6 Things Your MCA Funder Cannot Legally Do (Even Though They Will Try)
The contract gives the funder broad rights. The law imposes limits the contract does not mention.
MCA funders operate in a regulatory space that is less restrictive than traditional lending. The agreements they draft reflect this freedom: confessions of judgment, blanket UCC liens, personal guarantees, waiver-of-defense clauses, and fixed daily withdrawals that do not adjust for revenue. The contract, as written, appears to give the funder unlimited enforcement power.
It does not. The law imposes constraints that the contract does not disclose and that the funder has no obligation to mention.
They Cannot Freeze Your Bank Account Without a Judgment
A restraining notice on a bank account requires a court judgment. The funder cannot freeze your account merely because you missed a payment. If the funder holds a confession of judgment, it can obtain the judgment quickly (sometimes within days), but the judgment must be entered before the freeze. If the COJ is defective or the funder lacks jurisdiction, the freeze is unauthorized.
They Cannot File a Confession of Judgment Against an Out-of-State Business in New York
Since the 2019 amendments to CPLR 3218, confessions of judgment cannot be filed in New York against businesses that are not located in New York and do not conduct business in the state. If your business operates entirely outside New York and the funder filed a COJ in New York, the filing may be unenforceable.
They Cannot Charge Interest Rates That Exceed Usury Limits (If the Agreement Is a Loan)
MCA funders claim exemption from usury statutes because the advance is structured as a purchase of receivables, not a loan. If a court determines that the agreement is, in substance, a loan (based on the three-factor test: reconciliation, bankruptcy recourse, risk allocation), the statutory interest rate caps apply. In New York, the civil cap is sixteen percent and the criminal cap is twenty-five percent.
An agreement with an effective APR of one hundred fifty percent, or three hundred, or eight hundred, violates both.
Need Help With Your Case?
Don't face criminal charges alone. Our experienced defense attorneys are ready to fight for your rights and freedom.
- 100% Confidential
- Response Within 1 Hour
- No Obligation Consultation
Or call us directly:
(212) 300-5196They Cannot Ignore a Valid Reconciliation Request
The reconciliation clause is a contractual term the funder drafted and included in the agreement. If you submit a valid request with supporting documentation and the funder ignores it or denies it without adequate basis, the funder is in breach of its own contract.
They wrote the clause. They are bound by it.
They Cannot Contact Your Customers Without Contractual Authority
A funder may assert UCC lien rights by contacting your customers to redirect payments. But this right is limited to the scope of the security interest as defined in the agreement and the UCC filing. If the contact exceeds the authorized scope, or if the funder's claimed default is disputed, the contact may constitute tortious interference.
Todd Spodek
Lead Attorney & Founder
Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.
They Cannot Collect on a Void Agreement
If the agreement is declared usurious, it is void. A void agreement cannot be collected. The funder cannot pursue the balance, enforce the lien, or execute on the personal guarantee of a voided contract.
The determination of whether an agreement is void requires legal analysis by an attorney who understands the three-factor test, the relevant case law, and the specific provisions of your contract. That analysis is the consultation.
The funder knows what the contract permits. An attorney knows what the law allows. The difference between those two bodies of knowledge is the difference between capitulation and defense.
The consultation is free.
