5 Defenses Your Attorney Can Use to Fight an MCA Lawsuit

The funder filed the complaint expecting a default judgment. An answer changes everything.

MCA lawsuits are built for speed, not scrutiny. The complaint alleges breach of contract. The relief demanded is the full accelerated balance plus fees and attorneys' costs. The summons imposes a response deadline that, for most unrepresented business owners, functions as a countdown to a judgment entered without opposition. The funder's legal strategy depends on the merchant not responding. When the merchant responds, and responds with competent representation, the case becomes a different proceeding entirely.

An attorney examining your MCA agreement has access to defenses that the agreement itself was designed to prevent you from discovering.

Usury: The Agreement Is a Loan

The most powerful defense available in MCA litigation is the argument that the agreement is not what it claims to be. If the contract functions as a loan (fixed daily payments, illusory reconciliation, full recourse through personal guarantees), New York's usury statutes apply. The civil cap is sixteen percent. The criminal cap is twenty-five percent.

An MCA with an effective APR of one hundred fifty percent, two hundred, or higher violates both. The remedy is not merely a reduction in the amount owed. Under New York's criminal usury doctrine, the entire agreement may be declared void and the obligation extinguished. The Yellowstone Capital settlement, which resulted in the cancellation of over five hundred million in merchant debt, confirmed the power of this defense at scale.

Your attorney will examine the reconciliation clause, the risk allocation, and the repayment mechanism. If the agreement fails the three-factor test, the usury defense transforms the litigation.

Failure to Reconcile: The Funder Breached First

If your agreement contains a reconciliation clause and the funder refused to honor it, ignored your request, or imposed requirements designed to prevent reconciliation from occurring, the funder may have breached the agreement before you did.

A breach-of-contract claim requires both a contract and a breach. If the funder's refusal to reconcile constitutes a material breach, your subsequent failure to make payments may be excused. The funder cannot enforce an agreement it violated.

The funder sues for breach. Your attorney responds: you breached first.

This defense is most effective when the merchant can demonstrate a documented reconciliation request that was denied or ignored. The paper trail is the defense. Send requests in writing. Retain copies. Document the funder's response. An attorney can use this record to reframe the litigation from the merchant's default to the funder's misconduct.

Improper Service and Jurisdictional Defects

MCA lawsuits are frequently filed in New York, regardless of where the merchant is located, because the contract specifies New York as the venue. The summons and complaint must be served in accordance with the rules of civil procedure applicable in the filing jurisdiction.

Service that is defective (mailed to the wrong address, served on a person not authorized to accept service, or accomplished through a method not permitted by the rules) can be challenged. If service was improper, the deadline to respond may not have begun running when the funder claims it did. A default judgment entered on the basis of defective service can be vacated.