MCA Froze My Bank Account in New York

A legal guide to merchant cash advance bank levies, restraining notices, and judgment enforcement under New York law.

If you logged into your business bank account this morning and discovered that the funds are inaccessible — that wires are bouncing, payroll cannot run, and your bank is referring you to a “restraining notice” — there is a high probability that a merchant cash advance (MCA) lender has obtained a judgment and executed a bank levy against your account. New York is the epicenter of MCA litigation in the United States. A significant percentage of MCA contracts contain venue clauses requiring that any dispute be litigated in New York State courts, even when the borrowing business operates in California, Texas, Florida, or any other state.

This page is written for business owners in active distress. The situation is urgent — but in most cases it is not irreversible. Restraining notices can be challenged. Default judgments can be vacated. Settlements can be negotiated. The first 24 to 72 hours after a freeze are decisive, and what you do next determines whether your business survives the enforcement action or is dismantled by it. The pages that follow explain how MCA bank freezes work in New York, why they happen so quickly, what defenses exist under New York law, and the specific steps to take starting today.

Why MCA Lenders Freeze Business Bank Accounts in New York

A merchant cash advance is structured as the purchase of a percentage of a business’s future receivables rather than a traditional loan. The funder advances a lump sum and, in return, takes a fixed daily or weekly ACH withdrawal from the business’s operating account until the “purchased amount” has been collected. When daily revenue drops, when an account is changed, or when an ACH is blocked, the contract is treated as in default — and most MCA agreements give the funder broad and immediate enforcement rights once that default is declared.

In New York, those enforcement rights typically translate into one or more of the following: a commercial lawsuit filed in New York Supreme Court, a confession of judgment filed under the prior version of CPLR § 3218 (for older contracts), the issuance of a restraining notice under CPLR § 5222, the recording of a UCC-1 lien against business assets, and the use of a city marshal or sheriff to execute a levy directly against the business’s deposit accounts. These tools can be deployed in sequence within a matter of days.

Funders use New York for a reason. The state’s commercial courts are sophisticated and move quickly. Default judgments can be entered when an out-of-state defendant fails to respond, and once a judgment is in hand, New York provides one of the most efficient post-judgment enforcement frameworks in the country. By the time most business owners learn that they are being sued, the lender is already preparing the restraining notice.

How MCA Bank Levies Work in New York

Understanding the procedural sequence helps explain why your account was frozen with no warning. Under New York Civil Practice Law and Rules (CPLR) Article 52, a judgment creditor has a defined toolkit to reach a debtor’s property, and MCA funders use it aggressively.

1. Lawsuit filed in New York court. The funder files a complaint in a New York Supreme Court — most often New York County, Kings County, or Nassau County — alleging breach of the MCA agreement and seeking the unpaid balance, fees, and contractual interest.
2. Service and (often) default. Service is attempted on the business and on any individual personal guarantor. If no answer is filed within the statutory period, the funder moves for a default judgment.
3. Judgment entered. The court enters a money judgment, frequently for an amount that includes contractual “default fees,” attorneys’ fees, and accrued daily interest.
4. Restraining notice issued. Under CPLR § 5222, the creditor’s attorney serves a restraining notice directly on the business’s bank. The bank must immediately freeze up to twice the judgment amount in the account.
5. Levy and turnover. A city marshal (in New York City) or county sheriff serves a levy under CPLR § 5232. The bank then turns the restrained funds over to the marshal, who delivers them to the judgment creditor after the statutory waiting period.

The first time many business owners learn that any of this has happened is when a payroll ACH is rejected or a vendor payment fails to clear. By then, the funds have already been restrained — and in many cases, a marshal’s levy is already on its way.

Can a Merchant Cash Advance Lender Legally Freeze Your Bank Account?

The short answer is: only after obtaining a judgment, and only through the formal CPLR Article 52 enforcement process. An MCA funder cannot lawfully walk into your bank and freeze your account simply because you missed a daily payment. They must first establish a legal right to collect — typically through a court judgment — and then serve a properly issued restraining notice or levy.

That said, the threshold for obtaining the underlying judgment is often very low. If the contract is enforced as written and no defenses are raised, a New York court will enter judgment on a defaulted MCA in routine fashion. The harder and more important question is whether the contract should have been enforced as written in the first place. Courts in New York and elsewhere have spent the last several years scrutinizing MCA agreements to determine whether they are genuine receivable purchases or disguised loans subject to usury laws.

