- 1At least 15 states now have active legislation targeting MCA disclosure or regulation
- 2The CFPB has signaled intent to apply Section 1071 data collection rules to MCA funders
- 3Voluntary self-regulation could prevent overly restrictive government mandates
The Clock Is Ticking
By Mike Torino, Managing Partner at Torino Capital Partners — a 15-year veteran of the MCA industry who has funded over $500M in merchant cash advances.
Let me be blunt: if the MCA industry doesn't clean up its own house, state and federal regulators will do it for us — and we won't like the result.
I've been in this business since 2011. I've seen the industry grow from a niche product into a $15-20 billion market. I've also watched the bad actors multiply — funders with predatory factor rates, confession of judgment abuse, and brokers who mislead merchants about the true cost of capital. These aren't isolated incidents. They're systemic problems that are drawing regulatory attention at every level of government.
California's new disclosure law (SB-1247) is just the beginning. New York's commercial financing disclosure rules went into effect in 2024. Virginia passed its own version. Utah has requirements. And at least a dozen other states have active bills in committee. The CFPB has signaled interest in applying Section 1071 data collection requirements to MCA funders. It's not a question of if federal oversight is coming — it's when, and how aggressive it will be.
The Case for Self-Regulation
Here's what I've learned in 15 years: regulation written by people who don't understand our industry always gets it wrong. The APR disclosure requirements in New York, for example, force funders to present an annualized cost figure for a product that isn't a loan and doesn't have a fixed term. The resulting number is technically accurate but practically misleading — it makes a 6-month advance look more expensive than it actually is for the merchant.
This is what happens when lawmakers write rules without industry input. And it will get worse.
Self-regulation isn't just altruistic — it's strategically essential. If we can demonstrate that the industry can police itself effectively, we have leverage to push back against heavy-handed government mandates. If we can't, we deserve what we get.
A Three-Pillar Framework
I propose a three-pillar approach to industry self-regulation:
Pillar 1: Standardized Disclosure
Every funder should voluntarily adopt a standardized disclosure form that includes:
- Total cost of capital in dollars
- Estimated daily/weekly/monthly payment amounts
- Total repayment amount
- Payment frequency and estimated term
- A clear statement of whether early payoff discounts are available
This doesn't need to include APR — that metric is designed for loans with fixed terms and doesn't translate well to MCA. Instead, we should develop an industry-standard cost metric that accurately represents the economics of revenue-based financing.
Pillar 2: Broker Certification
The Wild West of broker conduct is the single biggest source of regulatory heat. Brokers who misrepresent deal terms, submit fraudulent applications, or facilitate stacking without disclosure are hurting merchants and giving the entire industry a black eye.
I'm calling for a voluntary broker certification program, administered by an independent industry body, that requires:
- Completion of an ethics and compliance training course
- Agreement to a code of conduct
- Background checks and ongoing monitoring
- Consequences for violations (suspension, de-certification)
Pillar 3: Enforcement With Teeth
Self-regulation without enforcement is just marketing. The industry needs a mechanism to investigate complaints against funders and brokers, impose consequences, and publicize disciplinary actions. This could be modeled on FINRA's approach in the securities industry — an industry-funded self-regulatory organization with real authority.
The Alternative Is Worse
The alternative to self-regulation isn't freedom — it's regulation written by people who think MCAs are predatory loans. Politicians don't understand the difference between a merchant cash advance and a payday loan. They don't understand the risk funders take on. They don't understand the speed and flexibility that makes MCA valuable to small businesses.
If we don't tell our own story and set our own standards, someone else will write the narrative for us. That should terrify everyone in this industry.
If we don't write the rules, someone who has never funded a deal will write them for us.
Frequently Asked Questions
Who would fund a self-regulatory organization? Industry membership dues, similar to how FINRA is funded by its member firms. Major funders and ISOs would bear the largest share.
Isn't self-regulation just a PR move? Only if there's no enforcement. The key is creating an independent body with the authority and willingness to take real action against bad actors.
What happens to funders who don't participate? Non-participation itself becomes a signal. Brokers, merchants, and regulators can draw their own conclusions about funders that refuse to adopt voluntary standards.
Mike Torino is Managing Partner at Torino Capital Partners and has been active in the MCA industry since 2011. He has served on the advisory boards of the SBFA and the MCA Trade Association. The views expressed are his own and do not represent Moneyline's editorial position.
