Merchant cash advance funders are navigating a fundamentally different regulatory landscape in 2026. Three major state-level developments — New York's sweeping FAIR Act, Texas's new disclosure-and-registration law, and Connecticut's pending confession-of-judgment reform — are converging simultaneously, while one of the industry's highest-profile enforcement cases reaches its final payout stage.

New York's FAIR Business Practices Act Arrives for MCA Funders

Signed by Governor Hochul on December 19, 2025, and in effect since February 17, 2026, New York's FAIR Business Practices Act is the most significant update to the state's core consumer-protection statute in more than four decades. Critically for the MCA industry, the law explicitly extends its protections to businesses and nonprofits — not just consumers — and for the first time empowers the Attorney General to pursue enforcement actions against "unfair" and "abusive" practices.

For MCA funders, the practical implications are significant. Aggressive collection tactics — stacked ACH debits, account freezes without judicial review, and threat-laden demand letters — may now constitute "abusive" practices under the statute. Confessions of judgment filed in New York courts face heightened scrutiny, and MCA agreements lacking true reconciliation mechanisms may be recharacterized as loans subject to New York's 25% criminal usury cap. The AG now has direct enforcement authority it lacked before, making this law a material risk factor for any funder operating in New York.

Yellowstone Capital Settlement Checks Reach Small Business Owners

In April 2026, payments began reaching qualifying claimants in the New York Attorney General's settlement with Yellowstone Capital. AG Letitia James had filed suit in March 2024, alleging Yellowstone was providing loans — not true MCAs — at rates far exceeding what New York law permits, and that the company used deceptive and fraudulent collection tactics. The settlement's payout marks a concrete outcome in what was one of the most prominent MCA enforcement actions of recent years, and signals the AG's office remains willing to litigate large funders.

Connecticut Moves to Close the Prejudgment Remedy Loophole

After New York banned confessions of judgment against out-of-state borrowers in 2019, many MCA funders shifted their contracts to name Connecticut as the governing jurisdiction — a move that gave them access to Connecticut's prejudgment remedy statute, which allows lenders to seek account freezes swiftly and without a full court hearing. A March 2026 NPR investigation documented how this loophole has been weaponized against small business owners, with accounts frozen overnight and businesses left unable to make payroll.

State Representative Jonathan Jacobson — who previously represented small businesses in MCA disputes before entering the legislature — has spearheaded legislation to outlaw prejudgment remedy waivers in MCA contracts. Connecticut lawmakers are expected to vote on the reform this spring. If it passes, one of the last remaining forum-shopping havens in the northeast would close.

Texas HB 700 Sets a New National Benchmark

Texas's House Bill 700, signed into law in June 2025 and effective September 2025, has quietly become one of the most consequential pieces of MCA legislation in the country. The law creates a registration, disclosure, and conduct framework administered by the Texas Office of Consumer Credit Commissioner. Key provisions include:

• Mandatory written disclosures of total financing amount, total repayment, and estimated periodic payments for deals under $1 million
• Confession-of-judgment provisions void and unenforceable — any contract including such a clause is legally nullified
• ACH debit restrictions — automatic debits are prohibited unless the funder holds a first-priority perfected security interest in the merchant's account, a standard most funders cannot meet
• Provider registration deadline of December 31, 2026 — funders not yet registered need to move quickly

Noteably, HB 700 does not cap rates, meaning the cost of capital itself remains unrestricted — but the operational and disclosure requirements represent a meaningful compliance burden for smaller funders.

What It Means

The MCA industry is in the middle of a genuine regulatory reckoning. New York's FAIR Act closes an enforcement gap that AG actions previously had to work around. Connecticut's pending reform would eliminate the last major northeast jurisdiction favored by MCA funders for prejudgment collection. Texas's disclosure regime — the largest state by MCA volume outside New York — is now live and registrations are due by year-end. And the Yellowstone settlement's payout is a visible reminder that AG offices are willing to follow through. Funders still operating on pre-2019 contract templates and collection playbooks should treat 2026 as a hard reset: the legal environment that made those approaches viable no longer exists in most major markets.