Three factors typically drive that analysis: (1) whether the funder bears genuine risk if the business’s receivables decline (a true purchase) or has effectively guaranteed repayment (a loan); (2) whether the contract permits meaningful reconciliation of the daily payment when revenue drops; and (3) whether the agreement has a fixed term. When these factors point toward a loan, the entire enforcement action — including any bank freeze flowing from it — becomes vulnerable to challenge. This is the legal foundation for most merchant cash advance defense strategies in New York.

New York Laws That Apply to MCA Bank Freezes

Three legal regimes intersect in nearly every New York MCA bank freeze case: the CPLR enforcement statutes, New York usury law, and the body of commercial case law defining the difference between a true receivable purchase and a loan.

CPLR Article 52 — Enforcement of Money Judgments

CPLR §§ 5222, 5230, and 5232 govern restraining notices, executions, and levies. A restraining notice prohibits the bank from transferring restrained funds. A levy directs the bank to turn those funds over to the marshal or sheriff. Notably, CPLR § 5222 requires that an Exemption Notice and Claim Form be sent to the judgment debtor when the account is restrained — a procedural requirement that lenders sometimes overlook, creating grounds to challenge the freeze.

New York Usury Caps

New York imposes a civil usury cap of 16% on most loans and a criminal usury cap of 25% under General Obligations Law § 5-501 and Penal Law § 190.40. These caps generally do not apply to genuine purchases of receivables — but they apply with full force to anything a court deems a disguised loan. Effective rates on many MCA contracts, when re-characterized as loans, far exceed 25% APR, which can render the underlying obligation criminally usurious and unenforceable in New York.

Confession of Judgment Reform

In 2019, New York amended CPLR § 3218 to bar the filing of confessions of judgment against non-residents in New York courts. This reform shut down the most abusive MCA enforcement mechanism for new contracts but did not retroactively vacate the thousands of judgments already entered. If your account was frozen based on a pre-2019 confession of judgment, vacating that judgment is often the first move — see vacating an MCA default judgment in New York for the procedural framework.

Immediate Steps If an MCA Froze Your Business Bank Account

The first 72 hours are the most important. The actions below are listed in the order they should typically be taken.

• Contact your bank in writing. Ask the branch manager or commercial banking officer for a copy of the restraining notice and any associated levy paperwork. The bank must have received a document identifying the judgment creditor, the case caption, the index number, the issuing court, and the amount restrained.
• Identify the case. Once you have the index number and county, search the New York State Courts Electronic Filing system (NYSCEF) to pull every document in the case — the complaint, the affidavit of service, the motion for default judgment, and the judgment itself.
• Calculate the deadlines. Identify when service was made and when the judgment was entered. New York provides specific windows to move to vacate a default judgment under CPLR §§ 317 and 5015. Missing those windows narrows your options considerably.
• Preserve cash flow elsewhere. Stop routing new deposits into the restrained account. Open a separate operating account at a different institution if you do not already have one. Be aware that funders can and do attempt to identify and restrain successor accounts.
• Pull and review the MCA contract. Locate every executed agreement, addendum, and personal guarantee. The reconciliation clause, the venue clause, the “true sale” recitals, and the daily withholding amount are the four provisions that will drive most of the legal analysis.
• Engage counsel immediately. MCA enforcement moves on a different timeline than ordinary commercial litigation. An MCA defense attorney with experience in CPLR Article 52 practice can move to vacate the judgment, lift the restraint, and open settlement negotiations in parallel.

How to Unfreeze a Business Bank Account After an MCA Levy

There is no single mechanism for lifting an MCA bank freeze. The right strategy depends on whether a judgment has been entered, how that judgment was obtained, what the underlying contract says, and how much room exists for negotiation. The most common pathways are:

• Motion to vacate the judgment. If the underlying default judgment was entered without proper service, or if the borrower has a meritorious defense, a motion to vacate under CPLR § 5015(a) can pull the foundation out from under the restraint. When the motion is granted, the restraint typically falls with the judgment.
• Negotiated settlement and stipulation. Even after judgment, MCA funders frequently agree to a merchant cash advance settlement in exchange for a lump sum or structured payments. A so-ordered stipulation can release the restraint and vacate the judgment as part of the deal.
• Hardship and exemption claims. If restrained funds include exempt sources (for example, certain government payments routed through the account), an exemption claim under CPLR § 5222-a can release those funds quickly.
• Order to show cause. In emergency circumstances — payroll, tax payments, a specific operational catastrophe — an order to show cause seeking immediate relief from the restraint can produce a hearing within days.
• Bankruptcy protection. Filing under Chapter 11 (including Subchapter V for small businesses) or, in some cases, Chapter 7 imposes the automatic stay under 11 U.S.C. § 362, which halts the levy and freezes further enforcement. Bankruptcy is rarely the first option, but it is often a viable last one.

