MCA debt settlement is a legal service. Is MCA debt settlement a scam, though? Sometimes, yes. Even when the service is legal, though, many of these programs cost you more than they save you.
Is MCA debt settlement a scam, or a real service with bad actors?
Under the Ohio Supreme Court’s Watkins decision, someone who is not a lawyer can negotiate business debt for you, acting as a messenger.
On May 27, 2026, Mark Csantaveri of Morristown, New Jersey pleaded guilty to conspiracy to commit wire fraud. He pitched a “proven proprietary debt restructuring system” that would lower your MCA payment by 80%. All you had to do was put money in an escrow account, and he moved the money to his personal accounts. See our explainer on whether MCA debt relief companies are legitimate.
What are the red flags of an MCA debt relief scam?
Some red flags to look for are upfront fees, firm-controlled escrow, guarantees, no lawyer, and advice to stop paying with no defense plan.
| Red flag | Why it hurts with an MCA | What clears it |
|---|
| A big fee before even calling the funders | You pay whether or not a single funder settles | Fees charged only after a settlement is signed and paid |
| The firm controls the escrow account | This is how the Csantaveri money disappeared | An account in your name, run by an unaffiliated administrator, withdrawable within 7 business days |
| A guarantee of how much they can save you, or a success rate | Funders have no duty to accept a settlement | A written estimate that says results aren't guaranteed |
| No lawyer, or a “network” of unnamed lawyers | Your LLC can't answer a lawsuit without counsel | A named, licensed lawyer who will defend you |
| Telling you to stop paying and ignore the funder | Receivable diversions, confessions of judgment and default awards can follow | A written enforcement plan with counsel already lined up |
Is it illegal for an MCA debt relief company to charge an upfront fee?
Probably not. The federal Telemarketing Sales Rule contains a provision that bans upfront fees for debt relief, but it does not apply to B2B calls. In the states we checked, the ones that license debt settlement companies do not include commercial debt: California’s registration covers consumer debt, and Texas only registers MCA providers and brokers.
The federal rule is still a good guide. It bars any fee until they have settled the debt and you have made a payment. Critics say MCA settlement firms charge 15% of the amount you enroll up front, before calling any funders. In one published hypothetical on a $100,000 advance, $41,000 in enrollment, administration, and success fees plus a $60,000 payoff cost the merchant $101,000.
Can an MCA debt settlement company guarantee how much they will save you?
No. As the New York Attorney General states on its website, the creditors do not have to agree to the debt settlement. Even when a firm is selling to your business by phone, under the federal Telemarketing Sales Rule they cannot misrepresent the amount of money you will save, the amount of time it will take, the percentage of customers for whom they are successful, or “the effect of the service on collection efforts of the customer’s creditors.” This last quote means they cannot promise that enrolling with them will stop funders from taking money out of your account or from suing you.
Why is "stop paying your funder" so dangerous with an MCA?
Ignoring the funder is risky because your funder has extra ways to collect, some without going to court. Under the Uniform Commercial Code, 9-406(a), once your customers get notice of the assignment, the only way they can pay their debt to you is to pay the funder. In New York funders have 3 years from the date you sign the agreement to file a confession of judgment under Civil Practice Law & Rules 3218. In June 2026 the New York Attorney General sued an arbitration service over about 3,000 MCA arbitrations in 3 years, and in 97% of them the business didn’t appear.
Under Civil Practice Law & Rules 321(a), if the funder sues, a corporation like your business can only appear in court through an attorney, and you only have 20 days to file an answer after being personally served and 30 days after substituted service. The only time stopping payments makes sense is if you are working with a lawyer who has a written plan to deal with each of these threats. See questions to ask before hiring MCA debt help.
What should you do if you already signed up with a bad firm?
First, take control of your money. See if the account is in your name and whether you can withdraw. The federal safe harbor for consumer debt relief, a good benchmark here, returns your money within 7 business days of a request. If you are served with a summons, calendar it and get counsel to represent your company. If the firm misrepresented itself, you can report it to the FTC and to your state attorney general. In New York the Attorney General can now go after unfair and abusive practices against businesses under the FAIR Business Practices Act, which went into effect on February 17, 2026.
Frequently Asked Questions
Can a non-lawyer company legally negotiate my MCA debt?
In Watkins, the Ohio Supreme Court held that a non-lawyer company could negotiate business debt as a messenger, without legal tactics or legal advice. In that case the firm had 31 complaints filed against it by clients who paid over $70,000, and was fined $1,000 and enjoined from further acting.
Will I have to pay taxes on my MCA settlement?
The IRS says that in general cancelled debt is taxable and you have to report it even if they don’t send you a 1099-C. However, there is an exclusion for people who are insolvent. Whether your MCA settlement will be considered cancelled debt depends on the facts. Ask a CPA, and be wary of any firm that doesn’t at least discuss this issue with you.
How do I know if an MCA relief review site is fake?
Check the registration date and see who owns the domain. Sometimes a firm owns the “best of” site, ranks itself first, and tracks who goes to the sites it refers you to. Also, be wary of a firm that quotes a “success rate,” because no public data shows what percentage of its clients have settled.
Isn’t it safe if the program says they have attorneys in their network?
Ask them for the name of the attorney who would file an answer for your company if you were sued by a funder, where that attorney is admitted to practice, and whether that attorney is part of the fee you are paying.