Story Series: debt settlement
They Offered to Reduce My MCA Payments. I Played Along.
September 3, 2024
It started when I got a cold text that said my merchant cash advances could be reduced by 80%. I didn’t have any advances but was intrigued by the audacity of the offer. REDUCE THEM BY EIGHTY PERCENT!
“Ok,” I thought to myself, “I’ll bite to see where this goes.”
I replied and was assigned a rep via text who introduced himself by name, Mark.
I told Mark I believed his offer to be a scam and sent him a link to an article (that was literally on deBanked) in which someone making similar offers had been arrested by the FBI. I was 100% confident that he would disappear but he was undeterred.
“Those were shady companies,” Mark said, assuring me he had nothing to do with them. I wondered if Mark had caught on to who I was because he seemed eager to convince me he was legit. He told me that I’d still have to pay my advances in full but that he would just get the payments for them reduced. That seemed unusually tame compared to what I’d heard about these type of encounters with “debt relief” companies but Mark kept talking.
By signing up with them I’d be assigned a lawyer who would have “leverage” over my MCA provider due to them likely being in default on their own contract. He explained that they were always in breach for failing to reduce the daily payments (a likely reference to reconciliation clauses). Mark’s fee for helping me take advantage of this, the cost of which was not mentioned, would be included in my new regular payments they’d negotiate for me.
Just as I was beginning to realize that I’d be on the hook for paying them for their service on top of apparently still paying my advances, the messages over texts stopped, and he tried to only continue the conversation by phone, which I avoided.
From there robocalls hit my phone 4-5x per day as they attempted to reel me back in until they eventually tried texts again. When they did the offer had changed from them being able to reduce my payments by 80% to only 50%. Weird. Nevertheless, I wanted to get back to where we had left off, finding out the cost of this service, of which I now learned included legal representation by an attorney and a separate case manager. It sounded like it would be very expensive for me and I let him know my concerns. If Mark had known who he was actually speaking to before, the attempt to play it off now had been forgotten.
“Our program is not designed to cost you any additional money,” Mark said. “We go after unpaid fees and interest. You will never have to pay us out of pocket.”
And so that was the pitch, wordplay designed to make it appear the service was free and I would never have to pay them.
The website they referred me to included obviously fake testimonials with stock photos. They were “Trusted”, “Approved” and had been seen on various TV networks. It promises to stop withdrawals from funding companies and that their “in-house licensed attorneys” based in Florida and New York will take care of everything. The 7 month old website, which lists no business address, also claims the team has a decade of experience while the legal entity itself does not appear to exist, at least not in all the states I checked.
As I attempted to track down anything about this company I could find, a breakthrough led me to an address in Miami, which as fate would have it was home to another debt relief company targeting businesses with merchant cash advances. The website is similar. They are “Trusted”, “Approved” and seen on TV. They can also improve cash flow by up to 80%. What a coincidence. The owner of this one also has a colorful background with the law. Although I was not able to fully confirm that this company is the alter-ego of the other, I learn that this second company was just sued in April for allegedly absconding with a merchant’s funds it claimed was being used to pay off MCAs. In another instance the debt relief company is suing a merchant for the recovery of over $400,000, the sum of which it claims was its fee for trying to reduce a merchant’s MCA payments. It would seem that such work is not so free after all.
As my phone continues to ring and ring with offers to reduce my MCA payments, I decide to disengage.
“Sean, how many loans do you have?” Mark resumes. “Sean we will reduce your payments by at least 50%, let’s discuss.”
I ignore him. When he tries me again, he tells me he can reduce the payments by 80%. Then again later by 50%. He never tells me why it changes. His last message more than several months later is a return to the same script.
“Sean, Do you have MCAs hurting your cash flow?”
I’m pretty sure that he can’t be trusted. If your sales drop, you should call your funding company to discuss and stay away from shady pitches like this.
Debt Settlement Attorney Sanctioned by Court
July 29, 2024A self-proclaimed merchant cash advance debt settlement attorney was sanctioned in the New York Supreme Court for frivolous conduct attributed to making an overtly false and/or misleading statement of fact.
The attorney is Dominick R. Dale, who is defending a merchant in an action brought by a revenue based financing company in Index No: EF000224-2024. According to court documents, Dale sought to move a case filed by plaintiff in Orange County, NY (which the contract specified as the forum) to either Kings County or New York County on the basis that defendant was not a resident of the State of New York, had no connection to the state, and that the forum selection clause in the agreement was invalid.
The irony is that the defendant did actually reside in Orange County, NY.
In the order granting plaintiff’s cross-motion for sanctions, the judge ruled that the defense attorney’s motion to transfer venue was “solely based on the distance between defense counsel’s office and the courthouse” because the 71 mile distance was apparently too far for him to want to travel.
The case is still ongoing.
Dale, who is listed under the name Law Office of Dominick Dale, Esq. in the action, also goes by the name “Merchant Cash Advances Law Firm” with an advertised focus on debt settlement.
