MCA Regulations Q4 2026: Compliance Deadlines Brokers and Funders Must Meet

Merchant cash advance law changed more in the first nine months of 2026 than in the previous five years combined. Texas registration is due by December 31, NACHA's new fraud monitoring rule applies to every originator, New York appellate and bankruptcy courts are drawing hard lines on reconciliation, and California just signed a licensing law that will reshape how brokers and funders operate in the state. This guide breaks down every MCA regulation and court ruling that matters heading into Q4 2026, what each one requires, and the exact steps brokers and funders should take before year end.

Short version for funders: file your Texas registration, confirm first position before using ACH on Texas deals, document your NACHA fraud monitoring process, honor and log every reconciliation request, remove bankruptcy as an event of default, audit collections for New York's FAIR Act, and use the correct disclosure form in all 11 disclosure states.

Short version for brokers: file your Texas registration, run UCC searches before submitting Texas deals, add the APR to every California quote, stop promising fixed terms or payoff dates, renew Connecticut and Missouri registrations on time, and ask your funders how they handle reconciliation.

Each section below ends with separate action steps for funders and brokers, because the two have different obligations.

Q4 2026 MCA Compliance Deadlines at a Glance

Deadline	Requirement	Who It Affects
Already in effect	Texas ACH rule: no automatic debits without a perfected first position UCC on receivables	Funders collecting from Texas merchants
Already in effect (6/22/2026)	NACHA written fraud monitoring process, reviewed annually	All ACH originators
Already in effect (2/17/2026)	New York FAIR Business Practices Act	Anyone dealing with New York businesses
Already in effect (1/1/2026)	California factor rate and APR quoting rules on deals up to $500K	California brokers and funders
11/1 to 12/31/2026	Connecticut registration renewal window	Connecticut-registered providers and brokers
12/31/2026	Texas OCCC registration through NMLS	Providers and brokers doing Texas deals
1/31/2027	Missouri broker registration renewal	Missouri-registered brokers
7/1/2027	Vermont licensing, APR disclosure, ACH limits, COJ ban	Anyone funding or brokering Vermont deals
1/1/2028	California AB 2116 substantive rules, including COJ prohibition	California commercial financing providers and brokers
7/1/2028	California AB 2116 DFPI licensing requirement	California commercial financing providers and brokers

Texas: OCCC Registration by December 31 and the ACH Rule

Register with the OCCC on NMLS before year end

Under Texas HB 700, the Commercial Sales-Based Financing Act, every sales-based financing provider and broker doing business with Texas merchants must register with the Texas Office of Consumer Credit Commissioner (OCCC) through the Nationwide Multistate Licensing System (NMLS) by December 31, 2026. NMLS filings routinely take longer than expected because of control person disclosures, background checks, and document requests. Do not leave this for the last two weeks of December, when NMLS processing slows and the OCCC will be flooded with last-minute applications.

For funders: register as a provider on NMLS now if you fund any Texas merchants.

For brokers: register as a broker on NMLS now if you place any Texas deals. Brokers have their own registration obligation and cannot rely on their funders' registrations.

Our full breakdown of the statute is in the Texas HB 700 compliance guide.

The Texas ACH rule is already live

The registration deadline gets the attention, but the ACH restriction is the rule that is already changing deal structures. A provider cannot use automatic ACH debits to collect from a Texas merchant unless it holds a perfected first position security interest in the merchant's receivables, evidenced by a UCC-1 filing. If you are in second position or behind, automatic debits are off the table, and you need another collection method such as merchant-initiated payments or split funding.

For funders: run a UCC search on every Texas merchant before funding, confirm your position, and only set up ACH debits where you hold a perfected first position. Otherwise use another collection method.

For brokers: run a UCC search before submitting a Texas deal and note the merchant's existing positions in your submission, so the funder can structure collections correctly. Tell the merchant upfront if a second position deal will mean a different payment method.

Our UCC filings guide for MCA brokers walks through how to search and read existing liens.

