Getting Relief From Celtic Bank Merchant Cash Advances
Merchant cash advances have become a popular way for small businesses to access quick capital. Unlike traditional bank loans, merchant cash advances provide funds quickly without requiring strong credit or collateral. However, these advances come at a steep price – with interest rates and fees equivalent to 60-200% APR or more. Many small business owners have found themselves trapped in a vicious debt cycle, taking out additional advances just to pay off previous ones.If this sounds familiar, you may be considering legal action against predatory merchant cash advance companies like Celtic Bank. Here‘s what you need to know about merchant cash advance relief lawyers and potential defenses against these loans.
How Merchant Cash Advances Work
Merchant cash advances provide an upfront lump sum to a business in exchange for a percentage of future credit card sales. The advances are repaid automatically through daily withdrawals from the business‘s merchant account.Unlike a loan, merchant cash advances have:
- No fixed repayment schedule or term length. Repayment depends entirely on credit card sales volume.
- Very high implied interest rates often exceeding 100% APR.
- Daily repayments that can drain a struggling business’s cash flow.
This structure allows providers to skirt state lending laws that cap interest rates. Merchant cash advance companies argue these are purchases of future receivables, not loans subject to usury caps.
Common Problems with Merchant Cash Advances
While merchant cash advances provide fast access to capital, they come with many risks for small businesses. Common problems include:
- Debt Traps: The short-term relief comes at an extremely high long-term cost. Struggling businesses often take out new advances to repay old ones, spiraling deeper into debt.
- Predatory Lending: Advance providers often target desperate businesses without fully explaining the high costs. They may even lie about rates being comparable to credit cards.
- Aggressive Collections: Providers can raid business bank accounts daily for repayments regardless of actual sales volumes. Some even directly contact customers to collect payments.
- Confessions of Judgement: Many providers require business owners to sign confessions permitting lenders to obtain judgements without notice. This removes legal defenses.
- Personal Guarantees: Business owners are often required to personally guarantee merchant cash advance loans, putting personal assets at risk.
- Minimum Payments: Minimum daily repayment amounts in contracts often exceed reasonable percentages of sales, crippling cash flow.
Legal Defenses Against Abusive Merchant Cash Advances
If you feel trapped in an abusive merchant cash advance agreement, a lawyer may be able to help you fight back. Here are some potential defenses:
- Usury violations – Interest rates above state caps may violate lending laws.
- Unconscionable terms – One-sided or confusing terms could be ruled unenforceable.
- Misleading statements – Evidence of deception could nullify contracts.
- Breach of contract – Daily withdrawals exceeding sales percentages violate contracts.
- No personal guarantee – Guarantees not properly executed may not be valid.
- Violation of RICO laws – Racketeering lawsuits possible for egregious abuses.
The right lawyer can analyze the specifics of your situation to identify potential violations of lending laws or flaws in the contracts.
Challenging Confessions of Judgement
One of the most dangerous provisions in merchant cash advance contracts is the confession of judgement. This takes away your right to defend yourself if the lender sues you for defaulting.Many states heavily restrict or prohibit confessions signed before any dispute arises. A lawyer can argue these should be ruled invalid, restoring your legal defenses. Just showing you have a good faith defense against repayment can sometimes be enough to vacate a confession judgement.
Negotiating Settlements
Rather than fighting merchant cash advance lawsuits directly, many businesses reach settlements. An experienced lawyer may be able to negotiate deals reducing the total owed or setting affordable long-term repayment plans.Settlements avoiding high legal costs can be a wise choice. Lenders may accept lower repayments to avoid the risk you prove the debt is legally unenforceable. A negotiated solution provides certainty and prevents further damage to your business.
Declaring Bankruptcy
For some businesses trapped in merchant cash advance debt spirals, bankruptcy may be the only option. This stops collections and discharges debts.Chapter 7 bankruptcy liquidates assets to pay creditors, while Chapter 11 involves restructuring debts under court supervision. Chapter 13 bankruptcy sets up repayment plans for sole proprietors.Bankruptcy damages credit but allows a fresh start. Your lawyer can explain if this drastic step is appropriate for your situation.
Finding the Right Lawyer for Your Case
With the right legal representation, you can escape abusive merchant cash advances and save your business. Look for a lawyer experienced with small business finance litigation.Ask prospective attorneys about their specific experience with merchant cash advance cases. Be sure they understand the nuances and have successfully challenged these lenders before.
A local lawyer familiar with laws and courts in your state will have the best insights. They can also advise if favorable precedents exist that improve your odds.Schedule initial consultations with several attorneys to find one you are comfortable with. Many provide free consultations and only collect fees if they win your case.
Beware of Scams Promising Easy Relief
Unfortunately, some “companies” promising to easily erase merchant cash advance debts are actually scams. They collect large upfront fees then fail to deliver.Avoid any business asking for payment before services. Legitimate lawyers typically work on contingency, collecting only if successful. Be wary of money-back guarantees, which rarely pay out.
Check credentials carefully and do online research before trusting any advisor with your case. Contact your state bar association to verify an attorney‘s license is current and no serious complaints exist.
What to Expect During the Legal Process
Once you hire a qualified lawyer, what can you expect during the merchant cash advance relief process? Here are typical next steps:
- Reviewing your case – The lawyer will analyze your contracts and business records to build defenses.
- Demand letters – Your attorney sends letters telling lenders to cease collections pending litigation.
- Settlement negotiations – If lenders won’t stop voluntarily, your lawyer negotiates deals.
- Filing claims – If talks fail, your attorney files lawsuits asserting defenses and claims.
- Seeking injunctions – Courts can order lenders to halt collections during lawsuits.
- Discovery phase – Your lawyer requests evidence from lenders to support your case.
- Motions and hearings – Oral arguments may be held seeking favorable judgements.
- Trial – If necessary, your case could go before a judge or jury.
- Settlement – The majority of cases settle before reaching trial.
- Judgement – If no settlement, the court issues a binding judgement.
- Appeals – Either side can appeal judgements to higher courts.
With an experienced attorney, you may be able to resolve your situation quickly through a settlement. If not, be prepared for a lengthy legal battle. The good news is merchant cash advance companies often back down rather than risk an unpredictable trial.
Beware of Threats and Harassment
Unfortunately, some merchant cash advance providers resort to intimidation tactics against businesses that challenge them legally. Your lawyer will advise you not to engage with any threatening communication.If lenders continue harassing you, keep detailed records. Seek restraining orders if needed. Any retaliation for exercising your legal rights can be used against lenders.Stand firm and let your attorney handle communications. Don’t let scare tactics derail your case.
Government Crackdowns on Abusive Lending
Regulators have ramped up actions against predatory merchant cash advance providers in recent years:
- The FTC won a case against a provider charging up to 350% interest in 2021.
- The CFPB sued several major providers in 2020 for deceptive practices.
- New York sued 55 providers in 2021 for illegal lending.
- California passed a bill regulating merchant cash advances in 2020.
- SEC investigations into securities violations are ongoing.
Rising legal and regulatory pressure increases risks for lenders. This environment improves the chances your attorney can negotiate settlements or win judgements.