MCA Debt Relief Options in New York
New York is where most MCA agreements are litigated, where most confessions of judgment are filed, and where the most significant legal precedents protecting business owners have been established. If you have MCA debt in New York, the law is evolving in your favor.
New York occupies a unique position in the MCA landscape. Most MCA agreements select New York law as the governing law and New York courts as the forum for disputes. Most confessions of judgment are filed in New York counties. Most of the case law examining whether MCAs are loans or purchases has been developed by New York courts. The state is the center of gravity for MCA litigation, and the legal developments emerging from New York courts are shaping the national landscape.
This concentration means that New York business owners have access to the most developed body of case law supporting MCA challenges, the most experienced attorneys in MCA litigation, and the most receptive judicial environment for recharacterization arguments.
The Legal Landscape in New York
New York enacted significant reforms to its confession of judgment rules in 2019, amending CPLR 3218 to impose new requirements on the affidavits accompanying confessions and restricting their use against out-of-state defendants. The amendments were a direct response to investigative reporting and advocacy that documented the MCA industry’s systematic use of confessions of judgment to freeze bank accounts and seize assets without notice or hearing.
New York’s commercial financing disclosure law, enacted in 2020 and implemented through regulations adopted by the Department of Financial Services, requires MCA providers to disclose the finance charge, the annual percentage rate, the total repayment amount, and other standardized metrics. The law brings MCA disclosures closer to the transparency required for consumer loans, giving business owners the information needed to evaluate the true cost of the advance.
New York’s General Business Law Section 349 prohibits deceptive acts and practices and provides a private right of action for businesses harmed by deceptive conduct. The statute has been used in MCA cases to challenge misrepresentations about the cost of advances, the availability of reconciliation, and the nature of the transaction.
Recharacterization and Usury
New York courts have been at the forefront of MCA recharacterization analysis. Multiple courts have examined MCA agreements and concluded that where the funder bore no genuine risk of loss — because of fixed payments, personal guarantees, confessions of judgment, and non-functional reconciliation clauses — the transaction is a loan, not a purchase.
New York’s criminal usury statute, Penal Law Section 190.40, makes it a class E felony to charge interest exceeding 25% per annum. A loan that exceeds this threshold is void under General Obligations Law Section 5-511. The voidness is absolute. The borrower has no obligation to repay any portion of a criminally usurious loan. When MCAs are recharacterized and their effective APRs calculated, rates of 100% to 300% are common. These rates exceed the criminal usury threshold by multiples.
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(212) 300-5196The combination of the recharacterization case law and the usury statute creates a powerful framework for New York business owners. The argument is straightforward: the funder bore no risk, the transaction is a loan, the rate exceeds 25%, the agreement is void. Courts have accepted this argument repeatedly.
Your Relief Options
Vacating confessions of judgment. If a confession of judgment has been filed against you or your business, a motion to vacate can challenge the judgment on procedural grounds, on the merits of the underlying agreement, or both. Emergency relief is available to release frozen bank accounts pending the motion. New York attorneys experienced in MCA litigation handle these motions routinely.
Affirmative litigation. Filing a lawsuit seeking a declaratory judgment that the MCA is void as a usurious loan, combined with claims for fraud, deceptive practices, and illegal collection, puts you in the plaintiff’s seat. The preemptive lawsuit changes the dynamics of the dispute and creates discovery obligations for the funder.
Settlement negotiation. With strong legal claims — usury, COJ procedural defects, disclosure violations — as leverage, settlement negotiations in New York are often favorable. The funder’s exposure to a voidness determination incentivizes settlement at a significant discount to the claimed balance.
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.
Regulatory complaints. Complaints to the New York Department of Financial Services, the Attorney General’s office, and the New York City Department of Consumer and Worker Protection can trigger investigations and contribute to the regulatory record.
Practical Steps
If you have received a default notice, a confession of judgment has been filed, or your bank account has been frozen, the timeline for action is compressed. Emergency motions and restraining orders must be filed promptly. Contact an attorney who practices MCA litigation in New York immediately.
If you are current on your MCA but struggling with the daily withdrawals, the time to act is now — before default, before the confession of judgment is filed, before the account is frozen. A preemptive legal strategy is more effective and less expensive than a reactive one. An attorney can evaluate your agreement, calculate the effective rate, assess the recharacterization argument, and recommend the optimal path forward.
