Here are five things to ask before you hire anyone for MCA debt help. Use this article as a script when you first talk to debt settlement companies, and make sure the answers are included in the contract you sign. Or read about how to choose among the different kinds of MCA debt relief companies.
What questions should you ask an MCA debt relief company?
Make sure to get these things in writing.
- Who will be negotiating with my funders? Who will go to court on my behalf if I am sued?
- How is your fee calculated? When do you get your fee?
- Which of my funders have you resolved in the last 12 months? What are they like?
- What happens in the first 48 hours if a funder sues me or freezes my account while I am in your program?
- What paperwork will you provide me at the end of the program? What happens if a funder refuses to settle?
Who will be negotiating with my funders and who will go to court for me if I am sued?
While non-lawyers can negotiate with MCA funders, only lawyers can go to court on your behalf. The Ohio Supreme Court found in 2020 that negotiating debt for a small business is not inherently the unauthorized practice of law, but fined the company $1,000 for providing legal advice in one instance. See Ohio State Bar Assn. v. Watkins Global Network.
Most MCA debt relief companies are not law firms and will turn a lawsuit over to a lawyer. That may be fine, but ask whether the lawyer's fee is included, whether you can choose the lawyer, and who the lawyer takes instructions from. Good answers will include a specific person's name and the state bar that they are a member of. Bad answers talk about "our legal team" and divert to savings.
How is the fee calculated, and does the FTC rule protect you?
Get in writing what the company's fee is calculated on. Some companies charge 20% of the debt you enroll, while others charge 25% of the savings. On a hypothetical $120,000 stack, the first charges $24,000, while the second charges $13,500 if your debt settles at 55 cents on the dollar (you saved $54,000). Also ask what they charge for debt they cannot settle, and what you owe if you leave after some debt is settled.
Unfortunately, federal law generally does not protect a business from these fees. The Federal Trade Commission's Telemarketing Sales Rule bars a fee until at least one debt is settled and you have made a payment on it. See 16 CFR 310.4(a)(5). But that rule only applies to "debt relief services," which are defined as helping you with unsecured creditors. See 16 CFR 310.2(o). Further, the rule does not apply to business-to-business calls except for the rules about misrepresentations. See 16 CFR 310.6(b)(7). The FTC amended the rule in 2024 to protect businesses from misrepresentation, but did not apply the prohibition on upfront fees to businesses. You will have to rely on the contract you sign. See also our article on whether MCA debt settlement is legit or a scam.
Why does a track record with your specific funders matter?
Each funder is different; some sue aggressively and some settle more willingly. Give the company the name of each funder to see if it has recent experience with them: how quickly they file suits, whether they use confessions of judgment, and whether they send letters to your customers. Ask for redacted examples of results with your funders.
Contract terms matter too. A New York appellate court held that, in deciding whether an MCA is actually a loan, courts consider whether the contract provided for reconciliation, a finite term and whether the funder had recourse in the event the merchant files for bankruptcy. See LG Funding, LLC v. United Senior Properties of Olathe, LLC. The New York Attorney General, treating MCAs as loans, obtained in January 2025 a $1.065 billion money judgment against Yellowstone Capital.
What happens if a funder sues you in the middle of a program?
A good provider can tell you what they would do in the first 48 hours if a funder files a lawsuit against you. In New York, a funder can only file a confession of judgment in the county where you resided when it was signed or when it is filed. See CPLR 3218. So New York confessions of judgment only work against New York residents. After a judgment, the funder's attorney can serve a one-year restraining notice on your bank account. See CPLR 5222. The funder can also notify your customers of the assignment, after which paying you will not satisfy their debt. See UCC 9-406.
In Texas, beginning on September 1, 2025, Texas House Bill 700 provides that any confession of judgment in a commercial sales-based financing contract is void and bars automatic debits unless the provider has a perfected first priority security interest in your account.
What should you have in hand when the program ends?
The company should provide you a letter from each funder stating that you owe them nothing or stating the terms of the settlement. It should make sure UCC-3 termination statements are filed to end the funders' UCC-1 liens, and obtain releases of any personal guarantees. If funders will not settle, the remaining options are litigation or bankruptcy. Note that, as of April 1, 2025, a business can only file under Subchapter V if its debts do not exceed $3,424,000. A bill to increase the limit to $7.5 million, S. 3977, passed the Senate in August 2026 and the House passed a bill in September, but as of September 21, 2026, none has become law.
Frequently Asked Questions
Does the FTC's advance-fee rule protect my business from upfront MCA relief fees?
Generally, no. The FTC's Telemarketing Sales Rule prohibits advance fees for debt relief services, but only for debts owed to unsecured creditors, and except for its misrepresentation bans the rule excludes business-to-business calls.
Can a debt relief company that isn't a law firm negotiate with my MCA funder?
Generally, yes. In 2020, the Ohio Supreme Court held that a non-law-firm debt relief company negotiating with creditors was not automatically engaged in the unauthorized practice of law. However, if a funder sues you, you need a lawyer to defend the suit.
Can a funder use a New York confession of judgment against me if I live in another state?
Generally, no. A New York confession of judgment can only be filed in the county where you resided when you signed it or when it is filed. However, the funder can still file a regular lawsuit against you.