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New York Attorney General Letitia James sued an arbitration company accused of rigging outcomes against small businesses on behalf of the MCA industry, as state-level enforcement actions and new disclosure laws continue to reshape the merchant cash advance landscape in mid-2026.
New York Attorney General Letitia James filed suit on June 8 against Rapid Ruling, an arbitration platform secretly created with MCA company LCF Group to rubber-stamp judgments against merchants. The case arrives as Illinois and New Jersey join a growing wave of states requiring standardized cost disclosures for merchant cash advances.
New York AG Letitia James sued Rapid Ruling—an arbitration platform allegedly rigged to favor MCA lenders—while the CFPB's May 2026 final rule excludes merchant cash advances from federal small business data reporting, leaving their legal status under ECOA unresolved.
The CFPB finalized a scaled-back Section 1071 rule in May 2026 that officially excludes merchant cash advances from small business lending data requirements, while New York's FAIR Act—effective February 2026—and new disclosure mandates in Illinois and New Jersey signal mounting state-level pressure on the industry.
The CFPB's revised Section 1071 rule formally exempts merchant cash advances from small business lending data reporting, but state-level action is accelerating—Connecticut is moving to ban prejudgment remedy waivers and New York's new FAIR Act gives regulators broader tools against abusive MCA practices.
New York's FAIR Business Practices Act is reshaping how merchant cash advance funders can collect debts, Texas's HB 700 disclosure regime is fully in force, Connecticut is moving to close a lender-favored loophole, and Yellowstone Capital's AG settlement checks are reaching small businesses.
The CFPB's May 2026 overhaul of small-business lending data rules carves out merchant cash advances entirely—just as tariff pressures funnel more desperate small businesses toward high-cost advances and New York, Connecticut, and federal enforcers tighten the screws on abusive practices.
The CFPB's revised Section 1071 rule, published May 1, officially locks merchant cash advances out of federal small business lending data requirements — while Illinois, New Jersey, and Connecticut push new state-level MCA protections in 2026.
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