Common MCA Lenders Involved in New York Bank Levies

A relatively small group of funders is responsible for a disproportionate share of MCA bank-freeze cases in New York Supreme Court. Names that appear repeatedly on case dockets include Yellowstone Capital and its successors, GTR Source, Itria Ventures, Rapid Capital Funding, LG Funding, EBF Holdings (EBF Partners), Funding Metrics, and a network of related entities operating under broker and ISO arrangements. Several of these companies have been the subject of investigations by the New York Attorney General and enforcement actions by the Federal Trade Commission focused on alleged deceptive practices, abuse of confessions of judgment, and harassment of borrowers and personal guarantors.

The identity of the funder matters because some of these companies have a documented track record on specific litigation issues — service defects, jurisdictional overreach, broker concealment, reconciliation refusals — that translate into concrete defenses. Identifying the specific plaintiff entity (which may be different from the broker or ISO that originated the deal) is one of the first steps in mounting an effective response.

Why So Many MCA Lawsuits Are Filed in New York Courts

Almost every MCA contract written in the past decade designates New York as the forum for any dispute. There are several reasons. New York provides experienced commercial judges, a well-developed body of case law on receivable purchases and personal guarantees, an efficient default-judgment process, and a broad menu of post-judgment enforcement tools. The result is that funders headquartered in New Jersey, New York, or Florida regularly drag merchants from across the country into New York Supreme Court.

Out-of-state borrowers sometimes have grounds to challenge personal jurisdiction, particularly where the contract was solicited and signed entirely outside New York and the contractual contacts are minimal. These jurisdictional challenges are highly fact-specific and time-sensitive, but they can be powerful when available.

New York Courts Where MCA Cases Are Common

MCA enforcement actions are concentrated in a handful of New York Supreme Court venues. Knowing where your case has been filed informs strategy because each county has its own scheduling practices, motion practice norms, and local rules:

• New York County (Manhattan) — the most common venue for high-dollar MCA cases involving funders headquartered in Manhattan.
• Kings County (Brooklyn) — heavy MCA filing volume, particularly from funders based in Brooklyn and Long Island.
• Queens County — frequent venue for cases involving small business defendants based in Queens.
• Bronx County — used by certain funders for jurisdictional and procedural reasons.
• Nassau and Suffolk Counties — common for funders located on Long Island.

Legal Defenses Available to New York Business Owners

New York case law over the past several years has produced a recognizable set of defenses to MCA enforcement. None of these are silver bullets, and their availability turns on the specific contract, the specific funder, and the specific procedural history. Counsel will typically evaluate each of the following:

Disguised Loan / Usury Defense

If the contract is properly characterized as a loan rather than a true receivable purchase, the implied annualized interest rate often exceeds New York’s 25% criminal usury cap. A criminally usurious loan is void and unenforceable in New York, which would unwind the underlying judgment and release the bank restraint.

Reconciliation Violations

Most MCA contracts contain a reconciliation provision allowing the daily payment to be adjusted when revenue declines. When a funder refuses a good-faith reconciliation request and then declares default for non-payment, it has often breached the very provision that distinguishes a purchase from a loan — undermining both the default and the “true sale” characterization.

Service and Procedural Defects

Default judgments in MCA cases are vulnerable to challenges based on improper service, defective affidavits, or failure to comply with CPLR notice requirements. A successful service challenge under CPLR § 317 or § 5015(a)(4) can vacate the judgment and lift any associated freeze.

Jurisdictional Challenges

Out-of-state merchants can challenge personal jurisdiction in New York where the connection to the state is weak, even when the contract designates New York as the forum.

Broker and Origination Misconduct

If the deal was originated through misrepresentations by a broker or ISO — inflated revenue, undisclosed stacking, hidden fees — those facts can support fraud and rescission defenses against the funder that purchased the resulting paper.

Unconscionability and Adhesion

Certain MCA contracts contain provisions so one-sided that courts have refused to enforce them. Excessive default fees, blanket personal guarantees, and aggressive cross-default provisions are common targets.

The Most Common MCA Collection Tactics

Bank freezes do not occur in isolation. They are part of a broader enforcement playbook that funders deploy in roughly the same sequence in nearly every case. Recognizing the playbook makes it easier to anticipate the next move.

Bank Account Levies

As described above, the bank levy is the centerpiece of MCA enforcement. A restraining notice freezes the account; a levy seizes the funds. See how to unfreeze a business bank account after an MCA levy for a deeper procedural walkthrough.

