State-by-State Guide: Which States Are Cracking Down on MCA Lenders?

A merchant cash advance (MCA) is not a loan. The funder “buys” a slice of future card sales, then pulls fixed daily or weekly debits until the balance plus heavy fees are paid. Because the amount withdrawn never changes, slow sales can leave a firm owing far longer than planned.

Some lenders also force owners to sign a confession of judgment (COJ) that lets the lender freeze accounts without a hearing. Rules for MCAs differ from one state to the next, so understanding whether a merchant cash advance is legal in your state is crucial before signing or fighting an agreement. A good consumer protection lawyer or commercial litigator can explain the fine print that applies where you operate.

State-by-State Summary of MCA Oversight

To make it easier for the readers to comprehend this oversight completely, we have divided this summary into four sections: the states with “strong” regulations, moderate safeguards, minimal oversights, and the states with no clear rules.

For a detailed 2025 update, read our full guide: Merchant Cash Advance Legality 2025 – State Breakdown.

Strong regulation

These twelve states have some strict regulations for MCAs:

• California – Requires full-cost disclosure and licenses funders; bans hidden COJs. 2024 attorney-general fines top $100 million.

• Colorado – Treats MCAs like loans when fees exceed the usury cap; lenders must file annual reports.

• Connecticut – Small-business Truth-in-Lending Act mandates APR display; COJs void inside the state.

• Delaware – Division of Banking now registers MCA firms; two large enforcement actions in 2025.

• Illinois – Consumer and commercial law update (SB314) forces plain-language contracts; penalties for unlicensed activity.

• Maryland – MCAs covered by Credit Services Businesses Act; COJs barred; state attorney won a 2023 injunction.

• New Jersey – Caps fees labeled “receivables purchase” when the deal functions like a loan; ongoing suits against three lenders.

• New York – Small-Business Disclosure Law plus COJ ban; the New York general attorney has frozen several funder accounts.

• Rhode Island – Licenses MCA providers and demands annual audited statements.

• Utah – Registration required; failure voids contract.

• Vermont – Treats large MCA fees as interest; COJs are not enforceable.

• Virginia – Requires license and APR-style disclosure; civil fines up to $50,000 per deal.

Moderate safeguards

These eighteen states have moderate safeguards:

• Arizona – No license rule, but deceptive MCA marketing violates consumer-fraud statute; one 2024 AG settlement.

• Florida – COJs banned; unfair-trade law used to attack excessive daily debits.

• Georgia – Civil usury cap can apply if MCA looks like financing; regulators issued warning letter in 2023.

• Indiana – Attorney general treats hidden fees as deceptive practice; no special MCA statute.

• Iowa – Usury law exempts business debt, yet courts void COJs signed in state.

• Kansas – Requires plain-language contract; COJs void; no license rule.

• Kentucky – MCA counts as “loan” when repayment is tied to time, not sales; one 2022 court ruling.

• Maine – 2024 reform bill orders disclosure of factor rate; enforcement is quiet so far.

• Massachusetts – AG action labels MCA with a double-digit factor rate as a usurious loan; COJs void.

• Michigan – Lenders must file under the Sales Finance Act; two cease-and-desist orders in 2025.

• Minnesota – Deceptive-trade law applies; courts reluctant to enforce out-of-state COJs.

• North Carolina – North Carolina law bans in-state COJs; contracts with >30 percent implied APR face usury claims.

• Oregon – Unlawful-Trade-Practices Act used against MCA brokers in 2024; no licensing yet.

• Pennsylvania – Department of Banking may require a license if MCA repaid on a fixed schedule; several warnings have been issued.

• South Carolina – South Carolina law voids any COJ; high factor rates are challenged under the Unfair-Trade-Practices Act.

• Texas – COJs disallowed; attorney general uses Deceptive-Practice Act to police double debits.

• Washington – Captive-venue clauses often struck down; 2025 bill would add license rule.

• Wisconsin – Treats MCA as a loan if collection fixed, not a percentage; two civil cases in 2023.

Minimal oversight

Now, for the states with minimal oversight, check these sixteen states:

• Alabama – No MCA statute; COJs okay if filed elsewhere; no major AG actions.

• Alaska – Usury cap waived for business deals; COJs allowed.

• Arkansas – High-rate MCA may breach usury clause; enforcement is rare.

• Idaho – Little FTC Act applies to fraud only; COJs stand.

• Louisiana – Courts enforce COJs signed out of state; no license rule.

• Missouri – Usury law exempts business debt; few MCA cases.

• Montana – Treats MCA as a sale of receivables; COJs allowed.

• Nebraska – COJ's legal; attorney general yet to file MCA suit.

• Nevada – New 2025 bill will require registration, but is not yet active.

• New Mexico – No statute; COJs and large fees stand unless fraudulent.

• North Dakota – Same as New Mexico; minimal oversight.

• Oklahoma – COJs legal; little case law on MCA disputes.

• South Dakota – Highest cap in nation; lenders free to charge large factor rates.

• Tennessee – Only fraud law applies; COJs legal.

• WestVirginia – Courts have voided one MCA as usurious in 2024; rules still loose.

• Wyoming – No MCA law; COJs allowed; no AG action yet.

No specific rules, but recent bills

Hawaii, Mississippi, New Hampshire, and Ohio – Draft bills in 2025 may add disclosures, but nothing has been enacted. Businesses here must rely on general contract laws and broader litigation laws when fighting unfair terms.

Business impact

Where protection is strong, a firm can halt withdrawals and argue that hidden fees breach the law about debt disclosures. Moderate states still let an owner void a COJ or sue under unfair-trade statutes, though the process takes longer.

Minimal-rule states leave merchants exposed; yet an experienced consumer protection attorney or debt relief lawyer can still challenge excessive interest or double debits through common-law fraud, usury, or lack of consideration. Knowing your bracket tells you whether to negotiate, litigate, or prepare for arbitration. Quick action often saves accounts before a lender sweeps them.

How Business Debt Counsel helps

Our law firm's New York team blends several law practices. A commercial law partner reviews contracts, an arbitration lawyer contests venue clauses, and a debt relief lawyer leads settlement talks. We move fast to vacate COJs, press state disclosure claims, and raise any new law defenses. Clients receive clear status updates and flat-fee options that fit tight cash flow.

Conclusion

Predatory MCA terms can be challenged, but every fight starts with state rules. If daily debits or a surprise judgment threaten your business, call Business Debt Counsel. A brief review will show where the lender broke the law and how we can defend you, before more money leaves your account.