What Do New York's MCA Laws Mean for My Business?

You can run a business in Texas, Florida, or Oregon and still find that your merchant cash advance lives under New York law. This article explains the New York rules that shape most MCA relationships in the country: what each statute actually says, what it changed, and where its limits are. One boundary before we start: this is legal education, describing laws and public enforcement actions with citations. It is not advice about your contract or your case. Anchor Resolve is not a law firm, and questions about how any of these laws apply to your specific situation belong with a licensed attorney in your state.

Why do so many MCA contracts choose New York law?

Because the industry grew up there, and its contracts followed. A large share of MCA funders operate from New York, and their agreements almost universally include choice-of-law and forum selection clauses naming New York, meaning disputes are decided under New York law, in New York courts, regardless of where the merchant operates. For funders this brings home-field advantages: courts experienced with the product, established case law treating properly structured advances as purchases rather than loans, and fast, familiar collection procedures.

For merchants it means the rules that matter are often not the rules of their home state. An Ohio contractor’s dispute may turn entirely on New York statutes and New York procedure. That is why understanding New York’s framework matters to almost everyone with an MCA, and why this page exists alongside our broader survey of which states regulate merchant cash advances.

What did New York’s 2019 confession of judgment reform change?

It closed New York’s courthouse doors to confessions of judgment against out-of-state debtors. A confession of judgment, or COJ, is a document signed at closing that lets a creditor enter a court judgment without a lawsuit, notice, or proof. For years, funders filed COJs signed by merchants nationwide in New York county clerks’ offices, converting defaults into enforceable judgments in as little as a day.

The scale of that machine was documented by Bloomberg’s 2018 investigative series “Sign Here to Lose Everything” by Zachary Mider and Zeke Faux, which found cash advance companies had used COJs to obtain more than 25,000 judgments worth an estimated $1.5 billion in New York courts over roughly four years, and documented forged documents and fabricated defaults along the way. The reporting drove reform: on August 30, 2019, New York enacted Senate Bill S6395, amending CPLR 3218 to prohibit filing confessions of judgment against debtors who do not reside in New York.

The limits matter as much as the rule. The reform did not protect New York based merchants, who can still be subject to COJs. It did not undo judgments already entered. And funders adapted, shifting toward fast-filed lawsuits and arbitration clauses. If you are assessing your own exposure under a signed COJ, that is a question for a licensed attorney, not a blog.

What does New York’s Commercial Finance Disclosure Law require?

It requires the number the industry never volunteered: an APR. The Commercial Finance Disclosure Law (CFDL), enacted in December 2020, requires providers of commercial financing of $2.5 million or less, expressly including sales-based financing such as merchant cash advances, to give recipients standardized, consumer-style cost disclosures at the time of an offer. The Department of Financial Services’ implementing regulation, 23 NYCRR Part 600, took effect with disclosure obligations beginning August 1, 2023.

The required disclosures include the financing amount, the finance charge, the total repayment amount, payment amounts and frequency, prepayment terms, and an APR or estimated APR calculated under prescribed methods. For sales-based financing, providers estimating a merchant’s revenue must follow prescribed estimation methods and, under the opt-in approach, report data to DFS on how accurate their estimates prove. The practical meaning for merchants: for covered offers made since August 2023, the cost of an MCA must be shown in terms that can be compared against a loan. The law governs disclosure at offer time; it does not cap rates, and it does not reach back into contracts signed before it took effect.

Sources: New York Commercial Finance Disclosure Law (2020); New York Department of Financial Services, 23 NYCRR Part 600 (disclosure compliance date August 1, 2023).

How do New York’s usury caps apply to MCAs?

Only if a court decides the advance is really a loan, which is the central legal fight of this industry. New York caps interest on many loans at 16 percent per year under its civil usury statute, and makes charging over 25 percent per year criminal usury under Penal Law section 190.40. Both caps come with significant carve-outs: civil usury generally cannot be raised by corporations, and larger loans fall outside various protections.

MCAs are written as purchases of future receivables, not loans, precisely so these caps do not apply. Whether that label holds is decided case by case. New York courts examining recharacterization have looked at factors including whether repayment is absolute rather than contingent on revenue, whether the reconciliation right is real or illusory, and whether the funder has full recourse on a business failure. When an advance functions as an unconditional repayment obligation, the purchase label can fail, and usury limits can come into play. This is educational background, not a roadmap for any particular contract: whether a recharacterization argument exists in your agreement is exactly the kind of question to bring to a licensed attorney in your state.

What did the Yellowstone Capital judgment establish?

That New York’s enforcers will treat an MCA that functions like a loan as a loan, at industrial scale. In her action against Yellowstone Capital and affiliated companies, Attorney General Letitia James alleged the companies’ advances were disguised usurious loans, with effective interest rates the AG’s investigation calculated as high as 820 percent per year. The result, announced in early 2025, was a consented judgment of $1.065 billion, including cancellation of about $534.6 million owed by small businesses, vacatur of unsatisfied judgments, and $16.1 million in restitution, affecting more than 18,000 small businesses nationwide. The entities were permanently barred from the merchant cash advance business.

Two honest cautions about what Yellowstone does not mean. It was a judgment against specific companies over their specific practices, not a ruling that MCAs generally are illegal. And its relief ran to the customers of those companies. What it establishes for everyone else is direction: the purchase-versus-loan boundary is being enforced, and the facts that mattered, fixed payments, illusory reconciliation, aggressive judgment collection, are the same facts a merchant should look for in any contract.

What should out-of-state businesses with New York contracts know?

Four things, each with a next step attached.

1. Your dispute probably lives in New York. Forum selection clauses are commonly enforced, so expect New York procedure and New York deadlines. Papers served from a New York court are real even if you have never set foot there, and ignoring them is how default judgments happen.
2. The 2019 COJ reform likely protects you from a New York COJ filing. If you reside outside New York, CPLR 3218 as amended bars filing a confession of judgment against you in New York courts. It does not prevent an ordinary, fast-moving lawsuit.
3. The CFDL’s disclosures may apply to your offer. Covered offers since August 2023 should have come with standardized cost disclosures, including an APR figure.
4. Judgment enforcement crosses state lines. A New York judgment can be domesticated and enforced where your assets are, which is why the pre-judgment window is when options are widest. If default fallout has started, liens, frozen accounts, notices to your customers, our UCC lien and default help page explains what we do in that window, and a licensed attorney should review anything already in court.

How is New York enforcement changing now?

It is moving from the extraordinary case to routine supervision. The Yellowstone judgment showed the ceiling of what enforcement can do; the CFDL gives regulators a standing rulebook that applies to every covered offer, every day. DFS oversees the disclosure regime, and providers using revenue estimates must account for their accuracy over time. Meanwhile the Attorney General’s office has continued publicly pursuing MCA practices it views as abusive, and New York’s framework has become the reference point other states borrow from as disclosure laws spread.

For merchants, the practical takeaway is that the information balance is shifting. A market that once ran on undisclosed triple-digit effective rates now produces paper trails: APR disclosures, estimation-accuracy reporting, and a public enforcement record. None of that pays a debit on Friday. Medical practices, contractors, carriers, and restaurants still face the same daily-draft math, and the industry-specific guides in this cluster, including our guide on whether medical practices can settle merchant cash advance debt, cover the operational side. For every term this article used, from COJ to recharacterization, our glossary and guides hub has a plain-English definition.

Common questions