NACHA Fraud Monitoring: Every Originator Needs a Written Process

As of June 22, 2026, NACHA's risk-based fraud monitoring rules apply to all ACH originators, not just the largest volume originators covered in the first phase earlier in the year. Every originator must have a written, risk-based process to identify ACH entries initiated due to fraud, including false pretenses, and must review that process at least once a year.

For funders: as ACH originators running daily or weekly debits at volume, you are directly covered. Your bank and ODFI will ask for your written process. A practical program covers:

• Account validation before the first debit, including bank account verification through open banking or prenotes
• Monitoring for changes in merchant bank account details, especially changes requested close to funding
• Tracking unauthorized and administrative return rates against NACHA thresholds
• Escalation steps when a merchant disputes debits or returns spike
• A dated annual review, signed off by a responsible person

For brokers: this rule applies to originators, so most brokers have no direct obligation. Expect funders to ask for more bank verification up front, such as open banking connections, and to question last-minute bank account changes. Prepping merchants for that speeds up funding.

Return rates are also where funder risk shows up first. See our guide on ACH returns and NSF events in MCA for how returns affect funders and brokers.

New York Courts: Reconciliation Must Be Real

The question of whether a merchant cash advance is a true purchase of receivables or a disguised loan has been litigated for years. In 2026, New York courts gave the industry a clearer answer: what you do matters more than what your contract says.

Why we name specific companies in this guide: every company mentioned below is a party to a published court decision or a public enforcement action. We name them only because the cases themselves are how the law is being set, and brokers and funders need to know which rulings to follow. Naming a case is not an endorsement and is not an accusation beyond what a court or regulator has found or alleged. Some of these matters are still ongoing.

People v. Richmond Capital Group (1st Dept., February 2026)

On February 19, 2026, the Appellate Division, First Department largely affirmed the Attorney General's case against Richmond Capital Group and related companies. The court held the agreements were loans subject to usury law, not purchases of receivables. The key fact: the contracts promised reconciliation, but reconciliation was never actually performed. Daily payments stayed fixed regardless of the merchant's sales, requests for adjustment were left to the funder's "sole discretion" and denied, and some agreements listed bankruptcy as an event of default. With no working reconciliation, the court found the usurious rates could be read straight off the contracts. The court did vacate the $77 million money judgment and sent the damages calculation back for further proceedings.

The NewCo ruling (4th Dept., June 2026)

In June, the Fourth Department went the other way in a case involving NewCo, finding the agreements were true MCAs. The differences were the ones that lost the Richmond case: reconciliation actually worked, there was no fixed repayment term, and the merchant filing for bankruptcy was not an event of default. Read together, the two decisions show courts looking past contract language to the funder's real conduct.

In re Kossoff PLLC (Bankr. S.D.N.Y., July 2026)

In late July, Judge David S. Jones of the Bankruptcy Court for the Southern District of New York recharacterized a series of 19 merchant cash advance agreements with a collapsed law firm as loans, clearing the way for the Chapter 7 trustee to pursue roughly $8.7 million paid to the funder. The court described the agreements as well drafted attempts to dress up high-return financing as asset sales. The lesson for funders: bankruptcy courts apply the same economic-reality analysis, and trustees are actively using it to claw back payments.

What to change after these rulings

For funders:

• Honor every reconciliation request and adjust payments based on actual receivables, not your own discretion.
• Log every request with the date, the documents reviewed, and the outcome. If you are ever sued, this record is your defense.
• Remove bankruptcy from your list of default events. It was a factor against the funder in Richmond and absent in the NewCo win.
• Avoid fixed terms and payment schedules that work out to a guaranteed repayment date.

For brokers:

• Don't sell MCAs like loans. Avoid promising a fixed term, a set payoff date, or a guaranteed daily payment. That language can be used as evidence the deal was a loan.
• Explain reconciliation to merchants and send their requests to the funder promptly, in writing.
• Ask funders how they handle reconciliation and whether bankruptcy is a default trigger before adding them to your panel. A funder that loses in court can take your renewals with it.

For contract-level detail, see our guides to MCA reconciliation clauses, why MCAs are not loans, and MCA and merchant bankruptcy.

