Merchant Cash Advance creditors or “MCA’s” are known to open multiple new companies with new names. We rarely see the same MCA creditors filing lawsuits with the same name for more than a year. It certainly seems that the MCA companies may open these new named sister companies for deceptive purposes given the consistent stream of new names, but who are usually represented by the same collection attorneys and likely owned by the same few MCA parent companies that we see over and over again. We usually see the law firm of David Fogel PC, a MCA collection law firm representing the MCA creditors above.

As always, the most important step is to make sure that an answer with affirmative defenses is submitted once a MCA lawsuit is received to avoid a default. Counterclaims may be appropriate in particular situations especially if UCC liens are being used for malicious purposes. Preventing a default judgment will keep the burden on the MCA plaintiff and keep some leverage on the side of the small business defendant. More importantly, it will prevent the levying of assets and or property which a judgment allows for.

If a default judgment is reached, it is extremely important to move to vacate the default as quickly as possible. The first step is to review the affidavit of service so that we know what kind of service was effectuated. Usually, we see service via mail and even e-mail these days when it comes to MCA matters. Service via mail may sometimes have tracking numbers attached but often it does not making service questionable. Wrong and or old addresses continue to be served causing a great deal of default judgments against small business. What we do know for sure is that personal service is rarely if ever attempted given that most MCA contracts allow for mail or e-mail service of process on the defendant. This means that under CPLR 317, a default may be vacated even if the defendant was served or has notice of the suit as long as it was not personal service and they have at least one meritorious defense. There are usually plenty of meritorious defenses when it comes to these MCA cases. However, it is important to note that the motion must be made within one year of notice of the judgment and within 5 years of the entry of the judgment. This standard is more difficult to meet in consumer debt cases that may be old but most small businesses learn about a default judgment rather quickly because of the aggressive nature of judgment enforcement that MCA creditors like the ones above usually take.

Litigation itself can be a lengthy process but we have seen more and more judges deny summary judgment motions from creditors like Litefund, Posperum and Swift Funding. These creditors will often be willing to engage in settlement discussions through David Fogel’s office, who we have always been able to obtain reasonable settlements with. This usually means a significant reduction of the total balance and an interest free re-payment term from 12-36 months depending on how high the balance is.

There are options for defending against MCA lawsuits against creditors like Prosperum, Litefund, Swift and others as well as the ability to vacate defaults and even negotiate resolutions as long as a knowledgeable attorney in this very niche field is handling the matter.