The scariest moments in MCA debt are rarely the payments themselves. They are the morning your bank account is frozen, the notice that a lien has been filed against your receivables, or the discovery that a judgment was entered against your business in a state you have never set foot in. Understanding the two legal tools behind those moments, UCC liens and confessions of judgment, is the first step to defending against them.
UCC liens: the funder's claim on your receivables
Most MCA agreements include a security interest that the funder perfects by filing a UCC-1 financing statement. That filing puts the world on notice that the funder claims an interest in your assets, typically your receivables, meaning the money your customers and payment processors owe you.
In a default scenario, funders use that lien aggressively. They can send notices to your payment processors and platforms, and businesses have had income from card processors and delivery platforms frozen at the source. A UCC filing also damages your ability to get any other financing, because every lender who searches the public record sees the funder's claim ahead of theirs.
The good news: liens are negotiable. Lien releases are a standard component of settlement agreements, and getting them removed is often one of the most valuable outcomes of resolving the debt.
Confessions of judgment: losing the lawsuit before it starts
A confession of judgment, or COJ, is a clause where you agree in advance to let the funder obtain a court judgment against you without notice or a hearing if they declare a default. The funder's attorney files an affidavit, a clerk enters the judgment, and within days your accounts can be restrained and assets levied. Many owners learn a judgment exists only after their bank account stops working.
This practice exploded into public view through investigative reporting, and lawmakers responded. In August 2019, New York amended its law (CPLR 3218) to prohibit filing confessions of judgment against out-of-state debtors, which mattered enormously because New York courts had been the industry's favorite venue, producing tens of thousands of judgments against small businesses nationwide. New Jersey followed with its own ban on COJs in business financing contracts with New Jersey debtors in 2020, and several states, including Florida and Massachusetts, do not permit them in commercial contracts at all.
Important: if you are located outside New York and a funder filed a New York confession of judgment against you after August 2019, attorneys widely note that such judgments can be challenged and potentially vacated. That is a conversation to have with a lawyer immediately, not eventually.
The protection is not universal. Businesses located in New York can still be subject to COJs, and funders have adapted by using similar instruments, such as cognovit provisions, in states that still allow them. Always know what your contract contains before a default is ever on the table.
Regulators are paying attention
The legal environment has shifted against the industry's worst practices. The most dramatic example came in January 2025, when the New York Attorney General announced a judgment and settlement exceeding $1 billion against Yellowstone Capital and affiliated entities, finding their advances were disguised loans with effective rates reaching as high as 820 percent. The settlement cancelled over $534 million in debt for more than 18,000 small businesses, vacated over a thousand judgments, and required the release of UCC liens. It will not be the last action of its kind.
If your accounts are frozen right now
Move fast and get help the same week. Identify exactly which funder acted and under what instrument, a judgment, a UCC notice to a processor, or both. Speak with a professional about vacating improper judgments and negotiating lien releases, and do not sign anything new, especially a fresh advance, under pressure. Frozen-account situations are urgent, but they are resolved every day. The owners who come out intact are the ones who engage immediately instead of hoping it resolves itself. If you want to understand the resolution paths first, start with our guide on how to get out of MCA debt.
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Get My Free Review Call (888) 222-7254This article is for general education only and is not legal, tax, or financial advice. Laws change and apply differently to every situation. Consult a qualified attorney about your specific contracts and circumstances. Global Debt Service is not a law firm.