ACH Withdrawals

Before any judgment is entered, funders rely on daily or weekly ACH withdrawals authorized by the contract. When these withdrawals continue at unsustainable levels, businesses sometimes block or revoke ACH authority, which the funder treats as a contractual default. A controlled, lawful pause of ACH activity, paired with prompt legal action, is often safer than a unilateral block — see how to stop MCA ACH withdrawals immediately.

UCC Liens

MCA agreements typically authorize the filing of a UCC-1 financing statement against “all assets” of the business. After default, funders sometimes weaponize these liens by sending notices to the business’s customers demanding that receivables be paid directly to the funder. This can be devastating for vendor relationships and is often itself a basis for legal challenge.

Lawsuits and Default Judgments

If ACH and UCC enforcement do not resolve the balance, the funder files suit. The MCA default judgment is the gateway that unlocks every other enforcement remedy, which is why challenging the judgment itself is so often the focus of the defense.

Can Merchant Cash Advance Lenders Garnish Wages?

Whether an MCA lender can reach personal income depends on a single threshold question: did you sign a personal guarantee? Most MCA contracts include one. Under a personal guarantee, the individual owner is jointly liable for the obligation, which means a judgment can be entered against that individual personally — and that judgment can, in turn, support an income execution against personal wages or compensation.

Without a personal guarantee, the funder is limited to the assets of the business entity itself. Even with one, wage garnishment requires a separate judgment against the individual and is subject to federal and state garnishment caps. In New York, an income execution under CPLR § 5231 generally cannot exceed 10% of gross wages, and broader federal limits under the Consumer Credit Protection Act also apply. The far more common scenario — and the one most distressed business owners are actually facing — is enforcement against business deposit accounts, not personal paychecks.

What Happens After an MCA Judgment Is Entered

Once a money judgment is in place, a New York judgment creditor can do all of the following without returning to court:

• Issue restraining notices to every bank where the debtor or guarantor maintains accounts.
• Direct a marshal or sheriff to levy on those accounts and turn over the funds.
• Serve information subpoenas on the debtor, banks, customers, and other third parties to identify additional assets.
• Record the judgment as a lien against any real property the debtor owns in New York.
• Pursue an income execution against personal wages of any individual guarantor.
• Seek a turnover order under CPLR § 5225 to reach property held by third parties.

The reason most business owners feel blindsided is structural. By the time the freeze hits the operating account, the judgment has already been entered, the restraining notice has already been issued, and the debtor’s name has already been added to enforcement databases used by other creditors. Speed of response — not just substance of defense — drives outcomes from this point forward.

When to Contact an MCA Defense Attorney

The right time to engage counsel is the day the freeze is discovered, or earlier — ideally as soon as a lawsuit, demand letter, or aggressive ACH default notice arrives. MCA enforcement timelines compress quickly. A motion to vacate filed two weeks after judgment is a routine application; the same motion filed nine months later faces a much higher burden. Settlement leverage is also greatest immediately after the freeze, when the funder has not yet collected and the court has not yet ruled.

An experienced MCA defense attorney will typically pursue several tracks in parallel: assessing the underlying contract for a usury or disguised-loan defense, evaluating service and procedural challenges, communicating with the funder’s counsel to open settlement discussions, and — where warranted — filing an order to show cause to release restrained funds for payroll, taxes, and operating expenses. For an overview of emergency MCA help and the categories of relief that can be pursued, see the linked resource.

Frequently Asked Questions

Can a merchant cash advance lender freeze my bank account in New York?

Yes — but only after obtaining a court judgment and serving a properly issued restraining notice on the bank under CPLR § 5222. An MCA funder cannot lawfully freeze your account based on contractual default alone; they must first secure a judgment, almost always in a New York Supreme Court. Once the restraining notice is served, the bank is required to freeze up to twice the judgment amount.

How long can a business bank account stay frozen after an MCA judgment?

A restraining notice under CPLR § 5222 is effective for one year, or until the judgment is satisfied, vacated, or otherwise resolved. In practice, the marshal’s levy and turnover often follow within weeks, at which point the restrained funds are paid over to the judgment creditor and the freeze on those specific funds ends — although new deposits can be restrained again if the judgment remains outstanding.

Can an MCA lender take all the money from my account?

The bank is required to freeze up to twice the judgment amount under CPLR § 5222. If the account holds less than that, all available funds may be restrained and ultimately turned over. Certain categories of funds (for example, specific government payments) may be exempt and can be released through an exemption claim under CPLR § 5222-a, but most ordinary business deposits are not exempt.

What is a restraining notice in New York?

