Attorneys' Fees Clause
Attorneys' fees clauses require the losing party in MCA litigation to pay the winning party's legal fees — providing significant deterrent to merchant litigation while enabling funders to recover collection costs.
Why This Matters
Attorneys' fees clause function: shifts legal cost burden to losing party (typically merchant in default litigation), enables funder cost recovery in collections, and discourages merchant litigation lacking strong merits. Most MCA contracts include unilateral fee shifting (only funder recovers fees if winning) though some jurisdictions require mutual fee shifting. Combined with confession of judgment provisions, fee shifting enables funders to obtain judgments including substantial fee awards (often 25-33% of principal balance) increasing total recovery in default situations.
Frequently Asked Questions
Frequently Asked Questions
How much do attorneys' fees add to default judgments?
Typically 25-33% of principal balance, sometimes higher for complex litigation. Substantial addition to merchant default cost — incentivizes payment plan negotiation rather than litigation.
Can merchants negotiate fee shifting clauses out of MCA contracts?
Theoretically yes but practically rare. Most MCA contracts are presented as standard terms; meaningful negotiation reserved for very large advances or sophisticated merchant counterparties.