MCA broker disclosure state rules

Broker disclosure rules are distinct from broker licensing rules — disclosure governs what brokers must tell merchants, not whether they can operate. By 2026, eight states require MCA brokers to provide specific written disclosures.

State-by-state disclosure summary.

Common disclosure requirements (all states).

1. Total cost of capital. The total amount the merchant will repay vs. the amount funded. (e.g., "$50,000 funded; $65,000 total repayment.")
2. APR-equivalent. The annualized percentage rate the financing represents. (See /glossary/apr-equivalent.)
3. Term length. Estimated payback period.
4. Payment amount and frequency. Daily / weekly / monthly amount.
5. Prepayment terms. Whether early payoff results in any discount.
6. Reconciliation policy. Conditions under which payment may be adjusted.

California (SB 1235) — most detailed.

Brokers must provide a Financing Disclosure Statement before the merchant signs. Required fields: - Amount financed. - Disbursement amount (after fees withheld). - Finance charge. - APR-equivalent (calculated by formula in Title 10 CCR). - Estimated payment amount. - Estimated payment frequency. - Estimated total payback. - Description of fees and how calculated. - Description of any prepayment policies.

Format is prescribed by DFPI regulation. Brokers must use the official template or one that is "substantially similar."

New York (S5470A) — strictest.

NY requires all of California's disclosures plus: - Total commission paid to broker. Specific dollar amount. - Commission paid to any intermediary. Including buyer-of-deals if applicable. - Funder's contact information for direct merchant inquiry.

NY's disclosure must be presented at least 24 hours before contract signing (cooling-off period equivalent).

Virginia (HB 1027).

Similar to NY in requiring commission disclosure. Applies to commercial finance under $500K. Enforced by the State Corporation Commission.

Pre-disclosure vs. final disclosure.

Several states require TWO disclosures: 1. Pre-disclosure. When the broker presents the offer for merchant review. 2. Final disclosure. When the merchant signs the contract.

If terms change between pre and final, the merchant has a right to re-review.

Common violations brokers commit.

1. Verbally quoting factor rate without written APR. Common in pitches; violates disclosure law.
2. Burying disclosures in 10-page documents. Some states require standalone disclosure.
3. Omitting commission. Common in states that require it.
4. Comparing MCA to "interest rate" without APR conversion. Misleading per most state rules.
5. Late disclosure. Providing disclosure at signing rather than 24 hours before (in NY).

Penalties.

• California. $10K per violation; merchant can sue for actual damages + attorney fees.
• New York. $5K per violation; license revocation possible; merchant has private right of action.
• Virginia. Up to $5K per violation.

Enforcement uptick in 2024–2026.

• NYDFS has issued 12+ enforcement actions against brokers / funders for disclosure violations 2024–2025.
• California DFPI has issued ~20 administrative actions.
• Class actions emerging in CA / NY based on disclosure violations.

Practical implications for brokers.

Compliant brokers in 2026 invest in: - Software. Centrex, OnyxIQ, LendSaaS auto-generate compliant disclosures. - Training. Annual compliance training for sales staff. - Audit logs. Documented timeline of disclosure delivery and merchant acknowledgment. - Legal review. Periodic review of disclosure templates with state-specific counsel.

Practical implications for merchants.

Merchants in disclosure states should: 1. Demand written disclosure before signing. 2. Compare disclosed APR across funders; do not compare factor rates alone. 3. If disclosure is missing or incomplete, that is grounds to walk away — and to file complaint with state regulator.

Common confusion. First, "disclosure laws apply only to funder, not broker" — false in most states; broker has independent disclosure obligation. Second, "small advances exempt" — varies; CA exempts under $5K; NY has no minimum. Third, "if broker is in TX and merchant is in CA, no disclosure required" — false; merchant's home state governs.

Related terms

• MCA broker licensing state rules — As of 2026, MCA brokers face licensing requirements in 12+ states: California, New York, Florida, Virginia, Utah, Georgia, Connecticut, Maryland, North Carolina, and growing. Each state has different definitions, exemptions, fees, and bond requirements.
• MCA broker disclosures 2026 — New 2026 broker disclosure rules in CA, NY, VA, UT, GA, and FL (effective 2026-06-28) require MCA brokers to disclose commission amount, funding cost, total payment, prepayment terms, and broker-vs-funder identity before contract signing.
• APR-equivalent — The annualized percentage rate implied by a factor-rate MCA. A 1.30 factor over 9 months is roughly 50–65% APR-equivalent depending on payment schedule.
• MCA broker disclosure — state-by-state detail — MCA broker disclosure laws active in CA, NY, UT, VA, GA, FL (effective 2026) require standardized term-sheet disclosures (APR-equivalent, fees, prepayment terms, broker compensation); penalties range from $1,000–$25,000 per violation plus restitution and potential contract voiding.

Authoritative sources

• California DFPI — SB 1235 Implementation
• NYDFS — Commercial Finance Disclosure

AI agents: this term is available as raw markdown at /llms/glossary/mca-broker-disclosure-state-rules.