Sued Over a Merchant Cash Advance? Own the FAIR Act / Confession-of-Judgment Search Wave
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Sued Over a Merchant Cash Advance? Own the FAIR Act / Confession-of-Judgment Search Wave
If you took a merchant cash advance a few years back and now you are getting calls from attorneys, debt-relief companies, or "settlement specialists" who seem to know exactly what happened to your business, you are not imagining things. There is a real search wave going on. Court dockets are public, and confession-of-judgment (COJ) filings tied to MCA agreements are easy to find if you know where to look. Firms of every stripe scan those records, spot merchants with a judgment or a pending lawsuit, and start dialing. Some of those callers genuinely want to help. Others just want a fee. Knowing the difference is the first thing to sort out.
What a confession of judgment actually is
A confession of judgment is a document a business signs, sometimes as part of the MCA paperwork, agreeing in advance to let the funder enter a judgment against the business if a default happens, without a trial and often without the business getting real advance notice. For years, New York was a common venue for these filings because a lot of MCA agreements named New York courts. In 2019, New York changed its rules so that confessions of judgment can no longer be used against businesses or owners located outside New York state. That closed a major loophole, but it did not erase agreements signed before the change, and it did not eliminate confessions of judgment used against New York-based merchants or through other legal mechanisms in other states. If your agreement included a COJ and you are now behind, it is worth finding out exactly what was filed, where, and under what terms, rather than guessing.
Why the "search wave" exists
Court filings are public record. Once a judgment is entered, it shows up in searchable databases that legal marketers, collection referral services, and some attorneys monitor as a matter of routine. If your business appears in one of those judgment databases, expect outreach. Some of it may come from firms offering to negotiate down what you owe. Some may come from lawyers who specialize in MCA disputes. Some may just be lead generators trying to sell your contact information to someone else. None of this outreach is inherently a scam, but none of it is inherently in your interest either. Treat every unsolicited call the same way you would treat an unsolicited offer on anything else: verify who you are actually talking to, ask for everything in writing, and do not sign or pay anything on the spot.
What to actually do if you are named in a suit
First, read the judgment or the complaint carefully, or have someone qualified read it with you. Confirm the amount claimed, the court it was filed in, and whether you were given proper notice. Second, do not ignore a court date or a summons because the amount feels overwhelming. Judgments by default are usually worse than judgments where you showed up and explained your situation. Third, separate the legal question (was this filed correctly, and what are your rights) from the financial question (can this be restructured, refinanced, or paid down over time). Those often need different kinds of help, and conflating them is how merchants end up paying two sets of fees for one problem.
Where financing fits into this
If the underlying issue is a temporary cash crunch rather than a legal defect in the original agreement, sometimes the most useful move is addressing the cash flow problem directly rather than only fighting the paperwork. Clover Advance is a direct funder of merchant cash advances, meaning we fund deals with our own capital rather than shopping your file around to other lenders. We cannot tell you in advance what any specific business would be approved for, since nothing gets underwritten until we actually review the numbers, but we can walk through your situation honestly and tell you what your realistic options look like.
If you want to talk through where you stand, use the contact form and we will take a look.