the plaintiff was under no obligation to reconcile the payments to a percentage amount of the defendants' sales rather than the fixed daily amount”

• “the plaintiff was entitled to collect the full uncollected purchase amount plus all fees due under the agreement in the event of the defendants' default by changing their payment processing arrangements or declaring bankruptcy”.

• “Together, these terms established that the agreement was a loan, pursuant to which repayment was absolute, rather than a purchase of future receipts under which repayment was contingent upon the defendants' actual sales”.

Undoubtedly, your MCA agreement had two or more of the same provisions.

On July 26, 2024, an appellate court in upstate New York, where most MCA lawsuits are filed now, upheld the borrower's lawsuit accusing the MCA lender of fraud. Oakshire Props. v Argus Capital Funding. The court held that the "reconciliation provision in the agreement *** appears to be illusory inasmuch as [the lender] may not be subject to any consequences for failing to comply with its terms." Almost every MCA agreement fails to subject the lender to any consequences for failing to reconcile, instead forbidding any claim against the lender. The court held that the contract was an illegal loan because the payments were fixed and not based on a percentage of sales and the lender could debit the payment regardless of any receipts. Every MCA contract has fixed payments not based on a percentage of sales, which are ACH-debited even if there are no sales.

On Sep. 15, 2023, the New York Attorney General won a case against an MCA company in which the court voided the MCA agreement. People vs Richmond Capital. The court held that the reconciliation was a sham because “the Borrowers were required to send bank statements to the Predatory Lenders”.

Every MCA agreement requires the debtor to provide its bank statements to the funder.

On Mar. 5, 2024, the New York State Attorney General filed a $1.3B lawsuit against a group of funders, based on practices and contract terms present in almost every MCA transaction. People v Yellowstone et al. [extracts of petition and memorandum of law].

Decisions won by Weinberg Legal on the defense of criminal usury:

May 15, 2018, LG Funding vs United Senior Properties

Mar. 11, 2020,  Appellate Court affirms.

Nov. 5, 2021, Union Funding Source, Inc.

Jan. 21, 2022, Ein Cap, Inc.

Jan. 25, 2022 Ace Funding Source

Feb. 1, 2022, Unique Funding Solutions LLC

Mar. 2, 2022, Chrome Capital LLC

Apr. 13, 2022, Fox Capital Group, Inc. v God's Love

Jun. 8, 2022, Slate Advance, (Appellate Division 2nd Dept.)

Jul. 7, 2022, Union Funding Source, Inc. (acknowledging 5 ways that lender was insulated from a reconciliation).

Sep. 21, 2022, Wynwood Capital Group

Nov. 14, 2022, Merchant Business Solutions

Feb. 22, 2023, World Global Fund

Mar. 8, 2023, IMS Fund LLC

May 9, 2023, Emerald Group Fund dba Vitalcap

Jan. 12, 2024, Kash Capital

Feb. 27, 2024, 22 Capital

Mar. 15, 2024, Avanza Group

Mar. 20, 2024, Emerald Group Fund dba Vitalcap

Apr. 22, 2024, Webfund Instafunders

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Weinberg Legal files detailed answers, listing all available defenses plus the math supporting the criminal usury defense. Samples (date order, earliest first):

Fundfi

Vox Funding

Worldwide Capital

Velocity Capital

Redstone Advance

Eminent Funding

CFG Merchant Solutions

E Advance Services

Itria Ventures

3Point Capital Group

Kalamata Capital Group

Main Street Merchant Services

Fincoast Capital

Kash Advance

Simply Funding

Swift Funding

Epic Advance

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Lenders Not Allowed to Sue in New York: If the plaintiff was formed under the laws of a state other than New York, and you are also outside of New York, the court may not have any subject matter jurisdiction and must dismiss the case. The plaintiff's only choice is to then sue you in your home state. Weinberg Legal has succeeded in getting cases dismissed on this ground: 

Fox Capital Group

Harper Advance

Pearl Beta Funding

Parkview Advance

Speedy Funding

Iruka Capital

Liberty Funding Solutions

Mantis Funding

The appellate court in Kapitus Servicing provided an easy test of whether this defense will succeed. Did the MCA company wire its funding from a New York bank? Check your bank statement showing the MCA company's wire of the funding. That wire confirmation will often provide the location or routing number of the MCA company's bank in order to determine if it was in New York. The Kapitus opinion was followed in a case against Bizfund defended by Weinberg Legal.

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Has the lender continued to debit payments after the lawsuit? If so, Weinberg Legal has gotten the lawsuit dismissed on that ground (Vox Funding) or summary judgment denied (AJ Equity Group LLC).

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Bank Accounts Located Outside New York State are Immune: New York follows the "separate entity rule" under which a bank account located outside of New York cannot be frozen or garnished in order to satisfy a New York judgment. This is true even if the bank has a New York branch or office. Almost every MCA lender violates this law by freezing and garnishing the bank account even though they know that your account is maintained out of state. Courts then force them to refund the money. Weinberg Legal brings such proceedings to get a refund. MCA Rehab LLC: restraint vacated. Cloudfund LLC restraint vacated.

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WARNING! -- Besides going to court, the MCA lender can send a UCC lien notice to any customer or credit processor you have, freezing any payments due to you. New York's highest court has just endorsed the UCC lien.

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Settlement Companies. Even before you get sued, settlement companies solicit you, usually promising to settle your loan once you put in escrow with them 40% of the amount owed. The only judge in New York to have thoroughly reviewed these companies found that they do nothing but take your money. Weinberg Legal has sued these companies for clients who couldn't get their money back from them.

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TESTIMONIALS

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Thank you Amos!! You are the man!! Will be my guy moving forward with the rest of these I have.

RJ,

Greenville NC

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Thank you. Words can not express the relief I feel right now. I have been running like a fugitive.  I really don't know what to do next. Thank you for all your work and your time. I don't know if I owe you anything right now but if I do please give time to get on my feet again.  Thank you again.

CR,

McKinney, Texas

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FAQ

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Q: Why should we retain you instead of the other dozen attorneys who contacted us?

A: ​Please see my track record, above, of winning these cases. No other attorney has this. Because I'm able to win these cases, I do more than just waste time until a settlement gets rammed down your throat.

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Q: Is it worth it for us to hire you?

A: As I warned above, the MCA lender can send a UCC lien notice to any known customer or credit processor of yours. If this is going to force you to settle with them, it may not be prudent  for you to hire me.

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Q: Can you guaranty a win?

A: I can't guaranty any result, but if I am not sure that we can beat the MCA company in court, I am not taking your case.

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Amos Weinberg, Admitted New York State and United States District Court, 1978

amos@AmosLegal.com

(516) 829-3900

(631) JUSTICE

(561) 728-8800

49 Somerset Drive South

Great Neck NY 11020

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