MCA Legal Analysis | May 11, 2026 | By Dennis Ray, Resident MCA Expert, Berkshire Financial Services
The federal government excluded merchant cash advances from its small business data collection rules last week. The MCA industry’s own trade group then responded in public. What they said is worth reading carefully if you are carrying MCA debt right now.
What the Rule Did
On May 1, 2026, the Consumer Financial Protection Bureau finalized its new Section 1071 rule. The rule sets what data lenders must collect and report on small business credit. MCAs were left out entirely. No MCA provider will be required to report who they lend to, what they charge, or what happens to the businesses that borrow from them.
We covered this ruling recently on this site. The short version. The only federal rule that would have created a public record of MCA pricing was finalized with MCAs cut out of it. No data. No transparency. No public record.
What the Industry Said
The Revenue Based Finance Coalition is the MCA industry’s trade and lobbying group. Its members are the companies funding business owners right now. When the CFPB finalized the rule last week, the RBFC issued a public statement. It was reportedly published in deBanked, the MCA industry’s own trade publication, on May 4, 2026.
Here is what they said, in their own words.
They called the rule an important step in the right direction. They said it reflects a fair approach to sales-based financing. They said MCAs are very different from traditional credit. They said the new framework provides clarity for responsible lenders.
Read that again slowly.
The industry whose contracts a New York court called unconscionable in February 2026 just praised the federal government for deciding not to collect data on what they charge. The industry whose real rates reportedly run from 40 percent to over 300 percent a year just called the choice not to measure those rates a fair approach. The industry that a former federal regulator reportedly said in public testimony was like mob tactics just celebrated being seen as different from traditional credit. Those rate ranges and regulator quotes are as reported in industry coverage and not independently verified by this publication.
Different from traditional credit. Yes. That is true. Traditional credit has rate caps. Traditional credit has disclosure laws. Traditional credit has federal oversight. The RBFC is right that MCAs are different from that. That is exactly the problem.
A note on that February 2026 ruling. The New York Appellate Division First Department called these contracts unconscionable. That is the court’s word. Not ours. The ruling does not erase your debt on its own. What it does is establish legal ground that a represented business owner with the original agreements in hand can use to challenge whether the debt is enforceable as structured.
What This Means Read Together
Earlier pieces on this site covered the federal collapse and the new rule on their own. This piece closes the loop.
The federal government decided not to look. The industry celebrated. The states are the only ones acting. Courts are the only ones ruling. State attorneys general are the only ones bringing real cases.
That is the world every business owner carrying MCA debt is in right now. No federal data. No federal eyes. No federal action. The industry’s own trade group calling it an important step in the right direction.
The Loophole Goes Both Ways
The federal exemption confirms the world we are in. It does not change the legal weakness in your contract.
That weakness is still there. The product was sold to business owners as a loan. The contract called it a purchase of future receivables. That switch was on purpose. It let the lender get around the lending laws, the rate caps, and the disclosure laws that would have applied.
That gap between how it was sold and what the contract says is the legal weakness. The lender used the gap to get around the laws that would have protected you. The same gap, surfaced by the right legal challenge, is the ground on which contracts are being unwound, settled, and in some cases voided. The federal data the 2023 rule would have produced would have made that case easier to prove at scale. Its absence does not change the case itself.
The State Layer Is Doing the Work
The legal ground to challenge these agreements has never been stronger.
New York’s appellate court called MCA contracts unconscionable in February 2026. Texas stripped lenders of their most aggressive enforcement tools in September 2025. New York’s attorney general gained new power in February 2026 to act on conduct that is unfair or abusive, not just deceptive. Reportedly ten states now require written disclosure of MCA terms before you sign, and three more added laws in 2026.
These are state-level tools built because the federal tools were taken off the table. The states are not waiting. The federal government just told the public it is not coming.
What This Means If You Are Carrying MCA Debt
None of the state-level legal ground activates on your file without representation and a structured program in place. The ground is there. Using it requires an attorney who knows how to apply it to your contract and a program that builds the leverage to negotiate from it.
The industry is celebrating its freedom to operate without federal eyes on it. The question is whether they get to operate that way on your file.
The window for a controlled outcome is defined by one thing. Whether structure goes in before the lender forces the issue. Federal eyes are not coming. State-level legal ground is open right now. Your MCA debt is not waiting for either.
Source: deBanked, May 4, 2026. https://debanked.com/2026/05/rbfc-response-to-new-cfpb-small-business-lending-rules/
Informational purposes only. Not legal advice. Berkshire Financial Services is not a law firm. Results vary.