CFPB Reaffirms Excluding Merchant Cash Advances From Section 1071

The CFPB has confirmed that Merchant Cash Advances (MCAs) will remain exempt from the strict reporting requirements of Section 1071. This is a significant win for retailers who rely on alternative funding to manage inventory or bridge cash flow gaps. If you use MCAs, your funding process will stay faster and require less paperwork compared to traditional small business loans. Section 1071 was designed to track data on small business lending to prevent discrimination. By excluding MCAs, the CFPB acknowledges that these transactions are technically purchases of future sales rather than standard loans. For the merchant, this means MCA providers won't have to collect and report the extensive demographic data required for other types of credit. This ruling preserves the 'low-friction' nature of the MCA market. However, it also means the sector remains less regulated than traditional banking. Business owners should still be diligent. While the reporting burden is lower, the costs of these products can be higher. Use this clarity to confidently evaluate your working capital options for the coming year. You can continue to leverage MCAs for quick capital without worrying about new regulatory delays or privacy disclosures typical of the 1071 rule.

Source: deBanked

← Return to the library· Submit a correction