Law Firm Sued Over “Debt Relief” Practices
July 9, 2024Another alleged “debt relief” law firm is under fire by a small business lender. This time the lender is National Funding and their latest lawsuit names not only a borrower that breached a loan agreement as a defendant but also a New York based law firm named J.S. Fritzon Law Firm, P.C.
According to the Complaint filed in San Diego County of California’s Superior Court, after the defendant law firm identifies National Funding’s customers, they contact them, offer to provide debt relief services, and attempt to persuade them to breach their obligations.
“As part of this effort, Non-Borrower Defendants routinely make misleading representations to National Funding’s customers, including by promising to save them money by settling their obligations to National Funding for a discounted amount when Non-Borrower Defendants have no legitimate basis for making such a promise and no reasonable expectation of being able to fulfill such a promise,” it says.
Among the causes of action against that defendant in particular are Intentional Interference with Contractual Relations, Unfair Competition, Conducting Business as a Prorater Without a License, Unauthorized Practice of Law, and Violation of Uniform Voidable Transfer Act.
The case number is 37-2024-00021246-CU-BC-CTL.
“MCA Debt Settlement” Company Sued
May 7, 2024A firm that offers to “restructure corporate debt primarily MCA or Merchant Cash Advance debt” was sued last month by a small business owner for fraudulent inducement, consumer fraud, unjust enrichment, breach of fiduciary duties, and for a declaratory judgment. Corporate defendants include MCA Resolve LLC and Coastal Debt Resolve (ABSM LLC) in addition to several individuals.
The alleged scheme, as laid out by plaintiff, asks business owners to pay huge fees to the debt settlement firm all while being forced to default on their business financing agreements on the hope that they might eventually get a proposal to settle for far less than the amount agreed. In this case, plaintiff explained that the result was that they actually ended up owing more because of how much defendants were charging. The case was filed in the Superior Court of Arizona and can be viewed here.
Notably, MCA Resolve LLC is currently being sued by two unrelated MCA funding companies in the New York Supreme Court.
Stop the Debt Settlement People, Funders Come Up With Merchant-Friendly Alternative
April 3, 2024
Are debt settlement “advisors” interfering with your contracts and putting your merchants in a bad spot? The industry is now taking the reins on a solution. It’s called GreenLedger, a platform for funders to work together on resolving a merchant’s situation with no debt settlement middlemen encouraging an intentional default, taking fees, and making false promises.
Founded by Elevate Funding CEO Heather Francis, who aims to eventually make it a non-profit, merchants would go to this industry-collaborative platform, indicate who they have open contracts with, and the platform would notify the funders directly.
“From there, the primary points of contact at each funder can get together to come up with a more specific and comprehensive payment plan that works with the merchant’s needs,” said Francis. “GreenLedger’s mission is to work directly with our small business clients to stabilize their revenue-based financing arrangements and avoid breaching their agreements, eliminating the need for potentially predatory middlemen.”
The platform has already been generating interest.
“As an attorney deeply committed to the financial empowerment of small and medium-sized businesses, I am thrilled to endorse Elevate Funding’s creation of GreenLedger,” said industry attorney Patrick Siegfried. “This initiative represents a pivotal step in our ongoing battle against the increasing prevalence of unscrupulous entities in the commercial finance debt settlement industry. Far too often, these bad actors employ deceptive sales tactics and bind clients with unfair contracts, leading not to the promised debt relief but to further financial strain for small businesses. GreenLedger, with its dedication to transparency and integrity, stands as a true avenue for business owners seeking legitimate and effective financial solutions. Its mission to root out malpractices and safeguard the interests of small businesses is not just commendable but essential in today’s challenging economic landscape.”
To learn how you can participate and cut the debt settlement people out of the picture, attend this webinar on April 16th.
Got an Offer to Settle Your Debts? Be Careful!
May 25, 2023“Imagine a small business owner who is getting calls and demand letters and lawsuits from their creditors,” said Steven Zakharyayev, Managing Attorney at Law Offices of Steven Zakharyayev, PLLC, “then this debt relief company comes along and claims they can help. Desperation makes them an easy target.”
Unlawful debt settlement schemes can take many forms but a common one is a third party enticing a merchant into believing that they can resolve their debts at a discounted price when there is no basis for that to be true.
“[The scammers’] marketing preys on small business owners who may be in tough financial situations with ‘pie in the sky’ promises,” Zakharyayev said.
Common red flags indicating a potential fraudulent marketing pitch include requests for upfront payments, down payments, or monthly installments. Third party assistance in and of itself is not necessarily unlawful but the debtors should conduct thorough due diligence on any proposal they receive.
“Consumers can look up the debt negotiation companies and find out if they are legit and how they work by looking up reviews and searching up the company,” said Manny Yosipov, CEO at Advanced Recovery Group.
Debtors should also take care to understand whom it is they are even speaking with. Sometimes the identity of the person calling to address a debt is not clear. Is it a creditor? A collections firm acting on behalf of a creditor? Or a third party with no relationship to the creditor at all? This can become all the more confusing when more than one communcations channel is being used.
