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The CFPB's revised Section 1071 rule formally exempts merchant cash advances from small business lending data reporting, but state-level action is accelerating—Connecticut is moving to ban prejudgment remedy waivers and New York's new FAIR Act gives regulators broader tools against abusive MCA practices.
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The merchant cash advance industry is navigating a split regulatory reality: federal oversight pulled back this spring while state capitals are tightening restrictions on collection practices, disclosure requirements, and courtroom shortcuts that funders have long relied on.
CFPB Finalizes Section 1071 Rule — MCAs Are Out On May 1, 2026, the Consumer Financial Protection Bureau published its final revised Section 1071 rule, which requires covered lenders to collect and report small business lending data under the Equal Credit Opportunity Act (ECOA).
The key headline for the MCA industry: merchant cash advances are expressly excluded from the rule's definition of a "covered credit transaction." The CFPB limited data-collection coverage to core products—loans, lines of credit, and credit cards—and raised the origination threshold to 1,000 transactions per year for two consecutive years, up sharply from the original 100-transaction threshold.
The Bureau also retreated from its 2023 position that MCAs constitute "credit" under ECOA, though it stopped short of declaring them definitively non-credit.
Covered institutions won't need to begin collecting data until January 1, 2028.
As deBanked reported, the CFPB's equivocation on MCA's ECOA status leaves the legal question open for a future administration, and FunderIntel noted the exclusion is a near-term win but not a permanent one.
Consumer Finance Monitor and Mayer Brown also covered the rule's finalization in depth.
Connecticut Moves to Ban Prejudgment Remedy Waivers Connecticut has become one of the most active venues for MCA litigation, and lawmakers are pushing back.