If you’re drowning in merchant cash advance (MCA) debt, you’re probably looking for relief that can help ease the financial burden. Unfortunately, you’re also exactly the type of business owner that scammers are hunting for.
Scammers often take advantage of people in vulnerable situations who may be more likely to fall for bad actors. That’s why when you see promises like “We can consolidate all your MCAs into one lower payment” or “We can make your MCA debt disappear,” you should proceed with caution.
Separating the scams from the legitimate debt relief offers can be challenging. In this article, we’ll break down how MCA debt consolidation scams work, warning signs to watch out for, and what steps to take if you’ve already been targeted.
How MCA Debt Consolidation Scams Work
MCA debt consolidation scams target stressed and cash-strapped small business owners with empty promises. They prey on those who are already financially vulnerable, as they’re often most desperate and most likely to fall for a scam.
MCA debt consolidation scams often start with cold calls with promises of debt relief and claims that they can reduce your debt by 50% or more. But the real goal is collecting costly upfront fees and then disappearing without actually helping you with your debt.
Common tactics of scammers include:
- High-pressure sales with phrasing such as “You must decide today or this offer expires.”
- Upfront fees of thousands of dollars are required before they provide any service.
- Vague explanations of the debt relief process with no written contract or agreement.
Red Flags of MCA Consolidation Scams
Unsolicited Contact
Scammers often reach out to you first, rather than the other way around. If you’re contacted by any debt relief or debt settlement company via phone, email, or social media, it may be worth a bit of extra caution. Legitimate debt relief companies often advertise their services, but don’t often reach out to prospective customers directly and especially do not hound you for your business.
Promises That Sound Too Good to Be True
False promises are a hallmark of debt consolidation scams. You should run the other way anytime a debt relief company promises you guaranteed approval or claims they can get rid of your debt altogether. You should also avoid companies that claim MCAs are illegal and that you won’t pay to pay anything, or those that pressure you to stop making payments to your MCA lender (especially if they encourage you to make those payments to them or an escrow account instead).
Missing Credentials and Transparency
Debt consolidation scams are intentionally vague, so it’s hard to tell if you’re being scammed. They often won’t have a written contract, or the one they do have is vague about the actual work they’ll provide or who they really are.
Debt relief scammers often won’t provide their real credentials or business license, or don’t have a real physical address or legitimate business presence. Refusal to provide references, and short term operations with little to no case results could be another red flag of a scam.
Vague Fee Structure With Upfront Fees
Debt consolidation scams will likely include vague fee structures, and it’s hard to get a straight answer to what you’ll actually pay, where you money is going and how much of it will be paid to the company upfront before any work is done. You’ll also typically be required to pay fees before the company does any work for you which is illegal in many States. Then, once you pay the upfront fee, they’ll likely disappear with little to no work done on your accounts.
How to Protect Yourself
If you’re struggling with MCA debt and are considering debt relief options, it’s critical that you protect yourself against scams. Before hiring or paying anyone, make sure to vet them carefully.
You can check the state bar association for the licensure of anyone claiming to be an attorney. You can also visit sites like the Better Business Bureau or Consumer Financial Protection Bureau to read customer reviews and complaints.
While you’re searching for a business debt consolidation or relief company, here are some questions to ask to understand how they work and whether you have reason to be concerned about a scam:
- What is your legal strategy for my specific situation?
- When are fees due, and what do they cover?
- Can I review everything in writing first?
- Are you licensed by the State I am in for debt help?
What to Do If You’ve Been Scammed
If you’ve been scammed (or are worried you have been), the first thing you should do is to stop all payments to the company and notify your financial institution or credit card issuer.
Once you’ve ensured the company can’t take any more money from you, report them to the Federal Trade Commission (FTC), your state’s attorney general, and any state consumer protection agencies in your state.
Finally, look for legitimate legal help from a licensed attorney who can review your MCA agreement, negotiate with your MCA providers, or defend you if your creditors have already taken legal action against you. The extent of the scam may determine how much help you’ll need from your new MCA lawyer.
Conclusion
Scammers often prey on business owners, especially those in financially vulnerable situations who may be struggling to repay their debt. Luckily, most debt relief scams have clear red flags, including promises that sound too good to be true and vague agreements.
When you’re vetting debt settlement firms, make sure to verify their credentials, ask plenty of questions, and trust your instincts if they’re telling you to go a different direction.
If you need help with your MCA debt, regardless of whether you’ve already fallen for a financial scam, a debt relief attorney can help.
Here at Tayne Law Group, we pride ourselves on helping business owners navigate their MCAs and find a resolution that works for them. Contact Tayne Law group today for a no obligation phone call at (866) 890-7337 or filling out our short contact form to set up a consultation. We never share or sell your information, and all conversations are confidential.
