Regulation
New York State Bill Seeks to Criminalize Invoice Factoring, Merchant Cash Advances, and More
May 6, 2026A Senate Bill in New York hopes to rewrite the state’s criminal usury laws to include invoice financing, revenue-based financing, merchant cash advances, retail installment contracts, “or any transaction that in substance functions as the advance of funds in exchange for a future payment or obligation, regardless of the label assigned to such transaction.” S10127, introduced by Senator Rachel May (D), says that the purpose is to ensure “that businesses cannot evade New York’s longstanding usury laws by re-labeling high-cost financing products as services or other non-loan transactions, and to apply existing civil and criminal interest rate protections to covered financing arrangements.”
Any product that falls under these definitions would be deemed criminal if its all-in cost exceeds 25% per annum or the equivalent rate for a longer or shorter period. Depending on the circumstances it would either be considered a Class E felony punishable up to 4 years in prison or a Class C felony punishable up to 15 years in prison.
The bill has merely been introduced and has not yet made its rounds through the legislature. It can be viewed here.
RBFC Response to New CFPB Small Business Lending Rules
May 4, 2026Last week, the CFPB updated its final Section 1071 small business loan data collection rules to improve the usefulness of the data and to reduce the burden on covered parties. As part of that, merchant cash advances were finally excluded from the reporting requirements.
The Revenue Based Finance Coalition (RBFC) had advocated strongly for some of the changes that made it into the final version. In a public statement, the RBFC offered this feedback on the news:
“The final 1071 Rule is an important step in the right direction. It reflects an evenhanded approach to sales-based financing and recognizes that these products are fundamentally different from traditional credit. The rule properly focuses on financing arrangements that clearly fall within the scope of the Equal Credit Opportunity Act. We’re pleased to see the Consumer Financial Protection Bureau acknowledge that whether a product constitutes credit depends on its specific structure.
The new framework provides important clarity for responsible providers and the small businesses that rely on flexible, performance-based financing. The Revenue Based Finance Coalition remains focused on advocating for fair, clear, and appropriate regulation of sales-based financing, with a top priority of ensuring that our members can continue to provide businesses with the capital they need to grow and thrive. This clarity will help support continued innovation and responsible access to capital for small businesses across the country.”
The Section 1071 label comes from its statutory section number in the 2010 Wall Street Reform and Consumer Protection Act.
Merchant Cash Advances Excluded From CFPB Small Business Loan Data Collection
May 1, 2026Merchant Cash Advances are now excluded from the CFPB’s small business loan data collection requirements. In the final rules filed by the agency on April 30th, the previous proposal to exclude MCAs from Section 1071 is now deemed approved and final.
“Since MCAs are not covered credit transactions under this final rule, no MCA providers will be required to report,” the docs say. The rationale is discussed across the 314 pages that comprise the final decision. However, the agency did leave open the possibility to reconsider the inclusion of MCAs years down the road.
But for now after more than a decade of debate and confusion over the matter, MCAs will not be considered a covered credit transaction for the purpose of Section 1071 of the Wall Street Reform and Consumer Protection Act. You can read the final rules here.
Bill Proposed to Amend CFPB’S Small Business Data Collection Rule
April 27, 2026
A simple bill has been introduced in the House of Representatives to amend the CFPB’s small business data collection rules. The 888-page rulebook has been undergoing an internal reconfiguration by the CFPB itself but in this instance members of Congress are attempting to make minor changes through legislation.
These proposed changes are as follows:
• Amend the definition of small business to mean a business that does $1 million a year in revenue versus the $5 million defined in the last iteration of the rules.
• Amend covered financial institutions as ones that do at least 500 credit transactions a year versus the 100 transaction threshold defined in the last iteration of the rules.
This bill is called the “Small Lenders Exempt from New Data and Excessive Reporting Act.”
The small business lending data collection rules drafted by the CFPB have been the subject of controversy since 2010 when the law requiring the agency collect small business loan data was first passed. Sixteen years later there has still been much disagreement as to what was actually intended to be collected, from whom it is to be collected from, the manner in which this collection takes place, and what can be done with the data itself once it’s in the agency’s hands. The agency is likely to release an amended version of the rules sometime this year.
