Streetwide Asset Recovery Collection Lawsuit: 6 Rights You Still Have

If your business has been sued by Streetwide Asset Recovery Group, it’s important for you to understand your rights and what you can do to minimize the financial impact. Knowing your rights and responsibilities as the defendant can help you protect your business, avoid further damage and possibly settle the case on favorable terms. However, the law is complex and may vary depending on the nature of the case. You get at least six rights: to answer the lawsuit on time, to raise defenses in your answer, to know who’s really collecting on the debt, to contest an arbitration award, to argue it was a loan, and to negotiate a settlement. Keep in mind that most of these run on deadlines, though, and can be lost if missed.

1. Answer on time

Your first action when served with the summons and complaint is to answer the complaint within the timeframe stated in the documents. Depending on your state’s laws, you generally have anywhere from 20 to 35 days to respond. Failing to respond can result in a default judgment, which means the court can rule in the plaintiff’s favor without hearing your side of the story. In New Jersey’s Superior Court system, the defendant has 35 days to serve the answer plus a Case Information Statement. A defendant in the New York City Civil Court has 20 days if served personally and 30 days otherwise, but a defendant in federal court has 21 days to respond.

2. Raise every defense early

In your answer, you should assert all available defenses, even those that might not be immediately apparent. Additionally, failure to raise a defense in the answer can waive it, preventing you from using it later in the lawsuit. In New York, if you are served with the lawsuit papers incorrectly, you have to complain early. If you think there was something wrong with the way you were served, you must raise that in your answer or as a motion to dismiss before you answer. You cannot wait until you are appealing the ruling. In a recent New York case involving Diesel Funding, the appeals court rejected some of the business’s arguments because they had not been raised earlier.

3. Know who is suing you

Streetwide says it works only in financial services, securities and securities-fraud debt. Its website says it sets up and oversees arbitrations, gets awards, which it turns into court judgments, and uses a nationwide network of securities attorneys. The federal Fair Debt Collection Practices Act (FDCPA) generally governs the way collectors of personal or household debt must act. Business debt is largely exempt. Consumer-debt protections likely won’t help you. However, you may face an arbitration and then a court judgment, not only a lawsuit. Know which rules apply.

4. Challenge an arbitration award

Under the Federal Arbitration Act, a party generally must ask a court to confirm an award within one year. The other side can usually fight confirmation only on limited grounds to vacate, modify or correct an award. The law requires notice of a motion to vacate, modify or correct to be served within three months after the award is filed or delivered. But don’t wait for the confirming side to go to court, because your three months can run from when they file the award or even when it was delivered.

5. Argue the deal was a loan

In the same case, Diesel Funding paid $850,000 to a company that agreed to pay back $1,274,150 from daily sales. The debtor argued the deal was usurious, or charged an illegally high interest rate, so the contract was void.

A company cannot charge too high an interest rate if the deal is not a loan. Judges look at several factors to determine whether an agreement is a loan. Those factors include whether there was a reconciliation provision, a finite term and what happened if the merchant went bankrupt. The contract had a reconciliation provision, and the merchant was to make payments based on receivables. The merchant had also argued that the reconciliation provision in the deal was illusory. But the debtor had never asked to use it, so the court would not review that claim. Finally, the agreement did not have a provision that made bankruptcy a default, so that ground also failed. The deal was not usurious because there was no loan.

The lesson here is simple. Check whether your payments are capped at a percentage of your receivables and will adjust downward with lower sales. Also, make sure to request a reconciliation before telling a judge the contract is a loan.

6. Settle, but read the default terms

As the defendant, you have the right to settle the lawsuit. The Diesel Funding deal settled for $1,150,740.12, and if the merchant defaulted, the lender would get a judgment without more notice, plus fees of 20 percent of the remaining balance. The merchant made no payments, and the judgment for Diesel came in at $1,476,330.68. The court enforced it. Diesel’s judgment ended up more than $325,000 above the settlement figure. Before you sign a settlement agreement, make sure the payments are manageable for you.

If your agreement includes a confession of judgment, New York tightened the rules on those for contracts signed after August 30, 2019. The creditor has to file the judgment in the NY county where the debtor lived when signing (or lives now); otherwise, the creditor can’t use the confession. This blocks using the confession against out-of-state debtors except by government agencies. But if the debtor has a place of business in New York, it can be in any county where the debtor has a place of business.

New Jersey gives you some space to deal with a default judgment. You can ask a court to vacate it for excusable neglect, mistake or fraud within a reasonable time, though no more than a year after it was entered. Claims on a contract generally have a six-year statute of limitations.

None of these rights helps you if you sit on the papers. If served, read them, mark the deadlines, raise defenses and read any settlement before you sign.

A free contract review costs nothing and takes a day or two. Call (888) 837-7053, or send the agreements to Delancey Street for a straight read on your options.