No, a bank won't restrain your deposits unless compelled by a legal instrument. A funder can get one in only three ways:
- by suing you and obtaining a judgment,
- by having a court clerk enter a judgment based on a confession of judgment, or
- by persuading a judge to issue a prejudgment attachment.
You may ask "can an MCA freeze my bank account?" because it looks as though the funder did it on its own.
Why can't the MCA funder freeze your bank account?
The funder is not your bank's customer and has no contract with your bank that gives it the right to give your bank orders. It has authority to charge your account via ACH debit for the agreed upon payment, and usually files a UCC-1 covering your receivables.
The UCC permits a creditor to perfect a security interest in a deposit account only by "control." See, e.g., UCC § 9-312. Under UCC § 9-104, the funder has control only if (a) it is your bank; (b) it becomes the bank's customer on your account; or (c) you, the bank and the funder sign a "deposit account control agreement." Banks are not required to enter into control agreements (UCC § 9-342). Absent control, the funder has no right under UCC § 9-607 to "sweep" your account upon default. With a signed control agreement, however, the funder can instruct your bank to pay it without going to court, so check whether your bank has countersigned any such document.
Courts agree. See Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999) (a federal court lacks authority to freeze assets pending a contract claim for money damages); Connecticut v. Doehr, 501 U.S. 1 (1991) (prejudgment attachment without notice and a hearing violates due process absent "exigent circumstances").
How does a judgment after a lawsuit lead to a frozen account?
With a money judgment, the funder can have the clerk or its own attorney issue a "restraining notice" under New York CPLR § 5222. The restraint is limited to twice the amount due. See our article on restraining notices and how to get them lifted. In Pennsylvania, the funder serves a writ of execution on your bank as garnishee.
How does a confession of judgment let a funder skip the lawsuit?
Once a clerk enters judgment on the confession and affidavit you signed, the funder's attorney can issue a restraining notice, again without a hearing. In its 2022 action against Richmond Capital, the FTC stated that confessions of judgment allow the funder "to immediately obtain an uncontested judgment in case of an alleged default." After a court entered a $20.3 million judgment in February 2024 in the FTC's case against Jonathan Braun and RCG, the FTC stated that the defendants had used confessions of judgment "to seize consumers' personal and business assets."
Some states limit confessions of judgment:
- New York: since August 30, 2019, a funder must file a confession of judgment within three years and "with the clerk of the county where the defendant's affidavit stated that the defendant resided." CPLR § 3218. "A non-natural person resides in any county where it has a place of business." So an out-of-state company with a New York office or warehouse is still exposed.
- Pennsylvania: before execution, the funder must give you 30 days' notice or serve notice with the writ, entitling you to a hearing within three business days with execution stayed meanwhile.
- Texas: "A commercial sales-based financing contract that contains a confession of judgment provision or any similar provision is void and unenforceable." Tex. Fin. Code § 398.055, effective September 1, 2025.
- Virginia: Va. Code § 6.2-2234, enacted in 2022, prohibits confession of judgment provisions in sales-based financing contracts.
- California: since January 1, 2023, a judgment by confession "may not be entered in any superior court." Cal. CCP § 1132.
Can an MCA freeze your bank account before it wins the lawsuit?
Only with a court order of prejudgment attachment, the hardest of the three paths. In New York it requires a pending suit and a ground listed in CPLR 6201. Two grounds matter for merchants: (1) you are a nondomiciliary or a foreign corporation not qualified to do business in New York, and (2) you are hiding or removing property to prevent enforcement of a future judgment. That second ground is why moving money to a second bank account after a default is a bad idea. See Can a MCA Take Money from a Second Bank Account?
A judge may issue the order without notice, but the funder must move for confirmation of the order within five days of levying on the bank account pursuant to CPLR 6211, otherwise the order and levy "shall have no further effect." Under CPLR 6212, the funder must post an undertaking (bond) of not less than $500.00 and is liable for damages and attorney's fees if the attachment is not proper, without limit to the bond amount. Pennsylvania rescinded its old foreign and fraudulent-debtor attachment rules effective October 1, 1989.
What if the freeze didn't come from the funder's legal process?
| Type of Freeze | Who Took the Action | Was a Court Involved? |
|---|
| Restraining Notice or Execution | Clerk or Funder's Attorney After Judgment | Yes |
| Restraint Pursuant to Confession of Judgment | Clerk Entered Judgment; Funder's Attorney Issued Restraint | Yes, but With No Hearing Before Judgment |
| Order of Attachment | Judge | Yes |
| Bank Hold After Funder's Demand Letter | Your Bank Pursuant to Deposit Agreement | No |
| ACH Payment for Greater Than Agreed Upon Amount | MCA Funder | No |
| Tax Levy or Action by Another Creditor | Taxing Agency or Other Creditor | Maybe |
See My Business Bank Account Was Frozen: What Do I Do?
Frequently Asked Questions About Bank Account Freezes
Can a merchant cash advance funder use a UCC lien to freeze my bank account?
No. A security interest in a deposit account may be perfected only by control, and filing a UCC-1 does not give the funder control.
Who signed the document to freeze my bank account?
In New York, the clerk or the funder's attorney, as an officer of the court, can sign a restraining notice, but only after judgment has been entered. Prejudgment attachment is the only type of freeze that requires a judge's signature.
My business is not located in New York. Can a New York merchant cash advance funder use a confession of judgment?
Yes, if your business has a place of business in a New York county. Pursuant to CPLR 3218, a business is a resident of every county in which it has a place of business.
Is there any way to unfreeze a bank account that was frozen using a confession of judgment?
Often you can try. Pennsylvania allows one petition to strike or open the judgment within 30 days after service of notice. In New York, CPLR 5015(a) lists grounds for vacating a judgment, including fraud and lack of jurisdiction.