The Merchant Cash Advance lenders above are some of the more common creditors that we have encountered recently defending businesses against the extremely high interest rate so called MCA “purchase of receivables,” contracts. We consistently find Michael Scarpati, of Regent and Associates, which seems to be a debt collection law firm representing these MCA lenders in lawsuits brought against businesses across the country. Interestingly, the law firm seems to be operating out of Texas although all of the cases that we have seen brought are in New York. Olympus, Prosperum, Wefund and the others all follow the similar playbook of other MCA creditors that we have discussed for years. They file lawsuits in volume against businesses and obtain a high majority of default judgments. These default judgments allow them to levy assets such as bank accounts and try to enforce against individuals who personally guaranteed these agreements. We have previously discussed that default judgments are prevalent in MCA litigation primarily because almost all of the MCA lenders have a clause in their contracts waiving formal service on the defendant. Some process service via mail while others do so via email. Almost every business we represent has had a default judgment placed against them because they did not receive service. It is also common that MCA lenders like the ones above move for default 31 days after the alleged service. This has produced unhappy remarks and multiple questions from many judges that we have appeared before as it denies the ability of a defendant who does learn about the lawsuit albeit often late to find proper counsel to defend them.

It is important for defendants who do receive notice of the actual lawsuit to submit defenses within the allowed upon time period to keep the burden on the MCA companies to prove their case. More New York state and federal cases are deciding that many of these Merchant Cash agreements are criminally usurious and employ deceptive practices. We also file counterclaims in situations where we believe they are appropriate and even motions to dismiss if we believe that we have a good chance of succeeding on the merits. Recently, we have been successful in dismissal based on improper jurisdiction. We often find that these MCA agreements are sloppy but in some recent scenarios against Regent and Mr. Scarpati, we were able to dismiss primarily because the Merchant Cash lender’s own agreement provided for a forum other than New York for litigation. Why they proceeded to file in New York is not available to us.

In a case where a default judgment is obtained, a motion to vacate must be filed as quickly as possible explaining the reasonable excuse for default or simply showing improper service along with a meritorious defense as described above. A motion to dismiss may be filed along with the motion to vacate if the case was filed in the wrong forum for example. However, engaging in practical settlement discussions also makes sense. Most clients would like a resolution to the underlying debt matter instead of prolonged and lengthy litigation. Creditors such as Prosperum, Funding Depot and others above are likely to agree to fair settlement terms that provides for a reduction of the balance and an interest free monthly repayment plan from our experience. There are certain cases and certain clients that would rather litigate to obtain dismissal and so it is important to identify the best defenses and counterclaims based on the agreement with the MCA lender and current case law.