Five Grounds to Question the Personal Guarantee Behind Your MCA Agreement

The Signature They Are Counting On

A personal guarantee enforces nothing on its own. The funder talks about it as a switch, signed once and thrown at the first missed remittance, and the collections department recites it over the phone as though recitation were process. This is the posture you are expected to accept. A guarantee is an agreement; agreements carry defenses, procedural prerequisites, and limits that no one with a commission riding on the file will volunteer. Five grounds decide, in our experience, whether the document you signed carries the weight your funder claims for it. The two treated here do most of the work.

Ground One: Usury and the Underlying Agreement

A guarantee borrows every unit of its strength from the obligation beneath it. Should a court determine that the MCA agreement was in substance a loan rather than a purchase of future receivables, and that the effective rate clears the usury ceiling of the state, the agreement is void, and a void agreement supports no guarantee. New York runs a dual framework: civil usury caps interest at sixteen percent, criminal usury at twenty-five. Convert the factor rate on a typical advance into an annual percentage rate and the figure lands, in most of the files we have reviewed, well past one hundred percent. The whole dispute compresses into one question of classification, purchase or loan, and the guarantee survives or falls with the answer.

Courts have accepted the argument. In Westchester County and in the Southern District, judges who examined what funders did, rather than what their contracts recited, vacated confessions of judgment and held MCA agreements void as usurious. The label on the first page does not bind a court. The conduct underneath it does.

Ground Two: Procedural Defects in the Confession of Judgment

Enforcement tends to arrive through a confession of judgment filed in New York, and CPLR Section 3218 governs what that instrument must contain. The affidavit must state the sum for which judgment may be entered, identify the county where the defendant resided at signing, set out in concise terms the facts behind the debt, and establish that the amount confessed is justly due. Each element is mandatory. An affidavit that misses one sits exposed to vacatur.

Volume is where the funder’s process betrays itself. Confessions get filed by the hundred, drafted from templates by staff who will never read the underlying agreement, and the output shows it: notarizations omitted, counties misidentified, sums padded with fees no contract authorized. Any one of those defects supports vacatur. Once the judgment is gone, the funder must collect the way every other creditor collects, through a lawsuit with service and an answer and defenses you are entitled to raise. The remaining grounds reward the same habit, reading the paper against the statute rather than against the funder’s description of it. A first conversation about your guarantee costs nothing and assumes nothing.