If you run a small business in Florida, Texas, or Ohio and took a merchant cash advance, you might assume that any lawsuit over it would be filed where you live. More and more often, it isn’t. Local reporting this month says Rockland County Supreme Court, in the suburbs north of New York City, is getting hundreds of merchant cash advance (MCA) collection suits every month. Many are brought by funders against businesses and owners who have no connection to the county.

Around the same time, a federal bankruptcy judge in Manhattan held that a series of MCA agreements were really loans subject to New York’s usury laws. That supports what many business owners have long suspected: some of these “advances” are high-cost loans, and courts are increasingly willing to treat them that way.

Here is what is going on, why it matters, and what to do if you have been sued.

What a Merchant Cash Advance Is and Why the Label Matters

An MCA is usually sold as a purchase of your business’s future receivables rather than a loan. The funder gives you a lump sum, often within a day or two. In return you agree to repay a larger “purchased amount” through fixed daily or weekly debits from your bank account. A business that gets $50,000 might owe $70,000 or more, collected over a few months.

The funders insist on the “purchase” label for a reason. New York caps interest on loans: 16% a year under civil usury law and 25% under criminal usury law. If an MCA is really a sale of receivables, those caps don’t apply. If it is really a loan, many MCAs are far over both limits once the cost is annualized. The Rockland reporting describes agreements whose effective annual rates worked out to 288% and 546%.

What the Rockland County Reporting Found

According to the Rockland County Business Journal, MCA providers are filing hundreds of collection suits a month in Rockland County Supreme Court, often where neither the funder nor the business has any real tie to the county. The article names several funders whose cases appear on the docket, including Funding Futures, Mantis Funding, The Merchant Marketplace, Swift Funding, Lendr Online, and Funding Depot. It reports that a large share of the cases are handled by the same attorney.

Why Rockland? MCA contracts almost always say New York law governs and that the business agrees to be sued in New York. Under New York’s venue rules, when no party lives in New York, the plaintiff can generally pick any county, which gives funders room to choose the courthouse.

For an out-of-state owner, the result is harsh: papers from a New York court in a county you’ve never visited, with a short deadline to respond. Many defendants never respond, and the funder gets a default judgment that can be carried into your home state and enforced through bank levies.

The article also notes that several bills pending in the New York legislature would extend usury caps to MCAs, require funders to be licensed by the Department of Financial Services, and expand the Attorney General’s enforcement power. None of those proposals is law yet.

The Bankruptcy Ruling: In re Kossoff PLLC

The legal development getting the most attention is from the U.S. Bankruptcy Court for the Southern District of New York. In In re Kossoff PLLC, the Chapter 7 trustee for a collapsed Manhattan law firm challenged a series of MCA agreements the firm had signed before it failed. The court recharacterized 19 of those agreements as loans, despite contract language saying they were not loans, which exposed them to New York’s usury laws. Commentators have described the decision as part of a growing line of cases treating MCAs as disguised loans.

The court applied the three-factor test New York courts have used since the Appellate Division’s 2020 decision in LG Funding, LLC v. United Senior Properties of Olathe, LLC. The question is whether the funder really took on the risk that the business’s receivables would never come in, or whether repayment was effectively guaranteed. The three factors:

1. Reconciliation. Is there a real, workable way to lower the daily or weekly payments if the business’s sales drop? If the reconciliation clause is illusory, discretionary, or never honored in practice, that points toward a loan.
2. Finite term. Does the agreement effectively set a fixed repayment period, or does repayment truly depend on how the business performs?
3. Recourse on bankruptcy. Does the funder have recourse against the business or its owner if the business files for bankruptcy or closes? If default is triggered by the very event a true buyer of receivables would have to absorb, the funder has not taken the risk.

When all three point toward a guaranteed repayment, courts increasingly conclude the transaction is a loan. The label on the first page does not decide the question.

Why This Matters: Criminal Usury and Void Agreements

New York law has an important quirk. Corporations and LLCs generally cannot raise civil usury (the 16% limit) as a defense. They can raise criminal usury, the 25% limit, as a defense to enforcement. In 2021, New York’s highest court held in Adar Bays, LLC v. GeneSYS ID, Inc. that a loan found to be criminally usurious is void from the start.

The federal Second Circuit has also affirmed a finding that an MCA agreement was a criminally usurious loan (Fleetwood Services, LLC v. Ram Capital Funding, LLC, 2023). Together with Kossoff, these decisions give businesses and their owners real arguments that an MCA with triple-digit effective rates cannot be enforced as written.

This is not automatic. Many courts have enforced MCA agreements that were carefully drafted and actually administered as receivables purchases. But the trend gives defendants leverage they often don’t realize they have.

The Personal Guarantee Problem

Almost every MCA includes a personal guarantee from the business owner. When a funder sues, it typically names both the business and the owner. That means your personal bank accounts, not just the business’s, can be on the line after a judgment.

Whether a guarantee is enforceable, and whether the owner can use the business’s usury defense, depends on the contract and the facts. If you were sued personally, raise that question early.

Other Pressure on the MCA Industry

The Rockland filings come amid growing scrutiny of MCA practices in New York:

• Confessions of judgment. In 2019, New York barred filing confessions of judgment against people who don’t live in New York. MCA funders had used these to get instant judgments against out-of-state businesses without any lawsuit. The shift toward conventional lawsuits, and the volume now landing in places like Rockland, is partly a result of losing that shortcut.
• Attorney General enforcement. The New York Attorney General has brought major cases against MCA funders, including the Yellowstone Capital settlement that cancelled hundreds of millions of dollars in small-business debt. In June 2026 the AG sued an arbitration service called Rapid Ruling, alleging it posed as neutral while working with MCA companies. The AG says roughly 3,000 arbitrations were handled through it, with about 97% decided without the business appearing.

If You’ve Been Sued Over a Merchant Cash Advance

Whether your case is in Rockland County or anywhere else, these steps matter most:

1. Don’t ignore the summons. The biggest mistake MCA defendants make is letting the deadline pass. In New York, the time to respond is short, and it depends on how you were served. A default judgment is far harder and more expensive to undo than a timely answer.
2. Gather your documents. Collect the MCA agreement, any guarantee, every bank statement showing the debits, and all communications with the funder, especially any request to lower payments and how the funder responded.
3. Look closely at reconciliation. Did you ever ask for a reconciliation? Was it ignored, denied, or conditioned on terms that made it meaningless? Did the debits stay the same when your revenue fell? These facts often decide whether the deal is a loan.
4. Calculate the effective rate. Compare what you received with what you were required to pay back and how quickly. If the effective annual rate is above 25%, criminal usury may be a defense.
5. Check venue and service. If you have no connection to the county where you were sued, there may be grounds to challenge how you were served or to seek a transfer, depending on your contract and the facts.
6. If a default judgment already exists, New York law allows motions to vacate in certain circumstances, including improper service or a reasonable excuse combined with a meritorious defense. Act quickly.
7. Watch for bank levies and UCC liens. MCA funders often file UCC liens and may send notices to your customers or freeze accounts. Get advice before paying anyone under pressure.

The Bottom Line

The flood of MCA filings in Rockland County shows that funders are still aggressively using New York’s courts against businesses all over the country. At the same time, courts, including the bankruptcy court in Kossoff, are increasingly willing to look past the paperwork and call these deals what many of them are: high-interest loans. A business owner who responds promptly and examines the agreement carefully may have far more defenses than the funder’s collection letters suggest.

This article is for general information and is not legal advice. MCA disputes depend heavily on the specific agreement, the funder’s conduct, and the court involved. If you’ve been sued, consult a lawyer licensed in the state where the case is pending.