Which States Are Getting Tough on MCA Lenders?

Merchant cash advances (MCAs) may look like quick and flexible funding, but for many small businesses, they come with costly traps. A typical MCA involves fixed daily or weekly withdrawals that continue until the funder collects the purchased receivables — plus heavy fees. Because these withdrawals don’t change when sales slow down, business owners often find themselves stuck in a cycle of debt they didn’t anticipate.

Even worse, some MCA contracts include confessions of judgment (COJs) — clauses that allow the lender to seize bank accounts without notice or a court hearing. These aggressive tactics have sparked growing concern among regulators and state attorneys general across the country. As a result, several states are now tightening oversight and enforcement against predatory MCA funders.

• Strong regulation: States like California, New York, and Illinois have introduced strict rules requiring MCA licensing, APR-style cost disclosures, and bans on COJs. These laws aim to increase transparency and protect small businesses from misleading or unfair agreements.

• Moderate safeguards: Other states, including Florida, Texas, and Michigan, use existing fair-debt and deceptive-practice laws to target unethical funders. While not as comprehensive as full regulation, these laws still give business owners grounds to challenge unfair withdrawals or hidden fees.

• Minimal oversight: In contrast, states such as Alabama and Nevada have minimal restrictions, allowing MCA companies to operate freely. This lack of oversight can make it harder for struggling business owners to fight back against unfair terms.

Understanding your state’s stance is crucial before signing an MCA contract or challenging an existing one. The laws and protections vary widely — and knowing where your state stands can mean the difference between relief and financial strain.

👉 Read the full 2025 guide here: [State-by-State Guide: Which States Are Cracking Down on MCA Lenders?] to explore how MCA rules differ across all 50 states and what they mean for your business. Protect your business before it’s too late.