April 20, 2026 – By Christian Smith, Berkshire Financial Services.
The Consumer Financial Protection Bureau has been functionally dismantled. Seventeen of its 34 active enforcement cases have been dismissed, 16 of them permanently. An 88 percent workforce reduction was attempted, cutting staff from 1,689 to roughly 207. The agency proposed removing merchant cash advances from its oversight framework entirely. Federal enforcement of predatory commercial lending has effectively ceased.
For business owners carrying MCA debt, this is not abstract policy. It is the removal of the one federal mechanism that existed to hold MCA lenders accountable at scale.
What the CFPB Was for MCA Borrowers
The CFPB was created in 2010 to consolidate federal consumer financial protection authority. In the MCA space, the bureau was never a comprehensive regulator. MCAs were structurally designed to operate outside traditional lending frameworks. But the CFPB was the federal mechanism with the authority and the scale to pursue billion-dollar enforcement actions against MCA lenders operating across state lines.
The Yellowstone Capital investigation, which culminated in a 1.065 billion dollar judgment and the cancellation of over 534 million dollars in merchant debt, was supported by CFPB investigative work before the New York Attorney General brought it to conclusion. That institutional capacity is now gone.
What the GAO Report Found
In January 2026, the Government Accountability Office documented the scope of the CFPB’s dismantling. Stop-work orders were issued on active examinations across the supervision, enforcement, and research divisions. Seventeen of 34 active enforcement cases were dismissed, 16 with prejudice, which means they cannot be refiled.
Courts have partially blocked the layoffs and litigation continues, but the operational damage is documented. What survives in 2026 is a bureau that has resumed examinations after a ten-month pause but now requires examiners to follow a humility in supervision pledge. Examinations are tightly scoped. Entities receive advance notice. Information requests are limited to the exam’s specific focus. The posture is cautious supervision, not aggressive enforcement.
The Section 1071 Provision That Was Quietly Buried
In November 2025, the CFPB proposed removing merchant cash advances from the Section 1071 small business data collection rule. Section 1071 of the Dodd-Frank Act required financial institutions to report data on small business loan applications. The original 2023 rule included MCAs.
The November 2025 proposal excluded them. The stated rationale: MCAs are structured differently from traditional lending products, and it would be premature to include them before observing how state laws address them.
In plain language: the only federal rule that would have created a public, documented record of MCA lending practices was rewritten to remove MCAs from its scope.
Who Filled the Void
States moved to fill the federal withdrawal, and they moved aggressively. The enforcement map has inverted.
New York secured a 1.065 billion dollar judgment against Yellowstone Capital. The FAIR Business Practices Act, effective February 17, 2026, expanded the attorney general’s enforcement reach to MCA collection tactics that are unfair or abusive, not just deceptive. The New York Appellate Division affirmed a 77 million dollar judgment against MCA lenders on four grounds in February 2026 and called the contracts unconscionable. Unconscionable means a deal was so one-sided that a court will not enforce it regardless of what was signed. That is the court’s word. Not ours.
Texas HB 700, effective September 2025, prohibits automatic ACH debits from merchant accounts unless the lender holds a first-priority security interest, a standard most cannot meet. Confession of judgment clauses, where a lender obtains a court ruling without a trial, are now void in Texas. California SB 362 requires any provider of commercial financing to disclose an APR equivalent in every communication following an offer. Colorado, Utah, Virginia, Maryland, Missouri, and Louisiana have enacted or expanded disclosure requirements for commercial financing.
What the Inversion Means for Your File
The CFPB’s retreat does not make MCA debt harder to challenge. It makes the challenge more dependent on where the business is located and who is representing it. Legal ground without representation is just ground.
The state-level framework that replaced federal oversight requires attorneys who understand how to apply it to specific contracts, specific lenders, and specific fact patterns. That is the supervised restructuring model. The contract in hand, the attorney network engaged at enrollment, and the legal challenge framework built around the positions on the file.
The federal watchdog is gone. The state architecture that replaced it is the most favorable legal environment for challenging MCA enforceability that has ever existed. The window for installing structure before lender escalation forces the outcome is defined by the same thing it has always been defined by. Timing.
The ruling does not do the work. The structure does. Enrollment is what activates the structure.
To speak with a Berkshire Financial Services Finance Manager about your file, call 1-800-801-1019.
Informational purposes only. Not legal advice. Berkshire Financial Services is not a law firm. Results vary.