New York's Rapid Ruling Lawsuit Exposes the MCA Industry's Arbitration Playbook

The merchant cash advance industry's biggest current storyline isn't a single day's headline — it's a widening split between state enforcement getting more aggressive and federal oversight pulling back. Here's where things stand.

NY AG sues "sham" arbitration platform Rapid Ruling

New York Attorney General Letitia James filed suit against Rapid Ruling, an online arbitration platform, along with its founders Zachary Meyer and Andrew Sachs, alleging the company presented itself as a neutral forum while secretly coordinating with an MCA funder to write rules that favored the lender. According to the OAG's investigation, an MCA company drafted and repeatedly revised Rapid Ruling's arbitration rules, and Meyer and Sachs adopted nearly all of the lender's proposed changes. The suit further alleges that 97% of the roughly 3,000 arbitrations Rapid Ruling handled in its first three years proceeded with no appearance from the small business on the other side — and that the platform ruled for the MCA company that initiated the case in nearly all of those default outcomes. The AG is seeking restitution for affected businesses, damages, civil penalties, and a court order shutting the platform down. (ag.ny.gov)

CFPB moves the opposite direction, excluding MCAs from 1071 reporting

While New York escalates enforcement, the CFPB finalized a rule this spring that excludes merchant cash advances from Section 1071 small-business lending data collection entirely — a reversal of its 2023 position that MCAs counted as "credit" under the Equal Credit Opportunity Act. No MCA provider will be required to report demographic and pricing data under the final rule. The Revenue Based Finance Coalition, an industry trade group, had lobbied for the change. The CFPB stopped short of saying MCAs categorically aren't credit, saying instead that further analysis is needed. (JD Supra / Goodwin, deBanked)

States keep adding disclosure laws as a federal bill waits for a floor vote

Illinois and New Jersey added commercial-financing disclosure requirements this year, joining California, New York, Utah, Virginia, Georgia, and Connecticut in forcing MCA funders to show a standardized APR-equivalent and total repayment figure before a business owner signs; Florida is currently debating its own version. At the federal level, the Small Business Lending Disclosure and Broker Regulation Act — introduced in the Senate in January 2026 and modeled on New York's disclosure regime — has bipartisan committee support and is expected to reach a floor vote in the second half of 2026. Separately, Texas HB 700, signed into law in 2025, now voids confession-of-judgment clauses in commercial financing contracts written for Texas merchants outright. (MCA-Track state guide, Credible Law)

Yellowstone Capital's $1B settlement is now paying out

The fallout from New York's earlier action against Yellowstone Capital continues to move through the claims process: the claim period for the $1 billion settlement — which canceled $534 million in merchant debt across a network of Yellowstone-controlled lenders — closed on January 9, 2026, and the settlement administrator began mailing payments to qualifying merchants on April 3, 2026. (NY AG settlement page)

What it means

The throughline across these stories is a widening gap between how states and the federal government are treating MCA oversight. New York, in particular, is no longer just going after funders directly — it's now targeting the infrastructure (arbitration platforms, collection mechanisms) that makes aggressive MCA collections possible, while its FAIR Business Practices Act gives the AG's office a lower bar to bring "unfair" and "abusive" practice claims on behalf of small businesses. Meanwhile, the CFPB's retreat from 1071 data collection means there will be less federal-level visibility into MCA pricing and demographics going forward, shifting the disclosure burden onto a patchwork of state laws and the still-pending federal disclosure bill. For funders, the practical upshot is that contract terms and collection partners that were standard practice in states like New York now carry real legal exposure — and that exposure is likely to keep expanding state by state before Washington settles on a uniform approach.