Regulation
Factoring to Take MCA Fight to Federal Level
July 2, 2026In the wake of new merchant cash advance laws passed in Texas and Vermont, American Factoring Association President Cole Harmonson posted the next step is to take the fight against MCAs to the federal level.
Post below:
Vermont Follows Texas on Merchant Cash Advance Regulations
June 23, 2026“Certain automatic debts prohibited. A provider shall not establish a mechanism for automatically debiting a recipient’s deposit account unless the provider holds a validly perfected security interest in the recipient’s account under Title 9A, with a first priority against the claims of all other persons.”
Vermont has followed Texas with an identical automatic debit prohibition on sales-based financing. The new law, identified as House Bill 648, goes into effect on July 1, 2027. Technically it only applies on deals where the funding amount is less than $1 million. COJs are banned, APRs are required, and nobody can solicit a Vermont-based business with funding unless they have a lending license. The full language can be viewed here.
The Governor signed the bill into law on June 16, 2026. While this law copied some of the language enacted in Texas, its actual origins is from the Factoring industry that took full credit for the Texas law.
Serial Litigants May Target Websites and “Trackers” As Alternative to TCPA
June 12, 2026
The small business loan brokerage had played it safe. Rather than robodial and take their chances in the minefield of TCPA compliance, they ran ads on Facebook and Instagram and had the merchants call them. Inbound leads were gold, they cheered, until one of those inquiries came through a little differently. It was a demand for damages for having been tracked on the internet.
The merchant alleged that they had only been served ads on social media by that company because they had been tracked from a prior website visit. They hadn’t wanted to be tracked and there was no option to opt out of tracking. As a result, they demanded to be compensated, heftily.
By now, most internet users have at least heard the term GDPR, the General Data Protection Regulation that became a never-ending source of controversy throughout Europe, but not all are aware that states and litigants in the US have tried to create a similar framework for privacy. For some in the small business finance industry, the vast complexity of compliance was not fully understood until the lawyers came calling.
“Pretty much every MCA company is potentially a victim because they’re all doing advertising,” said Richart Ruddie, CEO of Captain Compliance, a firm that specializes in safeguarding companies against these sorts of threats. “What we do is we protect against the rise and surge in privacy lawsuits and privacy litigation. So, anybody running TikTok ads, Facebook ads, Instagram ads, any sort of technology that does session-replay where it watches you move the cursor on the screen, if they’re running Google Analytics, all of these are cases that have been tried and are being litigated over.”
Ruddie said that companies within the small business finance industry, including a few within the segment of MCA, have been hit with claims, and they’re now actively working with them to make sure it doesn’t happen again.
“What our software does is provides the ability for users to have consent to opt-in or opt-out of any sort of ad targeting, tracking, session-replay technology,” Ruddie said. “And then we also provide software that constantly keeps businesses’s privacy notices and privacy policies up to date with their tracking and what they’re doing as well as their data handling practices.”
The larger issue is that for companies that might already be aware of the risks, the solutions they’re using may not actually be compliant with the laws.
“What’s happening now is there’s a handful of these cookie banner softwares but they don’t work and they’re creating bigger issues because they’re like ‘Hey, you told me I could opt out, and then I turned off the selling and sharing of my personal information and you still track me,'” Ruddie explained.
This is made all the more complex by the fact that there are nearly two dozen states with their own twists on compliance. And a growing cottage industry of serial litigants that know this complexity could make website operators easy targets to profit off of. For instance, some of them are going around and running automated website scans just to see who to target. Ruddie said that he’s seen claims reach into the tens of thousands or hundreds of thousands of dollars for alleged privacy violations.
Preventative measures are within reach, however. Ruddie says that for a brand new customer they can get a company compliant in one to three business days. It’s hard for companies to hide in the shadows if they’re online because it doesn’t take much to see what’s there and what isn’t.
“You can right-click and look at the code and then you can see all the different tech and what’s running on the website,” Ruddie said.
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.
Connecticut Commercial Financing Bill Moving Forward
April 29, 2026Connecticut’s commercial financing bill is moving its way through the state legislature. See it here.
Like a few other states it applies to merchant cash advances and it includes an APR requirement. While an earlier version of the bill exempted all sales-based financing transactions above $250,000 from the rules, it removed the threshold and made all transactions of all sizes subject to them. Both brokers and funders would be required to register with the Banking Department in order to offer commercial financing to Connecticut-based merchants.
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.
