5 Things to Check in a Recovery Solutions Group Agreement Before You Sign

So you’re considering a Recovery Solutions Group agreement, an offer to help with your Merchant Cash Advance. Before you sign, check five things. First, learn what service you are actually buying. Second, know where each payment is going. Third, find out exactly what you are paying in fees. Fourth, know what happens to your MCA payments and any lawsuit meanwhile. Fifth, get everything promised in writing. Your business has landed in a complicated situation, and it would be a shame if you settled into an agreement without being as certain as you can be of the outcome.

1. Know what you are buying

“Debt relief” is a marketing term for a whole range of services. Some providers negotiate to reduce your balance. Others may negotiate to extend your payment terms. Others offer new loans to settle your debts. Before you sign up, know the exact scope of what the provider is offering. Ask for an outline, in writing.

Since you are considering a negotiation service, you may be facing a lawsuit already, or you may be worried that one is on the way. Ask the provider if they would protect you if a suit comes, and in particular, if their attorneys would defend you if you are sued.

2. Follow the money

Marketers often let customers believe that when they pay the provider, the provider pays the funder. It’s not always so. A payment may go to cover fees. Or it may fund a negotiated settlement. Or it may just be a down payment on a future negotiation offer. Ask for an itemized statement of where each payment is going. Make sure your statement covers everything, so you can follow where your money goes. Ask for each deposit, each fee, each installment and what it covered, and each funder payment with the date it was sent and who it went to.

When you sign up, check the statement against your bank records, and each funder’s records. If the provider holds funds aside for a future negotiation, that doesn’t count as a payment on a current MCA balance. You should think of the money you’ve sent to the provider as going to a possibility, rather than to the funder.

3. Find the full cost

You may hear claims of how much of your debt a program could reduce. If so, that’s only one piece of the puzzle. The other is the total cost to you. Ask for a complete list of each fee, when and how much, and what the fee pays for. Also ask what happens when some of the agreements settle, and what happens if none settle.

If you’re going to buy a cash relief plan, get a list of how much each funder would get, when, and what the service fees would be. If the provider objects, that’s a warning sign. Another warning sign is any refusal to show you a complete breakdown of how your money has been spent. And see whether you can keep up the MCA payments the provider does not cover.

4. Be wary of advice to stop paying

The agent or marketer who enrolls you may ask you to cut off the MCA payments, or to send only the amount you’re negotiating, or to stop paying the funder and send payments to the provider instead. Stopping may look like a default to your funder, and end with you sued anyway. By itself, enrolling does not change your agreement with the funder. Always check with a lawyer before you stop paying what a contract requires.

Check what happens if a funder rejects a settlement offer. Negotiation does not put a lawsuit on hold by itself, so make sure you know who will handle court filings.

While you negotiate, you may still be getting payment from your customers, but a funder may send a notice asking your card processor to divert payments to the funder instead. If you get this notice, keep the whole document. Check with a lawyer before you respond to the notice or tell your customers what it means.

5. Get each settlement in writing

If you’re in talks to work out a settlement, don’t pay anything or commit to anything until you have the exact terms in writing. Whenever you’re told a negotiation has settled, get the settlement in writing from the funder.

Find out how and when the debt will be considered completely settled. “When” is a key: “when” payment ends, “when” the debt is marked satisfied. Check for exceptions and conditions. If the deal is paid in installments, don’t think of it as done before the last payment is done.

Before you agree to a settlement, plan for the IRS. Forgiven debt is usually taxable. Not all canceled debt is taxable - there are exceptions for bankruptcy and insolvency. But to take advantage of them, you’ll need to know how much was forgiven and how you will report it.

If You Already Signed Up

If you already signed up but haven’t gotten the promised results, and the funder is still demanding payments, start by making sure nothing falls through the cracks, and make sure you have a complete list of where each MCA stands. You may need to deal with court papers if a lawsuit is in progress. Find the deadline and start with that. If your program has stalled, don’t wait to ask for an accounting.

If you check around for reviews of a provider, remember that the issue may not be whether the provider is a nice guy, but rather, if they handle disputes properly, and whether they keep commitments. Reviews and listings are helpful, but they don’t describe the whole process. Make them a guide for your questions, not a replacement for them.

A free contract review costs nothing and takes a day or two. Call (888) 837-7053, or send the agreements to Delancey Street for a straight read on your options.