MCA Restructuring Cases Jump 30% as CFPB Scales Back Oversight

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. (deBanked)

State disclosure laws keep expanding the compliance map

While federal reporting requirements for MCAs are shrinking, state-level disclosure mandates keep growing. Illinois's Small Business Financing Transparency Act (SB 260) took full effect January 1, joining California and New York in requiring commercial financing providers — MCA funders included — to give small-business borrowers standardized, plain-language disclosures, including an annualized cost figure, before they sign. The law responds to a long-standing industry practice: because MCAs are structured as a purchase of future receivables rather than a loan, funders have not historically had to disclose an APR, even when a deal's factor rate annualizes to a triple-digit effective rate. (Venable LLP)

The backdrop: last year's billion-dollar settlement still looms

The current split — lighter federal reporting, heavier state disclosure — is playing out against the shadow of New York Attorney General Letitia James's $1.065 billion settlement with Yellowstone Capital, announced last year. The state accused the now-defunct funder of disguising high-interest loans as merchant cash advances and collecting fixed daily amounts unrelated to a merchant's actual revenue — the opposite of how a true MCA is supposed to work. The settlement forgave roughly $534 million in debt for more than 18,000 small businesses nationwide and remains the reference point regulators and plaintiffs' attorneys point to when arguing that a given MCA contract is really a disguised, usurious loan. (American Banker)

What it means

Nothing in the last few days rewrote the rules of the road, but the direction of travel is consistent: distress is rising, federal oversight of MCAs specifically is retreating, and states are stepping into that gap with their own disclosure and licensing regimes. For funders, that means compliance is increasingly a state-by-state exercise rather than a single federal standard. For merchants already juggling multiple advances, the growth in formal restructuring engagements suggests more borrowers are seeking structured workouts rather than defaulting outright — a trend worth watching as more state disclosure laws phase in over the rest of 2026.