What an MCA lender can and cannot do to your bank account

An MCA (merchant cash advance) lender cannot seize your bank account directly through the same legal process a court judgment creditor can. They have no automatic right to freeze your account or pull money out. However, they can still reach your account if you fall behind on repayment, and the path they take depends on how the MCA contract was written and what state you are in.

Most MCAs are structured as a sale of future revenue rather than a loan, which means the lender claims a percentage of your daily credit card sales or bank deposits. If your contract includes an ACH authorization — a signed agreement allowing them to pull money directly from your account — they can withdraw funds on the schedule you agreed to, even if the amount leaves you short. If you stop making payments and the lender sues and wins a judgment, they can then use that judgment to place a levy on your bank account, freezing it until the debt is paid.

Key Takeaways

  • An MCA lender with an ACH authorization can pull money from your account on the agreed schedule, but only the amount specified in your contract.
  • If you default and the lender obtains a court judgment, they can levy your bank account, which freezes it until the judgment is satisfied.
  • Bank account levies follow state law and require the lender to serve you with court papers before the freeze takes effect.
  • You have the right to claim certain funds as exempt from seizure, such as Social Security deposits or funds below a state-set threshold.
  • Stopping ACH withdrawals requires written notice to both your bank and the MCA lender, but does not erase the underlying debt.

How ACH authorization works in an MCA contract

When you sign an MCA agreement, you typically grant the lender permission to withdraw money from your business bank account through ACH (Automated Clearing House). This is not a seizure — it is an authorized transfer you agreed to in writing. The lender pulls a fixed percentage of your daily deposits or a set dollar amount on a set schedule, usually daily or weekly.

The contract specifies the exact amount and frequency. If the contract says the lender takes 10% of daily credit card sales, they can only take that percentage, not more. If you dispute the amount being withdrawn, you can contact your bank and request a reversal within a set window (usually 60 days for unauthorized ACH transfers), but this only works if the withdrawal truly violated the terms you signed. If the withdrawal matches the contract, your bank will likely deny the reversal request.

You can stop ACH withdrawals by sending written notice to your bank and the MCA lender, but this does not erase the debt. The lender can then pursue other collection methods, including suing you in court.

What happens if you default on an MCA

Defaulting on an MCA means you have stopped making the agreed payments or your account no longer generates enough revenue for the lender to collect their percentage. At this point, the lender has several options. They may continue attempting to withdraw funds through the existing ACH authorization (which will fail if your account has insufficient funds). They may contact you directly or hire a debt collector to demand payment. Or they may file a lawsuit against you.

If the lender sues and wins a judgment, the court issues an order stating you owe the debt. The lender can then use that judgment to place a levy on your bank account. A levy is a legal freeze that prevents you from withdrawing money until the judgment is paid. The process varies by state, but typically the lender must serve you with court papers before the levy takes effect, giving you time to respond or claim exemptions.

Not all MCAs result in lawsuits. Some lenders simply write off the debt or sell it to a third-party collector. Others pursue judgment aggressively. The likelihood depends on the size of the advance, your state's collection laws, and the lender's business model.

Bank account levies and how they work

A bank account levy is a court-ordered freeze that allows a creditor to take money directly from your account to satisfy a judgment. The process begins when the lender files a writ of execution or similar document with the court, which then sends it to your bank. Your bank receives notice and freezes the account for a holding period (usually 21 days), during which you can object or claim exemptions.

Once the holding period ends, the bank transfers the frozen funds to the court, which then pays the creditor. The amount seized depends on what is in the account at the time of the levy. If your account has $5,000 and the judgment is for $10,000, the lender takes the $5,000 but can still pursue you for the remaining $5,000 through wage garnishment or future levies.

State law determines which funds are exempt from levy. Most states protect Social Security deposits, unemployment benefits, and certain disability payments. Some states also protect a portion of your account balance — for example, California protects the first $1,725 of funds in a personal account (as of 2024, but this amount changes yearly). If your account contains only protected funds, you can file a claim of exemption with the court to prevent the levy.

