Newco Capital Group, MCA Servicing Company and capytal.com Merchant Cash Advance Lawsuits and Judgments

We encounter Newco Capital and the rest of the MCA creditors above frequently when discussing Merchant cash Advance collection, litigation and judgment enforcement. Newco, Capytal.com and others are represented by common MCA debt collection law firms including: PIEKARSKI LAW PLLC, who we see more often now, BERKOVITCH AND BOUSKILA PLLC, probably the most common MCA law firm, MURRAY LEGAL PLLC AND AINSWORTH GORKIN PLLC. Some are more aggressive than others but they essentially all follow the same playbook. Collection agents aggressively pursue businesses and their owners. A lawsuit is usually filed quickly thereafter. Although we cannot say for sure that their goal is to obtain a default judgment, our experience shows a high majority of businesses with default judgments obtained against them by MCA creditors. We have consistently discussed this issue, and it is very clearly related to the waiver of common service of process in the MCA contracts. In other words, most businesses are served via mail and more-so email. This results in a high number of default judgments and these judgments allow Newco and others to levy bank accounts and enforce on other business and personal assets since personal guarantees are always obtained by the MCA companies.

This form of serving businesses does make it easier to vacate default judgments. Instead of the usual method used in CPLR 5015 which requires a reasonable excuse and meritorious defense, CPLR 317 is a more useful provision when it comes to MCA default judgments. Under CPLR 317, a reasonable excuse is not required to vacate a judgment as long as the defendant has not been personally served, has a meritorious defense and as long as the defendant moves to vacate the judgment within 5 years of its entry and within one year of notice about the judgment. Personal service means that the defendant must be served in hand and that the affidavit of service has to have a clear description of the defendant. This is beneficial to businesses because the affidavit from Newco or Capytal.com and others will clearly show that defendant business and or individual was not personally served given that mail or email service was used. So as long as it is a judgment that was entered within the last five years, it can be vacated without showing a reasonable excuse under CPLR 317. Unfortunately, many judges do not know or properly understand CPLR 317 and use the CPLR 5015 analysis improperly stating that a reasonable excuse may not exist. We regularly move to appeal these improper decisions although a motion to re-argue can be filed as well so that the judge understands that they missed the issue.

Vacating defaults against MCA creditors is extremely important as it re-opens the case and allows the litigation to take place on the merits of the case instead of on default which the New York Court of Appeals has insisted that it prefers. There are numerous new defenses available to protect businesses against aggressive Merchant Cash Advance companies such as Capytal.com, Newco and others as well as potential counterclaims for abusive UCC liens and even on RICO claims which we are seeing filed more commonly against MCA creditors. Defending against MCA creditors also allows for potential settlement discussions if a client is interested in resolving the matter without the need fo further litigation. Almost all the MCA creditors and their attorneys that we have engaged with are interested in some sort of settlement. Every matter is different, but we have seen reductions from 20%-80% off of the balance and we have been able to obtain interest free payment plans on reduced balances from 12-36 months depending on the amount of the balance. The key is to make sure that businesses are protected when a lawsuit is filed or even in pre-suit so that they are not bullied and of course vacating any default judgment to remove the judgment enforcement authority that the MCA creditors possess.