The companies we have been able to find that work with MCA contracts use multi-tiered fee structures. The only price sheet we have found for an MCA debt settlement provider includes a one-time setup fee ($395 to $995), a $99/month "custodial account maintenance" fee and a "program fee" of 15% to 25% of the enrolled debt. It also charges $19.95 for each skipped payment.
How these fees differ between settlement companies, law firms and hybrid providers: How much do MCA debt relief companies charge?
What are MCA settlement company fees?
MCA settlement company fees include setup fees or retainers, monthly fees, a percentage fee for settling debts and fees on the savings account. Contingent fees, such as skipped payment, early termination and legal fees if you are sued, may come on top.
What is the setup fee, and when is it collected?
The setup fee is a one-time charge to set up your file. For MCA contracts we have found, it ranges from $395 to $995 and is often negotiated. The company adds it to your first weekly payment. Consumer programs charge around $10 to $50.
The FTC's Telemarketing Sales Rule bars consumer debt relief companies from collecting fees until a debt is settled and you have made a payment under the settlement. 16 CFR 310.4(a)(5). However, this prohibition does not apply to business-to-business telephone calls, 16 CFR 310.6(b)(7), and the 2024 amendments only extend the misrepresentation provisions to business buyers.
How much is the monthly program fee?
The monthly fee in the one MCA price sheet we've seen is $99/month, called a custodial account maintenance fee. Over 36 months, that is $3,564. Added to the $995 setup fee, that's $4,559 over a three-year program before you pay any percentage fees. Consumer programs charge around $5 to $20 per month.
Is the MCA settlement company fee a % of enrolled debt or a % of savings?
This depends on the settlement company. The one MCA price sheet we've seen charges 15% to 25% of the enrolled debt amount, split into an "Enrolled fee" and a "Settlement Success fee" and paid after settlements are executing. Other firms charge 15% to 35% of the amount saved. With $100,000 in enrolled debt, a 15% to 25% fee on the enrolled amount would be $15,000 to $25,000, while one law firm applied a 15% to 25% fee to the settlement amount and came up with only $4,500 to $15,000 (a gross understatement). See what's better: a % of enrolled debt or a % of savings as the MCA debt settlement fee.
The "enrolled debt amount" may include the default fees and costs of collection that your funder added after you defaulted. In a 2020 case, the FTC alleged a number of undisclosed fees that Yellowstone Capital deducted from the advances.
How much does the custodial account (reserves) cost with MCA debt relief?
Settlement companies charge a monthly fee for the account where your deposits sit, whether called a dedicated, custodial, escrow or reserve account. The MCA company we found charges $99/month, and also deducts the $19.95 skipped payment fee from this account. Consumer programs charge around $5 to $15 per month, plus around $30 per settlement payout.
For consumer debt, the funds must be held in an insured financial institution, the funds and interest must belong to you, the administrator must not be owned or controlled by the settlement company, and you must be able to withdraw the money within seven business days of leaving, less earned fees. Nothing requires this for business debt, so ask for it in your contract. The administrator may charge a "reasonable fee" but cannot transfer any funds to the debt relief provider until a debt is settled. See the FTC's Debt Relief Services: A Guide to the Telemarketing Sales Rule.
What hidden costs aren't on the price sheet?
Watch for costs found in the contract and not listed in the fee sheet:
- Fees on debts the company never negotiates or even contacts the lender about
- Skip payment fees, NSF fees and late fees
- Early termination fees (which can be a % of what you have enrolled)
- Default, attorney and collection fees lenders add to the payoff while you save
- Legal defense against a lender's lawsuit, unless the contract says in writing it is included
- Taxes on debt forgiveness, as stated by the IRS on canceled debt
What does the full bill look like on a $150,000 MCA balance?
Example: You settle $150,000 in merchant cash advances with a company priced like the sheet we found, in a 30-month program with a program fee of 20% of the enrolled balance, and you skip three payments:
| Line item | Amount |
|---|
| Setup Fee | $995.00 |
| Maintenance fee on Custodial Account ($99 x 30 months) | $2,970.00 |
| Program Fee (20% of enrolled balance) | $30,000.00 |
| Skip Payment Fees ($19.95 x 3) | $59.85 |
| Total Paid to MCA Debt Settlement Company | $34,024.85 |
You are paying 22.7% of the enrolled debt amount. If the lenders settle for 50%, or $75,000, you paid $109,024.85 in total, which is 72.7% of what you enrolled. Whether that beats staying current: Will it cost me less to get relief from my MCAs if I don't default first?
Questions About MCA Debt Settlement Company Fees
Are MCA settlement company fees capped by law?
We have not found any caps for businesses. The FTC refused to set a cap or even a formula for consumer debt settlement fees. A few states like Delaware have set a cap on consumer debt at 18% of the principal balance enrolled. For MCAs, the limit is what you are willing to sign up for.
Does the fee include legal fees if I get sued?
Some MCA debt settlement companies advertise that if you get sued, they will represent you as part of the one fee that you pay them. There are usually conditions to this. Be aware that in New York State, judgments on business debts accrue interest at 9% per year.
Do I have to pay taxes on the debt that was forgiven?
The IRS considers it potential income; ask your CPA how it affects you. The $600 figure you may see quoted is the amount at which certain creditors have to issue a 1099-C, not a tax-free floor.
What happens if I want to get out of the program early?
You pay whatever the contract's termination clause says plus fees already earned on settled debts. For consumer debt, early termination fees range from $50 to $200 (or more). One critic of MCA debt settlement used a hypothetical contract with a clause charging 2% of the remaining enrolled balance per month. On $500,000 enrolled, leaving after 2 months would cost $20,000.