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New York Attorney General Letitia James sued an arbitration company accused of rigging outcomes against small businesses on behalf of the MCA industry, as state-level enforcement actions and new disclosure laws continue to reshape the merchant cash advance landscape in mid-2026.
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The merchant cash advance industry faces a multi-front regulatory reckoning in 2026, with the New York Attorney General filing a fresh lawsuit against what it calls a fraudulent arbitration service purpose-built to favor MCA funders, while Connecticut debates stripping lenders of a legal tool that has made the state a hub for aggressive collections.
NY AG Sues Rapid Ruling Over 'Sham' MCA Arbitration On June 8, 2026, New York Attorney General Letitia James sued Rapid Ruling and its founders, Zachary Meyer and Andrew Sachs, alleging the online arbitration platform was never neutral — it was designed from the start to help MCA funders collect from small businesses without a fair process.
According to the AG's complaint, an MCA company wrote and repeatedly revised Rapid Ruling's own arbitration rules, tailoring them to favor funders: merchants had just seven days to respond to claims, service could be made by email, discovery was sharply restricted, and default awards were issued against merchants who failed to appear.
The OAG's investigation found that 97 percent of approximately 3,000 arbitrations Rapid Ruling administered in its first three years took place without any appearance by the small business on the receiving end, and Rapid Ruling ruled in favor of the MCA company that initiated arbitration in nearly all of those cases.
The lawsuit alleges violations of New York's FAIR Business Practices Act — which went into effect on February 17, 2026 — and seeks a court order preventing Rapid Ruling from operating, plus civil penalties and restitution for affected merchants.
The Rapid Ruling action follows the landmark Yellowstone Capital settlement announced in January 2025, which delivered over $534 million in debt relief and canceled all outstanding MCA debts owed to Yellowstone and its subsidiaries.
Settlement payments were mailed to qualifying claimants on April 3, 2026.
Connecticut Under Pressure to Close the 'Prejudgment Remedy' Loophole After New York banned out-of-state confessions of judgment in 2019, many MCA firms relocated to Connecticut, which allows lenders to add contract language directing a borrower's banks to freeze all accounts — swiftly and without judicial review — when payments stop.