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Kabbage Lawsuit: What to Know If You've Been Sued (2026)

Sued by Kabbage or an Amex assignee? Here's what the company is, typical contract terms, common defenses, and how to verify your case on PACER and state courts.

By Bar Alezrah10 min readPublished April 16, 2026 · Updated April 16, 2026

Kabbage sued your business -- or an entity calling itself a Kabbage assignee served you with a complaint. Before you panic or pay, you need to understand who Kabbage actually is in 2026, what court likely has your case, what the typical contract says, and which legal defenses apply. This guide covers all of that using only public information. It does not give legal advice, and it does not refer you to any specific law firm. If you have been served, read this, then call a licensed attorney in your state.

Who Kabbage Is

Kabbage was founded in 2009 and headquartered in Atlanta, Georgia. The company built an automated small business lending platform that used bank account data, accounting software connections, and other data feeds to underwrite lines of credit and, over time, merchant cash advances to small businesses across the United States. At its peak, Kabbage was one of the more visible fintech lenders in the small business market and raised substantial venture funding.

In October 2020, American Express completed its acquisition of Kabbage. Amex purchased the technology platform and certain assets, but the original Kabbage loan and MCA portfolio was largely retained in a separate entity, K Servicing, to manage runoff. K Servicing has been responsible for servicing and in some cases collecting on legacy Kabbage MCA agreements entered into before the acquisition.

By 2022 and 2023, K Servicing was winding down operations and facing its own financial difficulties. Servicing rights and portfolio ownership for some of these agreements may have been transferred to third-party buyers or collection entities. If you received a complaint or demand letter, the named plaintiff may be K Servicing, an American Express entity, or a portfolio purchaser. The name on the complaint matters: it tells you who actually owns the claim against you and who has standing to sue.

Kabbage is no longer originating new MCA products. The litigation you are facing, if any, relates entirely to contracts signed before or shortly after the 2020 acquisition.

Where Kabbage Typically Files Suit

Like most MCA funders that operated in New York's commercial lending market, legacy Kabbage agreements typically included choice-of-law and choice-of-forum clauses designating New York law and New York courts. This means that even if your business is based in Texas, California, or Florida, the lawsuit may be filed in New York state court -- specifically the New York Supreme Court, Commercial Division, or a New York Civil Court depending on the dollar amount.

New York's Commercial Division handles business disputes above certain dollar thresholds and has developed substantial case law on MCA agreements. Judges there are familiar with factor rate contracts, reconciliation provisions, and the recharacterization arguments common to MCA litigation.

If a federal claim is involved -- for example if there is a diversity of citizenship between the parties and the amount at issue exceeds $75,000 -- the case could be filed in the U.S. District Court for the Southern District of New York or another federal district. Federal cases are searchable on PACER.

Some assignees or collection entities that purchase MCA portfolios file in courts other than New York, particularly if the portfolio buyer is based elsewhere or if your agreement lacked a robust forum selection clause. Review your agreement for the governing law and venue provisions, or have an attorney locate them for you.

Common Contract Terms in Kabbage Agreements

Kabbage's legacy MCA agreements shared structural features common across the MCA industry, though contract terms varied by origination date, deal size, and program. Understanding these features helps you evaluate what you signed.

Factor rate. MCA agreements express cost as a factor rate rather than an interest rate. A 1.35 factor rate on a $50,000 advance means you agreed to repay $67,500 total. Factor rates in legacy Kabbage agreements varied based on creditworthiness and term.

Holdback percentage. Instead of fixed monthly payments, MCAs collect a specified percentage of daily or weekly card receipts or bank deposits. This percentage -- the holdback -- continues until the full purchased amount is recovered. Typical holdback ranges in the MCA industry run from roughly 10 to 20 percent of gross receivables, though specific terms vary.

Reconciliation provision. A properly drafted MCA agreement includes a reconciliation clause allowing the merchant to request an adjustment to the holdback percentage if revenues decline significantly. If a funder or servicer ignored reconciliation requests or refused to honor the provision, that fact can be relevant to litigation defense.

Personal guarantee. Most Kabbage MCA agreements required a personal guarantee from the business owner. A personal guarantee means the funder can pursue the individual owner's personal assets -- not just the business entity -- if the business defaults. This is a critical term to identify in your contract.

Confession of judgment. Earlier MCA agreements from many funders, including some Kabbage-era deals, contained confession of judgment (COJ) clauses. New York restricted the use of COJs against out-of-state defendants in 2019. If a COJ was entered against you, whether that entry was proper depends on when your contract was signed and where you are located.

Defenses Commonly Raised

MCA litigation has generated a body of case law, primarily in New York courts, and defendants have raised several categories of defenses with varying success. None of these defenses are guaranteed to succeed in your case -- outcomes depend on your specific contract language, the conduct of the parties, and the jurisdiction. An attorney needs to evaluate your specific facts.

Recharacterization as a loan. The central defense in many MCA cases is that the agreement is actually a loan disguised as a purchase of receivables. If the agreement is recharacterized as a loan, it may be subject to usury laws, and the effective interest rate on many MCA deals would exceed usury caps. Courts look at whether the funder bore any real risk of non-payment, whether the merchant was personally guaranteed to repay regardless of revenue, and whether the reconciliation provision was real or illusory.

Failure to honor reconciliation. If a funder or servicer failed to reduce holdback payments when revenues declined, in violation of a reconciliation provision, the merchant may have a breach of contract argument. Document any reconciliation requests you made and any responses you received.

Unconscionability. Some defendants have argued that MCA terms were so one-sided as to be unconscionable under applicable state law. This is a difficult standard to meet but has been raised in cases with extremely high effective rates.

Standing and assignment issues. If the plaintiff is not the original funder but a portfolio purchaser or assignee, the plaintiff must establish it has proper standing to sue. Gaps in the chain of assignment documentation can be a relevant defense.

UCC compliance. MCA agreements sometimes involve UCC filings. Whether those filings were properly made and whether they affect priority of claims is a factual and legal question for your attorney.

How to Verify Your Specific Case

Before taking any action, confirm that the lawsuit is real, who filed it, and where it is pending. Do not rely solely on a demand letter or phone call.

PACER (federal cases). Visit pacer.uscourts.gov to search federal court records by party name. PACER requires a free account. If your case is in federal court you will find the docket, complaint, and all filings there.

New York Unified Court System (state cases). Visit iapps.courts.state.ny.us/webcivilLocal/LCSearch to search New York state civil court records. The NY eCourts system also allows docket searches for Supreme Court cases. Search by your business name and your personal name.

Your state's court system. If the plaintiff filed in your home state rather than New York, search your state court's online docket system by party name.

Your attorney. A licensed attorney can pull court records, review the complaint for procedural defects, and assess the merits before you respond. Response deadlines after service are typically 20 to 30 days depending on jurisdiction. Missing a response deadline can result in a default judgment against you.

Learn more about the full litigation process in our MCA lawsuit being-sued playbook and our overview of MCA lawsuit defense strategies.

For guidance on finding qualified legal representation, see the MCA attorney complete guide and our article on responding to an MCA lawsuit complaint.