A restraining notice is a document served by a judgment creditor (or its attorney) on a third party — typically a bank — that prohibits the third party from transferring or paying out property of the judgment debtor. It is the legal mechanism that produces the “frozen account” experience. The notice is governed by CPLR § 5222 and has specific procedural requirements, including notice to the debtor, that can be challenged when violated.

How do I vacate an MCA default judgment in New York?

A motion to vacate is filed under CPLR § 5015(a) and, where applicable, CPLR § 317. The most common grounds are improper service, excusable default with a meritorious defense, fraud or misrepresentation in obtaining the judgment, and lack of personal jurisdiction. Timing matters — § 5015(a)(1) requires the motion to be filed within one year of notice of entry, and § 317 has its own time limits. See the dedicated guide on vacating an MCA default judgment in New York for the full procedure.

Can I negotiate an MCA settlement after a bank levy?

Yes, and in many cases the leverage to negotiate actually increases after the levy because the funder has now spent legal and enforcement costs and may be willing to accept a reduced lump sum or structured payments to close the file. Settlement terms commonly include lump-sum discounts, multi-month payment plans, release of UCC liens, and a so-ordered stipulation vacating the judgment.

What happens if I ignore an MCA lawsuit filed in New York?

Ignoring an MCA lawsuit is the single most common path to a frozen account. If you fail to answer the complaint, the funder will move for a default judgment and likely obtain one. From the date the judgment is entered, the funder can serve restraining notices and levies without further notice to you. Even if you believe the underlying claim is wrong or the contract is unenforceable, those defenses must be raised — failure to appear waives them.

Can MCA lenders freeze accounts at banks located outside New York?

Yes. A New York judgment can be domesticated in any other state under that state’s version of the Uniform Enforcement of Foreign Judgments Act (UEFJA). Once domesticated, the judgment can support restraining notices, garnishments, or levies in the second state under that state’s enforcement procedures. Many large MCA funders have collection counsel networks that can move a New York judgment into a sister state within weeks.

How do businesses stop MCA ACH withdrawals?

Options range from formal revocation of ACH authorization, to opening a new account at a different institution, to filing suit for declaratory and injunctive relief, to negotiating a temporary forbearance with the funder. Each option has tradeoffs, and unilateral action without legal advice can sometimes accelerate enforcement. The step-by-step guide on stopping MCA ACH withdrawals addresses each path.

Are merchant cash advances legal in New York?

Genuine purchases of future receivables are legal in New York and are not subject to the state’s usury caps. However, contracts that operate as loans in substance — fixed repayment, no genuine reconciliation, no real risk transfer — can be re-characterized by courts as loans and subjected to New York’s 16% civil and 25% criminal usury limits. New York has also enacted disclosure requirements (the Commercial Finance Disclosure Law) and substantially restricted the use of confessions of judgment against non-residents.

Will filing for bankruptcy stop an MCA bank levy?

Yes — the automatic stay under 11 U.S.C. § 362 takes effect the moment a bankruptcy petition is filed and immediately halts levies, restraints, garnishments, and most other collection activity. Bankruptcy is a serious step with long-term consequences, but for some businesses Subchapter V of Chapter 11 in particular offers a structured way to restructure MCA debt while preserving operations.

Can the same MCA judgment freeze my personal accounts too?

Only if a judgment has been entered against you personally — typically through a personal guarantee. If only the business is named in the judgment, restraints are limited to the business’s accounts and assets. If you signed a personal guarantee and the judgment names you individually, the funder can serve restraining notices on personal accounts as well as business accounts.

Conclusion: Move Quickly, but Move Strategically

A frozen business bank account is a serious event, but it is rarely the end of the story. Most MCA bank freezes in New York are the product of a procedural sequence — lawsuit, default, judgment, restraining notice, levy — and every step in that sequence is reviewable. Improper service can be challenged. Default judgments can be vacated. Disguised-loan and reconciliation defenses can unwind the underlying obligation. Settlements can release the restraint and resolve the matter for a fraction of the claimed balance.

The variable that matters most is speed. The window for the most effective defenses — vacating a recent judgment, releasing payroll funds through an order to show cause, negotiating before the funder has collected — is measured in days, not weeks. A business owner who acts within 72 hours of the freeze has dramatically more options than one who waits for the next missed payroll cycle. If you are facing an active New York MCA bank freeze, the next step is a focused review of your contract, your case docket, and your available defenses, conducted by counsel familiar with this specific area of practice.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship. Every case turns on its specific facts, contract terms, and procedural history. Business owners facing active MCA enforcement in New York should consult with a qualified attorney about their particular situation.