Get Out of MCA Loans 2026: New State Laws, Post-COJ Reform Landscape

If you took an MCA before 2020, the rules have changed under your feet. Six states now require Truth-in-Lending-style disclosures on commercial financing. New York shut down out-of-state COJ filings in 2019. California, Virginia, Utah, Georgia, Connecticut, and most recently Florida have all enacted commercial financing disclosure laws. The funders haven’t all kept up. That gap is your leverage in 2026.

The Post-2019 New York COJ Landscape

Before February 2019, MCA funders filed Confessions of Judgment in New York courts against merchants in every state in the country. New York amended CPLR 3218 to require that the debtor be a New York resident or the underlying business have a New York address at the time the COJ was signed. Overnight, the most aggressive collection tool in the MCA arsenal lost most of its teeth.

That said, COJs signed before the 2019 amendment, and COJs against actual New York businesses, are still enforceable. And funders have shifted to other states (some tried Tennessee, Kentucky, and Pennsylvania) to keep the COJ pipeline alive. Whether those filings actually survive a venue challenge is a different question, one independent counsel from our referral network handles regularly.

State Disclosure Laws You Can Actually Use

California SB 1235 (effective December 2022) requires written disclosure of APR, total payback, and prepayment terms on commercial financing under $500,000. New York DFS commercial financing rule (effective August 2023) requires similar disclosures. Florida’s commercial financing disclosure law took effect July 2024.

If your 2024 or 2025 MCA was funded into one of these states without proper disclosure, you have a regulatory violation argument that funders take seriously at the negotiating table. Settlement discounts of 10 to 20 cents on the dollar above the normal range are realistic when the violation is real.

The Federal Picture

The FTC has been increasingly active. In 2023 and 2024 the agency brought enforcement actions against several major MCA funders for deceptive collection practices, including misrepresenting reconciliation rights and filing fraudulent affidavits. Those orders create precedents that funders cite internally when deciding how aggressive to get on a workout file.

State attorneys general have been even more aggressive. The New York AG, New Jersey AG, and California DFPI have all taken action against funders for usury (where reclassification arguments apply) and deceptive practices.

What This Means for Your Settlement Number

In 2018, pre-litigation MCA settlements landed at 65 to 80 cents on the dollar. By 2023, the number had dropped to 50 to 65 cents. In 2026, with more regulatory pressure on funders and more borrowers exiting via Subchapter V bankruptcy, we routinely see settlements at 40 to 55 cents pre-litigation for merchants with documented hardship.

Funders know the alternative. They’d rather take 45 cents today than 0 cents in a Subchapter V case 18 months from now.

Practical 2026 Action Steps

• Identify your MCA’s state of origin. Funding date and your business address determine which disclosure law applies.
• Pull the funding documents. Look for APR disclosure, prepayment language, and reconciliation rights.
• Document hardship before you call. Three months of bank statements, processor reports, and AR aging make or break the settlement.
• Don’t let the funder hear from you first. A clean reconciliation request beats a panicked default call every time.
• Use the regulatory leverage where it exists. Senior advisors know which violations move which funders.

The 2026 environment is the most borrower-friendly the MCA industry has been since these products took off in 2010. Use it.

Delancey Street is a business debt-relief company, not a law firm. When a matter requires legal work, we refer you to an independent attorney from our referral network; the attorney–client relationship is between you and that attorney.

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