Merchant cash advance (MCA) providers can use harsh collection tactics to get repaid quickly. These lenders provide cash advances to small businesses in exchange for a portion of their daily credit and debit card sales. But when merchants struggle to repay, providers may rush to file a default judgment.
Understanding their default judgment tactics
MCA providers typically move quickly to get a default judgment because it gives them leverage over the merchant. This is often made possible by a confession of judgment clause, which enables the provider to secure a court judgment without a full lawsuit.
The following are some reasons why a provider might rush to get a default judgment:
- Efficiency: A default judgment allows the provider to bypass lengthy and costly litigation, getting them paid faster. This swift action can catch merchants off guard, leaving them little time to respond or seek help.
- Increased collection power: With a default judgment, the provider can garnish bank accounts, seize assets and even force the sale of business property to satisfy the debt. This range of collection tools can make it harder for merchants to avoid paying.
- Intimidation factor: A provider can use a default judgment to intimidate merchants into paying, even if they have a valid defense.
When an MCA provider obtains a default judgment, it can be devastating for the merchant. The provider can use this judgment to take control of the merchant’s assets, causing significant financial strain. Meanwhile, merchants who receive notice of a default judgment may be able to vacate it by challenging its legality or showing a valid excuse for not responding.
Fighting back against unfair collection practices
Facing a default judgment can be overwhelming for merchants. Seeking legal counsel may help them fight back against unfair collection practices and negotiate with the provider. By taking control of their situation, they may better navigate the complex MCA landscape as they find a more favorable resolution.