CFPB Pulls Back on MCA Data Rules While Courts and State AGs Keep Pressing

No single bombshell broke in the merchant cash advance world in the last day, but the industry's defining storyline — a federal regulator stepping back just as courts and state attorneys general step forward — is still very much in motion. Here's where things stand.

CFPB Excludes MCAs From Section 1071 Reporting, But Ducks the Bigger Question

On May 1, 2026, the Consumer Financial Protection Bureau finalized a rule amending its small business lending data collection requirements under Section 1071 of the Dodd-Frank Act, and the headline for MCA funders is that merchant cash advances are now excluded from the rule's data collection and reporting requirements. The Bureau said it had "erred" in its 2023 rule by prematurely deciding that collecting MCA data would serve Section 1071's purposes, pointing to the varied legal treatment of MCAs across markets and unsettled case law (Greenberg Traurig; deBanked). The amended rule takes effect June 30, 2026, with a compliance date of January 1, 2028.

What the CFPB did not do is settle whether MCAs count as "credit" under the Equal Credit Opportunity Act — it retracted its prior position without adopting a new one, leaving that threshold question open (Goodwin).

Courts Keep Recharacterizing MCA Deals as Loans

While the CFPB steps back, judges are increasingly willing to look past MCA contract language. A New York bankruptcy court recently allowed claims to proceed alleging that a set of merchant cash advance agreements were, in substance, disguised loans rather than purchases of future receivables — a recurring theme in MCA litigation that turns on whether a deal has a genuine "reconciliation" provision and true uncertainty about repayment (King & Spalding).

State AGs Aren't Waiting on Washington

New York's attorney general has continued to press the MCA industry following its landmark case against Yellowstone Capital, which produced a judgment and settlement worth more than $1 billion for high-interest loans disguised as MCAs made to over 18,000 small businesses — including a ban on Yellowstone entities operating in the MCA business and cancellation of more than $534 million owed by small businesses (Consumer Financial Services Law Monitor). New Jersey separately reached a $27.375 million settlement with Yellowstone Capital over allegations of unconscionable and misleading lending tactics (National Trial Lawyers). New York's AG has said it will continue pursuing related litigation against companies that took over Yellowstone's operations and individuals tied to the case.

MCA Debt Is Piling Up in Small Business Bankruptcies

Away from the regulators, MCA funders are showing up more often as major creditors in small business Chapter 11 filings. Bankruptcy cases listing MCA debt surged starting in 2023 and peaked with more than 230 filings, clustering heavily in Florida and Texas courts — a trend Bloomberg Law attributes in part to businesses leaning on MCA financing in the aftermath of the pandemic (Bloomberg Law).

What It Means

The through-line across these developments is a widening gap between federal and state oversight of MCAs. The CFPB is narrowing its own reporting reach and declining to resolve whether MCAs are "credit" at all, but that vacuum isn't stopping state attorneys general from extracting nine- and ten-figure settlements, or bankruptcy courts from picking apart MCA contracts deal by deal. For funders, the practical compliance burden is shifting toward the states and the courts rather than away from regulation altogether. For merchants, it means the strength of any protection still depends heavily on which state's law — and which judge — ends up reviewing the contract.