“The amended FDCPA allows debt collectors to use newer technologies, such as email and text messages, to communicate with consumers regarding their debts, subject to certain limitations, which protect consumers against harassment or abuse,” said Yosipov.
Meanwhile, Zakharyayev emphasizes the importance of creditors informing clients about the types of communications they might receive from third-party scammers and the unrealistic promises these scammers may make to settle their debt. Merchants should be aware that debt settlement companies often charge significant fees to settle debts that merchants could likely handle themselves.
“Businesses and their customers are usually better off in the long run if they communicate and are transparent with their financial records,” said Zakharyayev. “Once the debt settlement companies get involved, the situation gets more complicated and ironically less likely to settle.”
Funders Planning Mounted Response to Debt Settlement Schemers
December 30, 2021
Debt settlement companies are still using their tricky tactics, according to Efraim Kandinov of Fundfi Merchant Funding. He says a large group of funders are currently strategizing a mounted response to activity he believes is illicit.
Fundfi’s lawyers have already begun to send out Cease and Desists to the companies that have been telling his clients to breach their contracts and stop paying. He says it has become such an issue, that merchants in other parts of the country have begun ignoring his calls because of his New York area code, which they now associate with this kind of scam.
“[The merchant] said,‘I’m having all these New York numbers specifically, call me and plead with me ‘why are you doing this to yourself? Stop paying. Don’t pay these guys, pay me a fee and I’ll take care of it.’”
”This merchant was smart enough to say, ‘hey, this sounds like a scam’ and gave me the rundown.”
According to Kandinov, his company is one of the many that merchants are being told not to pay, while there are other funders who the debt settlers instruct to keep paying.
“They’re specifically targeting certain funders,” said Kandinov. “Whether they’ve been sued before by other ones, or have agreements, I have no idea. However I’m starting to realize, they’re specially targeting certain companies.”
War on Debt Settlement Continues: 16 Defendants Sued in RICO Case
September 6, 2018
Fourteen individuals and two companies (including Decision One Debt Relief) were sued by Funding Metrics in Federal court last month for allegedly “conducting a nationwide illegal debt restructuring scheme through numerous acts of mail and wire fraud.”
The suit, which stems from the defendants’ interference with Funding Metrics’ merchant cash advance customers, makes six claims, among them financial damages resulting from state and federal crimes. Per the complaint:
“Defendant Decision One (along with its affiliate/alter ego D1 Servicing) fraudulently presents itself as being able to renegotiate and restructure merchant agreements with Plaintiff and other funding companies. It has established a deceptive business practice of making misleading and often outright false representations to merchants under contract with Plaintiff promising that, with its help, these merchants will save money on those contracts by defaulting on them. Decision One tells merchants that they can safely stop paying cash advance funding companies like Plaintiff; that it will go to work for them promptly; that it can reduce their debt by 60-80% or more; and that they will be provided with a Veritas insurance plan to cover legal expenses arising from their defaults, once cash advance companies exercise their rights under agreements with their merchants, as they inevitably will. Based on these misrepresentations, the merchants default on their contracts with their funders – that is, at Decision One’s direction, they stop paying their funders and instead pay Decision One – although Decision One does not even expect to achieve results for the merchants. The result is a fraud on the merchants and tortious interference with the contracts Plaintiff have with them.”
The suit is just the latest bomb dropped on the exploding debt settlement industry. deBanked began covering the controversy surrounding debt settlement in late 2016 after the owner and employees of an upstate New York debt settlement company were arrested for charging merchants to restructure their merchant cash advances and then not actually performing any services. The owner, Sergiy Bezrukov, was charged with money laundering, bank fraud, mail fraud, wire fraud and conspiracy to defraud. Bezrukov has been locked away in jail for almost two years awaiting trial. He is facing a maximum of 30 years. Two of his employees pled guilty, Vanessa Cardona to bank fraud and Dustin Walker to conspiracy to commit bank fraud.
Since then, nearly a dozen major lawsuits have been filed by merchant cash advance companies against other debt settlement companies that are alleged to be carrying out similar schemes. One of those sued companies, NJ-based Corporate Bailout LLC, was featured on the cover of the New York Post last summer for being “the craziest office in America.” Corporate Bailout was sued by both Yellowstone Capital and Everest Business Funding which later resulted in a very public settlement agreement that forced Corporate Bailout to fork over $500,000 to the two MCA companies.
Decision One Debt Relief, sued now by Funding Metrics, was also originally a co-defendant alongside MCA Helpline in a lawsuit filed by Everest Business Funding earlier this year. In February, after determining the two were not related, Everest dropped the claims against Decision One only. The suit against MCA Helpline is still pending.
Around that same time, a representative for Decision One revealed to deBanked that the company was on track to be doing more than $100 million a year in business.
Bezrukov, by contrast, who currently resides in a Niagara County New York jail, is accused of having only obtained $1.2 million throughout his entire debt settlement venture’s existence. Although Decision One is not being charged criminally, the private civil suit alleges damages caused by a violation of criminal statutes including RICO.
The Funding Metrics suit against Decision One was filed in the Southern District of Florida under ID# 9:18-cv-81061.
