New York's FAIR Act puts MCA collection files in the AG's hands
New York's FAIR Act gives the attorney general a cleaner path to challenge MCA collection conduct as unfair or abusive, even as the CFPB pulls MCAs out of federal small-business data reporting.
New York's FAIR Business Practices Act is not an MCA statute by name. That is what makes it important. The law took effect February 17 and rewrote General Business Law section 349 so the attorney general can challenge business conduct as unfair or abusive, not only deceptive. It also removes the old consumer-oriented limit in AG actions, which means the file can involve a contractor, restaurant, shop, or other small business rather than a household consumer. For merchant cash advance funders, the risk is not that New York suddenly relabeled every advance as a loan. The risk is narrower and more practical: collection conduct now has a state abusive-practices lane. Account freezes, stacked positions, UCC pressure, reconciliation denials, personal-guarantee threats, and stipulations can be reviewed as conduct against a protected small business, even when the underlying product remains outside a federal data rule. Why this matters Federal MCA reporting risk narrowed this month, but New York collection risk widened. The same advance can sit outside CFPB small-business data collection and still become a New York abusive-practices problem if the collection record looks opportunistic. That federal contrast matters. The CFPB published its final small-business lending data rule on May 1, and Greenberg Traurig summarized the Bureau's MCA carve-out: the CFPB said it "erred in the 2023 Rule by prematurely determining that collection of data on MCA transactions would serve section 1071's statutory purposes." Under the version effective June 30, MCAs are excluded from covered transactions. The fight moves from reporting to collection The carve-out is useful, but it is not a shield. Being outside federal data collection says nothing about whether a New York collection file can survive an AG review. The FAIR Act preserves a compliance defense for conduct that is subject to and complies with federal agency rules. For MCAs, the absence of a federal reporting rule can cut the other way: there may be no federal safe harbor to point to when a state regulator asks how a merchant was treated after default. "The Act expressly abrogates this consumer-oriented limitation in actions brought by the NYAG. In practical terms, this removes a common motion-to-dismiss argument under GBL section 349, thereby expanding the range of cases that the NYAG may pursue." Arnold & Porter, Enforcement Edge That is the operational shift. The old first defense was often that the dispute was private B2B conduct, not consumer conduct aimed at the public. New York took that argument away in AG actions. A merchant complaint about how an advance was collected can now matter without first proving that the same practice was aimed at consumers broadly. What the file has to prove The word "abusive" is doing the heavy lifting. New York borrowed Consumer Financial Protection Act language, so the question is whether conduct materially interfered with a merchant's ability to understand a term, or took unreasonable advantage of a lack of understanding, inability to protect its interests, or reliance on the funder to act fairly. In MCA collection, that points straight at the evidence operators already know is messy: whether reconciliation was real, whether UCC notices matched the facts, whether the guarantee was explained, and whether pressure tactics made a temporary cash crunch look like consent. Opinion The compliance file is now a collection file The industry spent two years bracing for a federal data form. For MCAs, that form is gone. The live file is the one a New York investigator would read after a merchant says collection crossed the line: signed disclosures, payment history, reconciliation handling, UCC notices, guarantee explanations, and the tone of every demand after cash flow broke. The operator response is not to stop funding New York merchants. It is to keep collection evidence that reads cleanly to a regulator who can now treat a small business more like the law treats a consumer. The product did not change on February 17. The first defensible file did. Plutus tracks this beat at plutusai.net .