Merchant Cash Advance UCC Liens

We commonly see many Merchant Cash Advance lenders attempt to use a UCC-1 lien against our clients in what we believe is an improper manner. Specifically, many of them instruct online platforms, merchant processors or even banks to levy our client’s account or to transfer any funds owed directly to the Merchant Cash Advance company.

Our understanding is that a UCC lien simply allows a creditor to obtain priority over other creditors when a debt is being paid or enforced via a judgment or bankruptcy. To obtain an actual levy or lien, a Merchant Cash Advance lender would have to first sue the business or individual, win the lawsuit and then obtain a judgment against them which would then allow these companies to levy accounts or request that assets be sent to the MCA lender that they have priority on as opposed to another creditor pursuing those same assets that may also have a lien and judgment against the same debtor.

In other words, we believe that the law clearly prescribes that an MCA lender would have to obtain a judgment against the debtor to then force any bank, merchant processor or online platform to levy an account or to transfer a debtor’s assets to the MCA. Unfortunately, we see MCA’s commonly using these UCC-1 liens to levy debtor’s accounts with companies such as: Square, Stripe, Paypal, Venmo, Amazon, Turo, Airbnb, Intuit and others. As can be seen, they primarily focus on merchant processors, online sales platforms, and online payroll companies to make it difficult for some businesses to continue operating. We believe that this use of a UCC lien to be improper and have been aggressively defending our clients against such actions.