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Merchant cash advance debt-restructuring engagements are up sharply year-over-year, even as the CFPB exempts MCAs from federal small-business lending data rules and states like Illinois expand disclosure mandates.
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A quieter week for headline-grabbing lawsuits didn't mean a quiet week for the merchant cash advance industry.
Two threads worth watching converged this month: MCA-related debt distress is climbing sharply even as federal oversight of the product loosens, while states keep tightening disclosure rules on their own.
Here's where things stand.
MCA restructuring engagements up 30% year-over-year Second Wind Consultants and its debt-resolution arm, Rise Alliance, announced that more than 2,000 businesses entered Credit Rehabilitation Restructuring engagements over the past 12 months, addressing more than $300 million in merchant cash advance obligations — a 30% increase from the prior year.
Robert DiNozzi, Chief Growth Officer at Second Wind Consultants, framed the shift as a change in how distressed merchants need to be approached: "Merchant cash advance distress is often approached as a payment negotiation problem when, in reality, it is frequently a broader commercial restructuring problem." The numbers track with a broader pattern researchers have flagged for the past two years: businesses that can't keep up with one advance frequently take out another to cover it, a practice known as "stacking" that turns a cash-flow gap into compounding daily debits.
(Business Wire) CFPB finalizes exclusion of MCAs from small-business lending data rule The Consumer Financial Protection Bureau's final rule under Section 1071 of Dodd-Frank, filed April 30, now excludes merchant cash advances from the small-business lending data collection requirements that apply to other commercial credit products.
The move is a reversal from the CFPB's earlier position, which had treated MCAs as "credit" subject to ECOA-related reporting obligations.
In practice, it means MCA funders won't be required to report the race, sex, and other demographic data on small-business applicants that banks and other commercial lenders must now disclose.