Your rights when facing a bank account levy

You have the right to receive notice before a levy takes effect. The lender must serve you with the judgment and the writ of execution, giving you time to respond. You also have the right to claim exemptions for protected funds. If your account contains Social Security, unemployment, or other government benefits, you can file a claim of exemption with the court, and the funds should be released.

You can also challenge the judgment itself if you were not properly served with court papers or if the lender made an error in the lawsuit. If you can show the court made a mistake, you may be able to have the judgment overturned, which would stop the levy. This requires filing a motion with the court, usually within a set timeframe after the judgment is entered.

If the levy has already frozen your account and you need access to funds for essential expenses, you can request a stay of execution from the court, which temporarily halts the levy while you work out a payment plan or appeal. The court is not required to grant this, but it is worth requesting if the freeze creates genuine hardship.

Stopping ACH withdrawals and protecting your account

To stop an MCA lender from withdrawing money through ACH, send written notice to your bank requesting that all ACH transfers from that lender be blocked. Include the lender's name, the authorization date, and your account number. Your bank should process this within one to two business days. You should also send written notice directly to the MCA lender stating that you are revoking the ACH authorization, though this does not prevent them from suing you.

Protecting your account from future levies is harder, but you can take steps to reduce the risk. Keep protected funds (Social Security, unemployment, disability) in a separate account if possible, so they are not mixed with other money when a levy occurs. Maintain documentation of any protected deposits so you can prove their source if a levy happens. If you are facing collection action, consider consulting with a bankruptcy attorney or a consumer law attorney in your state — some states have strong protections against MCA collection that you may not know about.

Do not ignore court papers or collection notices. If you are sued, respond to the lawsuit within the deadline your state sets (usually 20 to 30 days). If you do not respond, the lender can win a default judgment, which makes a levy much more likely.

State-specific rules that affect MCA collection

Some states have passed laws that limit how aggressively MCA lenders can collect. New York, for example, requires MCA lenders to register and limits the interest rates they can charge. California has rules about how MCA contracts must be written and what disclosures lenders must provide. Other states treat MCAs as loans subject to usury laws, which cap the interest rate the lender can charge.

These rules vary significantly, so the answer to whether an MCA lender can reach your account depends partly on where you are located. If you are in a state with strong MCA regulations, the lender may have fewer collection tools available. If you are in a state with minimal MCA oversight, the lender has more flexibility. Researching your state's specific rules or consulting a local attorney can help you understand your actual risk.

Some states also have wage garnishment limits that restrict how much of your paycheck a creditor can take. If the MCA lender obtains a judgment, they may pursue wage garnishment instead of or in addition to a bank account levy. Understanding your state's garnishment rules helps you plan for the worst-case scenario.

Frequently Asked Questions

Can an MCA lender freeze my account without a court judgment?

No, not through a formal levy. However, if you signed an ACH authorization, they can withdraw funds on the schedule you agreed to. If you want to stop this, you must revoke the authorization in writing to both your bank and the lender. A court judgment is required for a formal freeze.

What if the MCA lender is taking more money than the contract allows?

Contact your bank immediately and request a reversal of the unauthorized ACH transfer. You have up to 60 days to dispute it. If the lender is truly exceeding the contract terms, your bank should reverse the excess. Document everything and keep copies of your contract and bank statements as proof.

Can Social Security be seized if an MCA lender gets a judgment against me?

No. Federal law protects Social Security deposits from creditor seizure. If your account contains only Social Security funds, file a claim of exemption with the court when the levy occurs, and the funds should be released. Keep Social Security in a separate account if possible to make this easier to prove.

What should I do if I receive a court summons from an MCA lender?

Respond to it within your state's deadline (usually 20 to 30 days). Do not ignore it. If you do not respond, the lender wins a default judgment, which makes a bank levy much more likely. Consider consulting an attorney to understand your options and whether you have any defenses.

Can I get my account unfrozen if a levy is placed on it?

Yes, if the frozen funds are protected (Social Security, unemployment, disability) or if you can negotiate a payment plan with the lender. File a claim of exemption for protected funds, or contact the lender to discuss a settlement or payment arrangement. You can also request a stay of execution from the court if the freeze creates hardship.