Maryland offers more structural protection against MCA abuse than most states, and funders operating there have adjusted their origination practices accordingly. The protections are not uniform, and they are not self-executing. A business owner who does not know they exist cannot invoke them. What follows is a description of the six most significant, with enough specificity to be useful.
1. The Prohibition on Confessions of Judgment
Maryland prohibits confessions of judgment in commercial contracts. This prohibition is among the most meaningful protections available to any Maryland business that has signed an MCA agreement, regardless of what state law the funder’s contract nominates as governing law. Prior to 2019, MCA funders routinely included New York confession-of-judgment clauses in agreements with out-of-state businesses. Those clauses allowed the funder to obtain a judgment against a Maryland debtor without notice or a hearing. New York eliminated that practice for out-of-state debtors, and Maryland’s own prohibition adds a second layer.
If a funder presents a Maryland business with a contract containing a confession of judgment clause, that clause is unenforceable. A judgment obtained through that mechanism against a Maryland defendant can be challenged in Maryland court on constitutional due process grounds as well as under state law.
2. The 2023 Commercial Financing Disclosure Law
Maryland’s HB 1297, effective in 2023, requires any provider of commercial financing to a Maryland business in an amount under $2 million to disclose, in writing, before the transaction closes: the total amount of funds provided, the total repayment amount, the term, the payment schedule, and the annualized cost of capital expressed as an annual percentage rate. That last requirement is the one funders resisted most. The factor rate, expressed as a multiplier rather than a percentage, obscures the true cost of an MCA. An APR disclosure makes the comparison to a conventional loan unavoidable.
Violation of the disclosure law is not simply a regulatory matter between the funder and the state. A business that received financing without compliant disclosures has a private right to challenge the terms and potentially the enforceability of the transaction.
3. The Credit Services Businesses Act
Maryland’s Credit Services Businesses Act regulates any person or entity that charges fees for arranging or assisting in obtaining credit or financing for another. MCA brokers, sometimes called ISOs, often fall within this definition. The Act requires registration, bonding, and compliance with consumer-protection-style disclosures. A broker who placed a Maryland business into an MCA without holding the required registration may have violated the Act, and the transactions arranged by unregistered brokers may be voidable.
The Act also prohibits misleading statements about the availability, terms, or cost of credit. An ISO that told a business owner the advance “was not a loan” to sidestep the business owner’s concerns about cost, without explaining the effective APR, may have made a prohibited misrepresentation.
4. Maryland Consumer Protection Act Reach Into Commercial Transactions
Maryland’s Consumer Protection Act broadly prohibits unfair or deceptive trade practices. Maryland courts have applied the Act to business-to-business transactions when the conduct involved deception affecting the public or a class of businesses. An MCA funder that applied a systematic practice of misrepresenting costs, accelerating payments without contractual authority, or making unauthorized debits from business accounts could face liability under this statute.
The Act allows for civil enforcement by the Attorney General and by private plaintiffs. Recoverable damages include actual harm and, in cases of willful violations, enhanced damages. The combination of private right of action and AG enforcement creates the possibility that a Maryland business owner’s complaint contributes to a broader enforcement action that generates restitution.
5. Unconscionability Under Maryland Common Law
Maryland courts apply the unconscionability doctrine to commercial contracts when both procedural and substantive elements are present. Procedural unconscionability concerns the circumstances of formation: a business under duress, no realistic negotiation, an agreement presented in dense boilerplate with no explanation. Substantive unconscionability concerns the terms themselves: effective costs that shock the conscience, remedies available to the funder but not the business, and provisions that operate only against the weaker party.
One Maryland appellate decision described unconscionability as applying when the contract “is one no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.” The MCA agreements that produced the current wave of disputes were not, for many business owners, agreements made in any meaningful sense of the word.
6. The Federal Trade Commission’s Updated Business Practices Rules
Maryland businesses can file complaints with the Federal Trade Commission under its unfair or deceptive acts or practices authority. The FTC’s 2024 enforcement actions targeting commercial lending and financing practices signaled that federal scrutiny of MCA conduct had expanded beyond the earlier pattern of state-level actions. An FTC complaint does not produce individual relief quickly, but it creates a federal record and, in conjunction with a Maryland AG complaint, may accelerate a response from the funder.
And FTC enforcement matters because it travels. A funder under federal investigation or subject to a federal consent order faces consequences that reach across every state in which it operates, not merely Maryland. For a business owner whose complaint is one among many, the aggregate pressure of federal enforcement can shift a funder’s settlement posture in individual cases.
These six protections are available. Whether they apply to a specific agreement depends on when it was originated, how it was presented, and what the funder has done since. A Maryland attorney who handles MCA disputes can review the agreement and the funder’s conduct and tell you which of these tools will carry weight in your situation.
