The Legal Ground You’re Standing On
Michigan MCA law: the three facts that shape every option
Every resolution strategy — renegotiation, settlement, defense, refinancing — plays out differently depending on these three pieces of Michigan law. A firm that can’t speak to them isn’t the best firm for a Michigan file.
1Usury limits & the recharacterization question
Michigan's civil usury statute (MCL 438.31) sets a 5% legal rate, 7% by written agreement, and MCL 438.32 strips a lender charging excess interest of all interest, fees, and costs — plus the borrower's attorney fees. Regulated banks can charge business entities any agreed rate (MCL 438.61), but non-bank lenders to businesses — which is what a recharacterized MCA funder would be — are limited by the criminal usury act: MCL 438.41 makes knowingly charging above 25% simple per annum punishable by up to 5 years. If a court recharacterizes a fixed-payment MCA as a loan, a non-bank funder charging a Michigan business an effective rate above 25% is over the criminal line, and under Soaring Pine (Mich. 2023) a usury savings clause cannot cure a facially usurious agreement.
Sources: MCL 438.31 (civil usury) · In re Top Shelv — opinion quoting MCL 438.32, 438.41, 438.61 in full · Soaring Pine Capital v. Park Street Group, 511 Mich. 89 (2023)
2Confessions of judgment in Michigan
Practically unusable in MCA contracts Michigan heavily restricts confessions of judgment: MCL 600.2906 allows judgment on a confession only where the authority for it is contained in an instrument "distinct from" the contract evidencing the debt, signed by an attorney and filed with the court. A cognovit or warrant of attorney embedded in the MCA agreement itself — the standard industry drafting — does not satisfy the distinct-instrument requirement, making pre-signed MCA confessions practically unusable in Michigan courts. The old workaround of filing in New York was closed by the 2019 CPLR 3218 amendment.
Sources: MCL 600.2906 (distinct-instrument requirement) · NY CPLR 3218 (2019 residence restriction)
3Commercial financing disclosure: where Michigan stands
Michigan has not enacted a commercial financing disclosure law covering MCAs — the March 2026 Venable survey lists ten enacted states and pending bills elsewhere, with Michigan in neither category. Michigan merchants hold no statutory right to pre-signing cost disclosures, so the agreement itself is the only place the true cost appears. The counterweight is Michigan's unusually strong usury remedies if a court recharacterizes the advance as a loan: forfeiture of all interest and fees, attorney fees, and a 25% criminal line for non-bank funders.
Sources: Venable — State Commercial Financing Disclosure Laws (Mar. 2026)
How funders actually enforce here: Funders typically obtain judgment in their contractual out-of-state forum and domesticate it under Michigan's Uniform Enforcement of Foreign Judgments Act (MCL 691.1171–691.1179): the authenticated judgment is filed with a court clerk, notice is mailed, and enforcement cannot begin until 21 days after that notice — after which Michigan's ordinary collection tools apply, including bank-account garnishment. A debtor can obtain a stay by showing an appeal or any ground on which a Michigan judgment would be stayed. Funders also routinely perfect UCC-1 liens through the Michigan Department of State's UCC online system. MCL 691.1171–691.1179 — Uniform Enforcement of Foreign Judgments Act (21-day window) · Michigan Department of State — UCC
