Merchant Cash Advances, the extremely high-interest rate “receivables” contracts that caused so much hardship for small businesses have transformed over the last few years. Many of the large companies like the former Yellowstone Capital were featured in a Bloomberg expose that explained the notorious industry along with the types of people involved. That lead to an investigation by the NY State Attorney General and lawsuits that forced many of the bad players to either shut down and or pay major penalties and fines. New York State also took a major step by changing state laws to force Merchant Cash Advance Creditors to file lawsuits against small businesses instead of entering confession judgments which allowed the creditors to bypass litigation entirely. Merchant Cash Creditors often entered these confession judgments in small counties in Upstate New York allowing the judgments to be entered almost immediately. They were then able to levy bank accounts and merchant processing accounts, place liens on real and personal property, and pursue monies owed to small businesses from clients.
Common Merchant Cash Advance creditors such as Kalamata Capital, Pearl Capital, Mantis Funding, Kash Capital, On Deck Capital, Ivy Receivables, Last Chance Funding, and Green Note Funding now have to go through the regular litigation process just as any bank or other lender would. This means that a small business can defend itself and keep the burden on the MCA companies to prove their case. Unfortunately, we still see frequent default judgments entered against small businesses by law firms such as Zachter PLLC, Berkovitch & Bouskila, and The Feldman Law Firm PC on behalf of the MCA lenders. However, now small businesses can move to vacate these default judgments due to improper service or based on a reasonable excuse and re-open their case so it can be litigated on the merits just as in consumer debt cases whereas vacating confession judgments in the past was an almost impossible burden to meet.
Merchant Cash Advance business debt collection and litigation can now be aggressively defended against on the merits instead of dealing with confession judgments. Default judgments by MCA lenders and their law firms can be vacated giving leverage to small businesses to pursue resolution of the debt via litigation and or settlement.