New York AG: The FAIR Business Practices Act Reaches Business Deals

New York's Fostering Affordability and Integrity through Reasonable Business Practices Act, known as the FAIR Business Practices Act, took effect on February 17, 2026. It expands General Business Law section 349 so the Attorney General can go after unfair and abusive practices, not just deceptive ones, and it protects businesses as well as consumers. That second point is what makes it an MCA law in practice.

The Attorney General has already used it against the industry. On June 8, 2026, she sued Rapid Ruling, an online arbitration service used in MCA collections, and its founders. The complaint alleges an MCA company secretly drafted the platform's rules, that small businesses lost almost every case, and that arbitrators awarded junk fees and padded attorneys' fees that became court judgments. These are allegations in a pending lawsuit, not findings by a court. We mention the case because it is the first time the FAIR Act has been used against a business tied to the MCA industry.

For funders, audit now:

• Collection call scripts and texts, including anything that pressures merchants or threatens action you will not take
• Fees added after funding, including default, NSF, and legal fees
• Arbitration clauses and the arbitration providers named in your contracts
• Whether merchants can actually understand your terms, since the "abusive" standard targets practices that interfere with that

For brokers, audit now:

• Sales scripts, texts, and ads, including high-pressure tactics and claims like "no hidden fees" that your funders' contracts don't support
• How you explain cost, payment amount, and personal guarantees, since the "abusive" standard covers practices that keep merchants from understanding terms
• Any fees you charge merchants directly

California: Quote Rules Now, DFPI Licensing in 2028

Factor rate and APR rules already in effect

Since January 1, 2026, on commercial financing up to $500,000, California prohibits describing a factor rate as an interest rate and requires the estimated APR to be stated whenever you quote a rate, price, or cost of financing. That applies to broker texts, emails, and sales scripts, not just the formal disclosure. If a rep texts a merchant "1.35 factor," the APR needs to be in that message.

For brokers: this hits you hardest, because most quotes start with your reps. Rewrite text and email templates so every rate or cost includes the APR and nothing calls a factor rate an interest rate.

For funders: update offer sheets, portal quotes, and ISO-facing pricing tools so the numbers your brokers forward are already compliant.

Our California APR disclosure guide covers the details. You can model the numbers with our MCA underwriting calculator.

AB 2116: licensing for providers and brokers

Governor Newsom signed AB 2116 on September 30, 2026. It brings commercial financing, including merchant cash advances and factoring, under the California Financing Law and creates new license categories for commercial financing providers and brokers. Key points:

• Licensing becomes operative July 1, 2028. Firms with a completed application on file by that date can keep operating while it is pending.
• Substantive rules start January 1, 2028, including an ability-to-repay requirement and a prohibition on confessions of judgment.
• Agreements made without the required license or pending application may be unenforceable.
• Transactions over $500,000 fall outside the licensing requirement.
• Brokers must post the average and maximum APRs of deals they facilitated in the prior year on their websites.

For funders: plan for a provider license, an ability-to-repay process, and contract templates without confessions of judgment by January 1, 2028.

For brokers: plan for a broker license and start tracking the average and maximum APRs on deals you place, since you will need to post them on your website.

State Disclosure Laws: 11 States and Counting

Eleven states now require commercial financing disclosures on MCA and sales-based financing deals:

State	Notes
New York	Disclosures on deals up to $2.5M
California	Deals up to $500K, APR required
Utah	Registration and disclosure
Virginia	Registration and disclosure
Georgia	Disclosure
Florida	Disclosure
Connecticut	Registration renews 11/1 to 12/31
Kansas	Disclosure
Missouri	Broker registration renews by 1/31
Texas	Disclosure, registration, ACH rule
Louisiana	Disclosure

Each state has its own form, thresholds, and required fields. Using New York's form on a Georgia deal is a violation, not a technicality. Map every deal to the merchant's state and pull the right template.

For funders: as providers, you are generally responsible for generating and delivering the state disclosure. Build state detection into your deal flow so the right form goes out automatically.

