The merchant cash advance industry operated for years in a regulatory vacuum, and the consequences of that silence are arriving all at once. Between federal enforcement, state attorney general suits, and new disclosure mandates, the legal architecture around MCAs has shifted from permissive ambiguity to active scrutiny. For business owners caught in predatory MCA arrangements, each of these actions represents a crack in the wall that once shielded funders from accountability.
The FTC’s Permanent Ban on RCG Advances
In 2022, the Federal Trade Commission secured a permanent industry ban against RCG Advances, LLC and its principal, Robert Giardina. The FTC alleged that the company deceived small business owners about costs and terms, then resorted to threats of physical violence when borrowers could not maintain payments. The order barred the defendants from the MCA and debt collection industries entirely, and mandated restitution to affected merchants.
What distinguished this action was not the fraud itself but the agency’s willingness to treat MCA providers as subject to its jurisdiction. For years, the industry maintained that because cash advances are technically purchases of future receivables, they fall outside traditional lending regulations. The FTC disagreed. It applied its deception and unfairness framework to the transaction regardless of how the contract characterized itself.
That distinction matters for every business owner who has been told their MCA agreement is beyond the reach of consumer protection law.
Jonathan Braun and the Expansion of Individual Liability
A related action targeted Jonathan Braun, who controlled RCG Advances from behind a network of affiliated entities. A federal court issued summary judgment in favor of the FTC and imposed a permanent injunction against Braun personally. The significance lies in the agency’s pursuit of the individual, not merely the corporate shell.
MCA companies are structured, often with considerable deliberation, to insulate owners from personal exposure. The Braun case signaled that the FTC would look through those structures. One can regard this as overdue. The industry had relied on entity proliferation as a defensive strategy for the better part of a decade, and that strategy had succeeded until it did not.
New York v. Yellowstone Capital
In January 2025, Attorney General Letitia James announced a judgment and settlement against Yellowstone Capital exceeding one billion dollars. The state alleged that Yellowstone disguised predatory loans as merchant cash advances and charged merchants interest rates reaching as high as 820 percent annually. The settlement cancelled more than $534 million in outstanding balances owed by over 18,000 small businesses and permanently barred Yellowstone and its executives from the industry.
The scale of this action reshaped the enforcement conversation. A billion dollar judgment is not a regulatory footnote. It is a statement about what the state considers the MCA model to be when stripped of its contractual characterization: lending, subject to usury limits and fair dealing obligations.
The contracts said “purchase of future receivables.” The court said “loan.” That single word carries the weight of an entire regulatory regime.
New Jersey’s Consent Order Against Yellowstone
Before the New York action, New Jersey’s Division of Consumer Affairs entered a consent order with Yellowstone Capital in December 2022 to resolve allegations of abusive practices. The terms required Yellowstone to forgive approximately $21.7 million in outstanding MCA balances and pay more than $5.6 million in fines and restitution.
The New Jersey action is worth noting not for its size but for its reasoning. The state treated MCA collection conduct as subject to its consumer fraud act, an approach that other states have been reluctant to adopt. Whether this becomes a template depends on which attorneys general choose to follow.
The CFPB’s Classification Ruling
In February 2025, a federal court upheld the Consumer Financial Protection Bureau’s determination that merchant cash advances qualify as “credit” under federal lending law. A magistrate found that the CFPB did not exceed its authority by including MCA lenders in its small business lending data collection rule and dismissed claims that MCAs should be exempt from regulation as credit transactions.
This ruling, if it survives further challenge, would require MCA providers to comply with the same fair lending rules as traditional lenders. The practical implications are considerable. Disclosure requirements, data reporting obligations, and anti-discrimination provisions would all apply to transactions that have historically avoided each of these.
Some in the industry regard this as an existential threat. That assessment may be correct.
California’s Commercial Finance Disclosure Law
Effective August 2023, California’s disclosure law requires MCA providers to present borrowers with the annualized percentage rate, total amount financed, finance charges, and a clear breakdown of repayment terms before execution. The law treats transparency as regulatory intervention, and for an industry built on opaque pricing, that intervention is substantial.
The California model has influenced legislation in other states. Missouri enacted similar requirements effective February 2025. Connecticut’s commercial financing disclosure legislation took effect in July 2024 for sales-based financing transactions up to $250,000. Virginia now requires APR-equivalent disclosures, broker licensing, and a three business day contract review period.
The FTC-CFPB Joint Action Against Cleo AI
In March 2025, the FTC and CFPB jointly settled with Cleo AI, a cash advance company, for $17 million. The agencies alleged that Cleo failed to provide consumers the money promised in the time advertised. While Cleo operates in a consumer space somewhat adjacent to traditional MCA, the joint action demonstrated an emerging pattern of interagency coordination on advance products.
The coordination matters more than the dollar figure. When two federal agencies align their enforcement priorities around the same product category, the regulatory signal is not subtle.
New York’s Confession of Judgment Restrictions
In 2019, New York restricted the use of confessions of judgment against out-of-state borrowers, eliminating one of the MCA industry’s most aggressive collection tools. A confession of judgment allowed a lender to obtain a court judgment against a borrower without notice or hearing, and New York courts had become the preferred venue for these filings regardless of where the borrower was located.
The restriction did not eliminate confessions of judgment entirely. It limited their geographic reach. But for the thousands of business owners outside New York who had signed MCA agreements with COJ provisions, the reform removed an immediate threat of asset seizure without due process.
And for attorneys representing MCA borrowers, this change altered the procedural landscape in ways that continue to shape litigation strategy.
What These Actions Mean for Borrowers
The pattern across all eight actions is consistent: regulators are recharacterizing MCAs as lending products and applying lending-law protections accordingly. The contractual fiction of a “purchase of future receivables” is losing its protective force. State and federal agencies are treating the economic substance of the transaction as dispositive, not the label the funder chose to apply.
For business owners currently trapped in MCA arrangements with excessive factor rates, unauthorized debits, or threatening collection practices, this regulatory momentum creates legal arguments that did not exist even a few years ago. The ground is shifting beneath the industry, and the firms that once operated with impunity are discovering that impunity was always borrowed time.
A consultation with an attorney who understands both the regulatory developments and the practical mechanics of MCA disputes is where the conversation begins. That first call costs nothing and assumes nothing.
