What are the 5 ways that MCA funders jack up the payoff balance?
- Inflating the accelerated balance, by failing to account for prior debits.
- Charging both a flat default fee and a percentage liquidated damages fee for default.
- Charging contingency attorney fees as a percentage of the claim.
- Charging fees for each returned ACH.
- Charging for “reconciling” the account, when they didn’t.
To reduce your MCA payoff balance, start with the line items. Most MCA contracts allow for jack-up of the payoff amount, but each of these charges has weak spots you can argue against. To show what a payoff amount might look like, we’ve taken the merchant cash advance agreement that Cedar Advance filed with the SEC in 2023.
What is the payoff amount on an MCA agreement after default?
Let’s assume that $300,000 of Cedar’s $746,750 purchased amount is still unpaid when the merchant defaults. Here is each fee from the contract and the total payoff balance (the math is ours, not Cedar’s).
| Line item | Contract basis | Amount |
|---|
| Accelerated balance (of uncollected purchased amount) | Section 16 | $300,000 |
| Liquidated damages | Section 31, 25% of unpaid balance | $75,000 |
| Blocked account fee / default fee | Fee schedule in section 2 | $2,500 |
| Returned ACH fees (6 debits x $50 each) | Fee schedule in section 2 | $300 |
| Attorney fees | Section 39, contingency fees of up to 40% of amount claimed | $151,120 |
| Total demand | | $528,920 |
Is the accelerated balance counting everything you already paid?
The accelerated balance should just be the remaining unpaid amount of the purchased amount. Oftentimes it will be higher, because the funder misses remitted payments, ignores debits it should have reconciled (if it agreed to reconcile), or continues to take debits after you’ve paid it off. The FTC alleged in 2020 that MCA funder Yellowstone Capital continued to take debits for days after people had paid off their advances, causing overdraft fees. In February 2026 the First Department of the New York Appellate Division described Richmond Capital’s wrongful withdrawal of payments on holidays. See People v. Richmond Capital.
The best way to challenge the accelerated balance is to reconcile the account yourself: compare the debits on your bank statements to the purchased amount, and to what the specified percentage of actual receipts would have been.
Can an MCA funder charge both a default fee and liquidated damages?
They typically will; Cedar charges a $2,500 default fee and 25% of the unpaid balance as liquidated damages. The argument against this is that it’s duplicative to charge a default fee, liquidated damages and also accelerate the remaining balance, since all three compensate the funder for the same receivables it did not receive. I don’t believe there’s a case on point, however.
Liquidated damages are enforceable if (a) the damages were difficult to estimate at the time of contracting and (b) the amount is not “conspicuously disproportionate” to the foreseeable damages. JMD Holding. The burden is on the party challenging the clause. A court in Kings County allowed an 18% liquidated damages clause in 2025 because the merchant had offered no evidence at all of disproportion.
Is 40% attorney’s fees on an MCA enforceable?
Here the argument comes from the contract itself, which provides for “reasonable attorney fees, which may include a contingency fee of up to 40% of the amount claimed.” The catch is that the fees still have to be “reasonable”, and a percentage isn’t based on actual hours worked. If the payoff letter includes attorney’s fees and you haven’t been sued yet, ask what billable hours were actually worked.
Fees are often embedded in confessions of judgment. Two days after Oakshire Properties asked for a payment adjustment, Argus Capital Funding (the moneyator) filed a confession of judgment against it for $319,993.20, plus $105,822.75 in fees and costs. See Oakshire Properties v. Argus Capital Funding. Under CPLR 3218, the supporting affidavit must establish that the sum confessed to is justly due.
How many NSF fees can one bounced debit produce?
Cedar schedules only one $50 fee per actual return. However, one NSF return can trigger all the other fees. In NewCo Capital Group LLC v. SPE Trading, Inc., 4th Dept, decided June 26, 2026, one debit returned for insufficient funds, plus the merchant’s failure to ask for reconciliation within one business day, put the merchant in default, and the judgment, including attorney fees, was affirmed.
Cross reference the NSF fees with the actual R01 return codes on your statement, and eliminate any fee waived by your giving at least one business day’s advance notice (if you weren’t in default for another reason), any fee on a holiday debit, and any fee on a debit taken after the purchased amount was reached.
Does an ignored reconciliation request mean your MCA payoff balance is inflated?
If you didn’t ask for reconciliation, or your request was refused, the amount due is probably greater than what the specified percentage would have produced. However, the courts will expect you to ask for reconciliation, and it won’t help to argue that the remedy is illusory, as the merchant did unsuccessfully in Apollo Funding (2nd Dept, September 2025). Do the math first, because Cedar’s reconciliation can also increase debits if too little was collected.
Review the disclosure you signed with the MCA offer. For a covered offer, 23 NYCRR 600.6 requires line items disclosing whether paying off early carries any finance charges or any additional fees, and whether a renewal would include unpaid finance charges from the old advance (double dipping). If the payoff fee isn’t disclosed there, you may be able to argue it shouldn’t be charged.
Frequently Asked Questions
How do I dispute the payoff amount of my MCA?
Dispute the amount in writing, with documentation such as bank statements and a ledger, and ask for an itemized payoff amount and remittance history. Unfortunately, the FDCPA’s validation notice and 30 day dispute period don’t apply because the FDCPA only covers consumer debts.
Can a funder charge a fee to release the UCC lien after I pay?
Some moneyators’ contracts allow a fee to file a UCC termination; the Cedar contract schedules $195. However, UCC 9-513 requires the secured party, once the agreement’s conditions are satisfied, to file or send a termination statement within 20 days after you make an authenticated demand. The UCC doesn’t mention a fee, so negotiate this point and make a UCC-3 termination statement a condition of payment.
What happens to padded fees if the funder gets a judgment?
The fees are included in the judgment, and in New York the entire judgment, fees included, accrues 9% interest per annum under CPLR 5004. The moneyator can also restrain twice the amount due in your bank account with a restraining notice under CPLR 5222.