NY AG Sues 'Sham' Arbitration Firm Built by MCA Funder to Extract Judgments Against Small Businesses

The merchant cash advance industry's enforcement reckoning intensified this month with a major New York AG action targeting what officials call a rigged arbitration system designed from the inside to favor MCA funders over the small businesses they finance.

NY AG Sues Rapid Ruling for Rigged MCA Arbitration

On June 8, 2026, Attorney General Letitia James filed suit against online arbitration platform Rapid Ruling and its founders, Zachary Meyer and Andrew Sachs. The complaint alleges that Rapid Ruling was not a neutral forum at all — it was conceived and built in coordination with MCA company LCF Group, Inc., which wrote the arbitration rules to systematically favor MCA funders.

The OAG's investigation found that in roughly 3,000 arbitrations conducted during Rapid Ruling's first three years of operation, 97 percent proceeded with no appearance by the small business respondent. Because merchants were routinely absent — whether from lack of notice, resources, or awareness — arbitrators almost always ruled against them, routinely piling on junk fees and padded attorneys' fees on top of the underlying debt.

The AG is seeking restitution for impacted businesses, civil damages, civil penalties against Rapid Ruling and its principals, and a court order barring the company from continuing its operations. The lawsuit marks one of the most direct attacks yet on the legal infrastructure MCA companies have used to enforce their contracts quickly and cheaply.

The FAIR Business Practices Act Is Now the Enforcement Engine

The Rapid Ruling complaint invokes New York's FAIR Business Practices Act, signed by Governor Kathy Hochul on December 19, 2025, and effective February 17, 2026. The law represents the most significant overhaul of General Business Law § 349 in over four decades.

Critically for the MCA industry, the FAIR Act:

• Extends protections to businesses and nonprofits, not just individual consumers
• Adds "unfair" and "abusive" conduct as independently actionable — the AG no longer needs to prove outright deception
• Expands the AG's enforcement toolkit, allowing scrutiny of aggressive collection tactics like account freezes, stacking, improper UCC-1 filings, and threats of personal liability

As Skadden noted in April, the FAIR Act gives regulators powerful new leverage that simply didn't exist when many MCA contracts were drafted. The Rapid Ruling lawsuit is the first high-profile test of those powers in the MCA context.

Illinois and New Jersey Join the State Disclosure Law Wave

Separately, the patchwork of state-level MCA disclosure requirements continues to expand. In 2026, Illinois and New Jersey enacted disclosure laws requiring MCA funders to provide merchants with a standardized APR-equivalent and total repayment amount before contract signing — joining California, New York, Utah, Virginia, Georgia, and Connecticut, which passed similar mandates in prior years. Florida is currently debating its own version.

The cumulative effect is that funders operating nationally now face disclosure compliance obligations in at least eight states, with more likely on the way. New Jersey has also moved to limit confessions of judgment and is pursuing active litigation against at least three lenders under its receivables-purchase framework.

What It Means

The Rapid Ruling lawsuit is significant beyond its facts: it signals that regulators are now willing to attack the mechanisms MCA companies use to enforce their contracts, not just the terms of those contracts themselves. A rigged arbitration forum that produces thousands of default judgments is an attractive enforcement target because it offers vivid evidence of systematic harm at scale. For MCA funders that rely on proprietary or preferred arbitration clauses — and there are many — this case is a direct warning shot. Combined with the FAIR Act's new "abusive" conduct standard and the growing disclosure-law footprint, the legal environment for aggressive MCA collection practices has materially tightened in 2026.