Wisconsin Merchant Cash Advance Attorney
Common Legal Issues With Merchant Cash Advances in Wisconsin
While MCAs offer easy access to capital, they also come with major downsides that often lead to legal problems for borrowers:
- Deceptive marketing – MCA providers may misrepresent or omit key terms like costs, payment amounts, penalties and use of personal guarantees[5].
- Excessively high costs – MCAs can carry annualized interest rates over 100% once all fees are factored in. These high costs quickly consume businesses’ profits[6].
- Personal guarantees – Many MCA contracts require a personal guarantee from the business owner, meaning their personal assets can be pursued for repayment. This is often not clearly disclosed upfront.
- Confessions of judgement – MCA contracts frequently contain confessions of judgement (COJ) allowing the lender to obtain a judgement without notice or a hearing if the borrower defaults. This gives them immense collection power.
- Aggressive collections – MCA lenders are notorious for aggressive collections like freezing bank accounts, garnishing wages and harassing the borrower. Some engage in illegal practices.
- Lawsuits and arbitration – Predatory MCA lenders frequently sue borrowers or force them into arbitration over disputes. Defending these actions is costly.
- Damaged credit and finances – Struggling to repay an MCA can wreck a borrower’s personal credit and leave their business finances in ruins.
How a Wisconsin Merchant Cash Advance Attorney Can Help
If you are facing legal issues related to a merchant cash advance in Wisconsin, contacting an attorney experienced in this unique area is highly advisable. An MCA lawyer can provide a variety of services and protections:
-- Contract review – Have an attorney review your MCA contract to identify any illegal, deceptive or unconscionable terms.
- Renegotiation – They can negotiate with the MCA provider to work out alternative, more affordable repayment terms.
- Settlements – If unable to renegotiate terms, they may be able to negotiate a discounted lump sum settlement.
- Lawsuits – Defend against any lawsuits filed over alleged default on MCA repayment.
- Violations of law – Identify any violations of state/federal lending laws and consumer protections.
- Confessions of judgement – Challenge or defend against improperly obtained confessions of judgement.
- Bankruptcy – File for bankruptcy as a last resort to discharge some or all MCA debt.
- Cessation of collections – Demand collections cease until disputes are resolved.
- Damages – If applicable, pursue actual and statutory damages against the MCA provider for legal violations.
Having an qualified attorney levels the playing field when dealing with unscrupulous MCA companies. They have the expertise to protect your interests and maximize your legal options.
Wisconsin Laws Regarding Merchant Cash Advances
Wisconsin has enacted some laws regarding regulation of merchant cash advances:
- Interest rate caps – MCAs are subject to Wisconsin’s criminal usury law capping interest rates at no more than 18% for licensed lenders. However, some MCA providers exploit loopholes claiming they are purchasing future receivables, not making loans.
- Licensing requirements – MCA providers must obtain a Wisconsin Consumer Act license if they charge over 18% annual interest. But many skirt this requirement.
- Prohibited practices – State law bans some harmful acts like taking confessions of judgement against Wisconsin residents. But enforcement remains limited.
- Pending legislation – As of 2022, Wisconsin legislators have proposed bills imposing additional regulations on MCA lending practices. These have not yet passed into law.
So while Wisconsin has made some attempts at regulation, major gaps remain that enable predatory MCA lending. Borrowers must exercise extreme caution.
Vetting a Wisconsin Merchant Cash Advance Attorney
If exploring legal assistance for MCA issues, it is critical to vet attorneys thoroughly. Key credentials to seek out include:
-- MCA focus – They should specialize specifically in MCA law, not just general financial services. The MCA industry has unique dynamics.
- Local experience – Look for attorneys familiar with Wisconsin laws and courts. State laws vary regarding MCAs.
- Track record – Ask about their history negotiating, settling or litigating MCA cases. Check reviews and client testimonials.
- Fee structure – MCA attorneys typically work on a contingency basis or offer free consultations. Avoid any charging hefty upfront fees.
- Licensed – They must be a licensed attorney in good standing with the Wisconsin bar. Verify their status.
- Personable – You will be sharing sensitive financial details so make sure you are comfortable working with them.
Doing diligence allows you to find an attorney truly qualified to address your MCA issues. Don’t just hire the first lawyer you come across.
Alternatives to Merchant Cash Advances in Wisconsin
Rather than resorting to a potentially harmful MCA, Wisconsin businesses do have some safer financing alternatives to consider:
- Bank loans – Traditional term loans and lines of credit that offer lower costs, better protections, and more oversight.
- SBA loans – Small Business Administration loans backstopped by the federal government. More applicant-friendly than conventional loans.
- Invoice factoring – Selling unpaid customer invoices to a factoring company for immediate cash. Lower risk than MCAs.
- Equipment financing – Loans using owned equipment as collateral. Allows you to expand equipment.
- 401(k) business financing – Some allow you to leverage funds from your 401(k) for business purposes.
- Crowdfunding – Raising small amounts of capital from a large number of backers.
- Angel investors – Wealthy individuals who provide capital in exchange for equity.
- Venture capital – Institutional investors who provide substantial funding to startups.
While these options have more prerequisites, they provide funding without the predatory practices of MCAs.
Conclusion
Merchant cash advances seem like an easy financing solution for Wisconsin businesses, but can quickly spiral out of control if providers use deceptive or abusive tactics. Working with an experienced Wisconsin MCA attorney provides the best chance to defend your rights and improve the situation. They can apply their specialized legal knowledge to negotiate better repayment terms, reach settlements, or pursue formal legal action if warranted. With assistance from qualified counsel, businesses can mitigate the damage from predatory merchant cash advances.