229 Companies Now Registered as Sales-Based Financing Providers in Virginia
April 20, 2026Almost four years since Virginia’s sales-based financing provider law went into effect, the state now lists 229 registered parties. That’s an increase of only 27 companies since last year.
Both funders and brokers are required to be registered if they intend to transact with Virginia-based merchants, subject to some exceptions. Registrants on the list include some big recognizable names like eBay Commerce, First Data Merchant Services, PayPal, and Wal-Mart.com USA, but dozens of smaller known MCA broker shops also appear.
If you are a broker or funder in MCA and are not registered to do deals with Virginia-based merchants, you should contact a knowledgeable industry attorney to get set up right away. The law went into effect in 2022.
Concerned About The MCA Automatic Debit Law in Texas? This ACH Company Says There’s a Way
March 25, 2026
There may be no need to overcomplicate Merchant Cash Advance compliance in Texas. A key phrase in the MCA prohibition law that went into effect last year specifies that it’s a prohibition on “establishing a mechanism for automatically debiting a recipient’s account” unless a lot of other requirements are met.
One company looked closely at that piece of the language and came up with a simple solution.
“…our approach is to request the payment at each time and capture the authorization at the time of the transaction,” said John Innes, President of the Texas-based and aptly-named ACH Processing Company. “So instead of capturing an authorization at the beginning and embedding that into the documents where you’re going to do a recurring debit transaction to the merchant’s account, you are sending a request saying, ‘Okay, please authorize this payment.’ And so each payment is individually authorized so you don’t need that security interest [component] anymore.”
No automatic recurring debits. Instead there’s a Request For Payment that requires merchants to manually authorize debits on a debit-by-debit basis whether that be daily, weekly, or monthly, depending on whatever the agreed frequency is.
“I think this was maybe the intent of the law,” Innes continued. “It gives the merchant kind of that control over that debit and it fosters communication between the two parties.”
Innes said there’s various ways that this interaction can be conducted to reduce the friction of this process.
Other options proposed across the industry have focused on another piece of the language, that the prohibition is specifically meant for “commercial sales-based financing providers” and the proposed cure for that is to offer a non-sales-based financing product in the state instead. ACH Processing Company’s solution, however, allows an MCA funder to keep its product suite as-is.
“…you don’t have to break all that,” said Innes. “Continue with the same business plan. ”
Since the Texas law went into effect seven months ago, Innes says that numerous funders have still been in a holding pattern trying to figure out how to approach it. It’s their belief that this solution is a simple way to now get Texas turned back on if they’re ready.
California Bill Asserts Businesses Generating Up to $18 Million/Year in Sales Need Consumer Protections
March 10, 2026California’s AB2116 is proposing to amend the state’s Consumer Financial Protection Law and declare that small businesses generating less than $18 million a year in revenue be considered a consumer for the purpose of consumer financial protections.
“Small business” means a business entity organized for profit with annual gross receipts of no more than sixteen million dollars ($16,000,000) or the annual gross receipt level as biennially adjusted by the Department of General Services in accordance with Section 14837 of the Government Code, whichever is greater.-AB2116
The DGS alternative, when applied to the “whichever is greater” test, currently sits at $18 million, making that the current applicable baseline for what is small.
“Small business owners are often similarly situated as consumers with regards to their sophistication and bargaining power relative to providers of financial services and products,” the bill says. “Many of the rationales supporting legal protections for consumers apply also to small business owners. Small businesses have a better chance to survive and grow if they are able to access safe and effective financial products and are protected from unfair, deceptive, or abusive practices when accessing financial products and services.”
For comparison’s sake, deBanked tracked one online small business lender that originated $200 million in business loans that generated just $14.3M in revenue. Per the bill, this lender would also be presumed an unsophisticated consumer that is unable to bargain on financial service products without consumer protections.
CFPB Costs Consumers At Least 10x More Than They Get Back
February 19, 2026A new study published by the White House Council of Economic Advisors found that the CFPB costs consumers more than it saves them. According to the report, CFPB regulations increased borrowing costs to consumers by $222 billion to $350 billion over the time period of 2011 – 2024. In return the CFPB has touted that it has returned more than $21 billion to consumers over the same time period.
A takeaway is that the while the CFPB has provided the optics of doing good for consumers it has actually cost them far in excess of the perceived benefit to them.