For brokers: make sure merchants get the disclosure before they sign, don't quote numbers that conflict with it, and keep your own registrations current, including Connecticut renewals (11/1 to 12/31) and Missouri renewals (by 1/31).

See the multi-state disclosure compliance guide and our New York disclosure guide for state-by-state requirements.

On the Radar for 2027

• Vermont (July 1, 2027): HB 648 adds licensing, APR disclosure, a Texas-style ACH restriction, and a ban on confessions of judgment. Details in our Vermont HB 648 guide.
• New York: pending bills would ban confessions of judgment on deals under $5 million and cap rates on MCAs. See our confession of judgment guide.
• New Jersey: a commercial financing disclosure bill is pending.
• Good news from Washington: the CFPB's revised Section 1071 rule excludes merchant cash advances. Read what the 1071 exemption means.

Q4 2026 Compliance Checklist for MCA Brokers

Brokers are named directly in Texas, California, Connecticut, and Missouri law, and courts and regulators increasingly treat brokers as part of the deal. Before year end:

1. File your Texas OCCC registration on NMLS if you broker Texas deals.
2. Calendar Connecticut (11/1 to 12/31) and Missouri (by 1/31) renewals.
3. Rewrite California quote templates and texts so every number includes an APR and no factor rate is called an interest rate.
4. Confirm you are delivering the correct state disclosure form on every deal.
5. Ask your funders how they handle reconciliation requests and whether bankruptcy is still a default trigger. Funders who lose in court can take your renewals and trailing commissions with them.
6. Review your own collection-adjacent communications for New York FAIR Act risk.

Vetting funders on these points is part of choosing a panel. Search our funder directory to compare funders, or create your free broker account to connect with verified funders.

Q4 2026 Compliance Checklist for MCA Funders

1. Complete Texas OCCC registration and confirm UCC position before setting up ACH on Texas deals.
2. Put your NACHA fraud monitoring process in writing and schedule the annual review.
3. Build a reconciliation workflow that responds to every request and records the outcome.
4. Remove bankruptcy from events of default and review fixed-term language.
5. Audit collection scripts, post-funding fees, and arbitration clauses for FAIR Act exposure.
6. Begin planning for California AB 2116 licensing and contract changes.

Frequently Asked Questions

When is the Texas MCA registration deadline?

Sales-based financing providers and brokers must register with the Texas OCCC through NMLS by December 31, 2026.

Can MCA funders use ACH debits in Texas?

Only if the funder holds a perfected first position security interest in the merchant's receivables. Funders in second position or behind cannot use automatic ACH debits on Texas merchants.

Is a merchant cash advance a loan in New York?

Not automatically. New York courts look at how the deal actually works. Agreements with a reconciliation provision that is honored in practice, no fixed term, and no bankruptcy default trigger are more likely to be treated as true purchases of receivables. Where reconciliation exists only on paper, as in Richmond Capital, courts have treated MCAs as usurious loans.

Does California require a license for merchant cash advances?

Under AB 2116, signed September 30, 2026, commercial financing providers and brokers will need a California Financing Law license starting July 1, 2028, for transactions of $500,000 or less.

Which states require MCA disclosures?

As of Q4 2026, New York, California, Utah, Virginia, Georgia, Florida, Connecticut, Kansas, Missouri, Texas, and Louisiana require commercial financing disclosures. Vermont's requirements begin July 1, 2027.

Are MCAs covered by the CFPB Section 1071 rule?

No. The CFPB's revised Section 1071 final rule excludes merchant cash advances.

Bottom Line

The 2026 rules share one theme: regulators and courts are judging MCA providers by how they actually operate. Go through your contracts and disclosures, get your Texas registration filed before December, put your NACHA fraud process on paper, and make reconciliation something you do, not just something you promise. Funders and brokers who tighten up ACH practices and reconciliation now will be in a far stronger position as Vermont, California, and possibly New York add new requirements in 2027 and 2028. For terms used in this guide, see our MCA glossary.

This article is general industry information, not legal advice. Consult a qualified attorney about your specific obligations.