If you’re reading this, chances are you’re behind on a merchant cash advance and the funder is calling you relentlessly. So you start seeing ads from debt settlement companies. You see ads from “MCA debt lawyers.” Both are promising you an out. You assume that the debt lawyers are safe, and that the debt settlement companies are cheaper. Neither is necessarily the case. A New York ruling from January 2026 shows why. It involved a merchant cash advance funder, a debt settlement company, and an MCA debt attorney that was working with the settlement company. Guess what the funder did? They sued the debt settlement company and the attorney. And the judge let the case go forward against both.
So which one should you hire? I’d argue this is the wrong question to ask. What separates an MCA debt attorney from a debt settlement company really comes down to the level of service you get, and not the fact that one of them has a law license. What you are trying to figure out from both types is whether or not they understand what they are doing and whether or not they can do it. The details of that New York case show what can go wrong.
NewCo Capital Group VI, LLC V. MCA Resolve LLC
The case is NewCo Capital Group VI, LLC v. MCA Resolve LLC, Dominick Dale, et al., filed in New York County. NewCo is a revenue-based funder that buys merchants’ receivables under a revenue purchase agreement, or RPA. NewCo claims that debt settlement companies (DSCs), like MCA Resolve, call dozens, maybe hundreds, of its customers. The DSC tells merchants not to make their normal remittances to NewCo. They’re supposed to send the money to pay the DSC’s fees and to a “settlement account” instead. The DSC tells merchants that their RPA agreements are illegal and that they don’t need to comply with them. The DSC doesn’t ask merchants to invoke the reconciliation procedure in the RPA, nor does it reach out to NewCo to discuss a settlement. Instead, it just charges the merchants monthly fees. The DSC also interferes with NewCo’s communications to its customers.
When NewCo sues a merchant, it says, the defense comes from New York lawyers retained by the debt settlement companies to defend the case. These lawyers have no relationship with the merchants and don’t even communicate with them. Their role, according to NewCo, is to file frivolous papers to prolong the case so NewCo can’t get a judgment against them (sometimes for multiple years of litigation) — and the DSC keeps getting paid. NewCo even identified no fewer than 36 cases where one of the defense lawyers appeared, apparently to buy time for the debt settlement company. And at the end of the day, when there’s nothing left to squeeze out of the merchant, the DSCs and the attorneys abandon them. The debt negotiation the merchants paid for never happens. This means that the merchant has now paid twice. They still owe NewCo under the contract and they’ve also lost the money they paid to the DSC.
Two Motions to Dismiss
On January 13, 2026, Justice Andrea Masley of the Commercial Division denied almost all of the arguments in two motions to dismiss, one filed by the settlement company and one by the attorney. MCA Resolve, the DSC in question, is located in Florida. The Court held the DSC and its principals can be sued in New York because it deliberately contracted to provide services in New York (legal defense) and engaged in torts in New York (interference with NewCo’s business relationships with its customers).
The following claims against the DSC survive: tortious interference with contract, conversion, and civil conspiracy. The Court found sufficient allegations that the defendants had knowingly induced merchants to breach their contracts by false promises of debt resolution and directing the diversion of receivables that NewCo had purchased. The claim for punitive damages was found not to be dismissed, as NewCo alleged a malicious and repetitive course of conduct directed at the public and the courts.
The attorney’s motion to dismiss is rejected in full. The claim of attorney immunity is rejected. The Court found sufficient allegations that the attorney provided substantial assistance to the scheme, through frivolous and vexatious litigation.
The claim under Judiciary Law § 487 (deceit by an attorney) also survives. The Court found sufficient allegations of a pattern of deceit, multiple appearances without engagement letters or communication with clients, abusive motion practice, and at least 36 related cases. NewCo may now proceed to discovery and trial on its claims for damages, which include the value of uncollected receivables and increased litigation and funding costs.
Keep in mind that a motion to dismiss only tests whether the claims are strong enough on paper. That doesn’t mean the funder will win at trial. But it means the funder won an important victory.
So back to the title question. In that lawsuit, both the settlement company and the lawyer were defendants. They were working together. So it wasn’t a lawyer versus settlement company situation. Lawyers have the ability to manipulate the process and prolong litigation. But it costs money to delay your case. That money has to come from somewhere, and according to NewCo, it came out of the merchants’ pockets.
Before You Hire Anyone, Lawyer or Settlement Company
Once a “debt management” or “settlement” organization says your agreement is illegal and you can walk away, and to stop your remittances and send them to the company instead, that’s a bad sign. The funder probably still has a right to collect. You can’t just assume that because a DSC says it is illegal that it is. I’d also worry if a company was charging a monthly fee for its services, and nothing happened ever–nobody even called the funder. That would be another warning sign. Another sign would be if a lawyer files papers for you in your case but you’ve never seen that lawyer before, and never signed an engagement letter with them. Another sign would be if the company was just dragging things out and making it take longer than necessary. Delay isn’t the answer. When the client’s cash runs out, that law firm or debt settlement organization may simply abandon the client and they’ll still be liable to the funder and they’ll still have paid the middleman too.
So before you hire anyone, lawyer or settlement company, ask some plain questions. Start with whether they will actually call your funder. If they say no, you have your answer. The only way this works is if they call the funder and negotiate for you. Ask whether they will use the reconciliation procedure in your agreement. And ask them what their plan is, and if the plan has a provision that says, “Then we’ll make an offer and negotiate in good faith”. Because that’s what a plan should have in it. Ask them to provide a status report on your matter, or a plan of action for getting things resolved. Ask for copies of any and all paperwork your potential lawyer has filed for you in court. Ask for copies of the letters they’ve sent to the funder. If the company says, “Your agreement is illegal, don’t pay it,” I’d ask why the company thinks that and what makes them so sure. If a lawyer will be appearing in court for you, ask to speak with that lawyer and to see an engagement letter. If you can’t access your money or find out where it’s going, watch out. Something’s up. If you don’t like the answers, move on. Find another lawyer or settlement company.
The question is not which one should I pick? The answer is the better service provider. The one that actually does something. The attorney who is not just there to drag out your litigation. The attorney that is there to actually negotiate a resolution for you. And the debt settlement company that actually calls the funder. Find an organization or a lawyer that will be responsive to you. It’s your money and your case. Make sure you know what you are getting into.
