NY AG Sues Sham Arbitration Platform Tied to the MCA Industry as State Crackdowns Mount

Merchant cash advance funders are navigating an increasingly crowded regulatory landscape this summer, with state enforcers, federal regulators, and state legislatures all moving on different fronts at once. Here's a roundup of the developments currently shaping the industry.

New York AG Sues "Sham" Arbitration Service Rapid Ruling

On June 8, 2026, New York Attorney General Letitia James sued the online arbitration platform Rapid Ruling and its founders, Zachary Meyer and Andrew Sachs, alleging the platform was created in coordination with an MCA company to present itself as neutral while actually favoring funders in disputes with small businesses. According to the complaint, small businesses hauled into Rapid Ruling arbitration over defaulted advances almost always lost, with arbitrators regularly rejecting merchants' defenses and awarding funders exorbitant junk fees and padded attorneys' fees. The suit alleges violations of New York's FAIR Business Practices Act and seeks restitution for affected businesses, civil penalties, and an order barring the scheme from continuing. It follows James's $1.065 billion judgment against Yellowstone Capital in January 2025, which cancelled roughly $534 million in debt for more than 18,000 small businesses.

CFPB Pulls Back on Treating MCAs as "Credit"

On May 1, 2026, the Consumer Financial Protection Bureau issued a final rule amending its Section 1071 small business data collection requirements that excludes merchant cash advances from the reporting mandate, retreating from the agency's 2023 position that MCAs qualify as "credit" under the Equal Credit Opportunity Act. The Bureau stopped short of declaring MCAs are categorically not credit, saying instead that further analysis is needed to sort which MCA products qualify. In practice, MCA providers will not be required to report data under the amended rule for now.

Texas Registration Deadline Approaches Under HB 700

Texas's HB 700, signed into law in 2025 and in effect since September of that year, created a registration, disclosure, and conduct regime for sales-based financing providers and brokers overseen by the Office of Consumer Credit Commissioner (OCCC). Registration is due by December 31, 2026, and the law voids confession-of-judgment-style clauses and contracts built around similar immediate-remedy provisions. Violations can draw civil penalties of up to $10,000 per instance, and the OCCC is tasked with adopting rules identifying unfair, deceptive, or abusive practices in the sector.

More States Add APR-Style Disclosure Mandates

California's SB 362, signed in 2025, upgraded the state's existing Commercial Financing Disclosures Law to require MCA providers to express financing costs using an APR-equivalent figure rather than factor rates alone. In 2026, Illinois and New Jersey enacted similar commercial-financing disclosure laws, and Florida is currently debating its own version. The trend continues a pattern dating to 2022, when states began requiring MCA providers to disclose financing costs upfront before a merchant signs.

What It Means

No single event this week reshapes the MCA business, but the direction of travel is consistent: state attorneys general are targeting not just funders but the infrastructure around them, like arbitration services, while more state legislatures adopt disclosure and registration regimes that add compliance overhead. Meanwhile federal oversight through the CFPB has loosened rather than tightened. For funders and brokers, the practical upshot is that state-by-state compliance, not federal rulemaking, is where the real near-term risk and cost is concentrated, and the Texas and prospective Florida rules bear watching as year-end deadlines approach.