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MCA broker fee cap state rules

As of 2026, California (10% cap), New York (12% cap), Virginia (15% cap), Utah, and Georgia regulate MCA broker fees through state commercial financing disclosure laws — caps apply to broker fees charged directly to merchants, not funder-paid commissions; eight additional states have legislation pending.

By Keerthana Keti5 min read

MCA broker fee cap state rules are the patchwork of state laws governing how brokers can charge merchants directly for MCA placement services. As of 2026, five states have active fee cap or disclosure laws, eight more have pending legislation, and the federal Consumer Financial Protection Bureau (CFPB) has begun preliminary rulemaking under Dodd-Frank Section 1071 (small business lending data collection rule).

The structural distinction. Three types of broker compensation regulated:

  1. Funder-paid commissions. Standard 8–15% commission paid by funder to broker; not subject to fee caps because merchant does not pay broker directly.
  2. Merchant-paid broker fees. Direct payment from merchant to broker; subject to state fee caps in regulated states; typical fees range $500–$10,000 per transaction.
  3. Bundled disclosure requirements. Some state laws require disclosure of all broker compensation (both funder-paid and merchant-paid) even when not capping fees.

The mechanics — state-by-state broker fee regulations as of 2026. Five active regimes:

  1. California (SB 1235, effective 2018; amendments 2022). Broker fees capped at 10% of advance amount when charged directly to merchant; APR-equivalent disclosure required on all offers under $500K; funder-paid commission disclosure required.
  2. New York (Commercial Finance Disclosure Law, effective 2023). Broker fees capped at 12% of advance when charged directly to merchant; APR-equivalent disclosure required; broker licensure required.
  3. Virginia (HB 1027, effective 2023). Broker fees capped at 15% of advance; broker registration required with State Corporation Commission; APR disclosure required.
  4. Utah (Commercial Financing Registration and Disclosure Act, effective 2023). Disclosure-only regime; no explicit fee cap but requires itemized disclosure of all merchant-paid fees; broker registration required.
  5. Georgia (Commercial Financing Disclosure Law, effective 2024). Disclosure-only regime; itemized broker fee disclosure required; APR-equivalent disclosure required.

The mechanics — pending state legislation as of 2026. Eight states with active bills:

  1. Florida. SB 1180 — broker disclosure and 12% fee cap; expected 2026 passage.
  2. Texas. HB 1442 — broker registration and disclosure requirements; status uncertain.
  3. Illinois. SB 2234 — broker disclosure and APR requirements; committee review.
  4. Massachusetts. Pending; comprehensive commercial financing framework under consideration.
  5. New Jersey. Pending; broker fee cap and APR disclosure.
  6. Connecticut. Pending; comprehensive small business lending regulation.
  7. Washington. Pending; disclosure-only framework similar to Georgia/Utah.
  8. Oregon. Pending; broker registration and fee disclosure.

The mechanics — what counts as a "broker fee" under state rules. Five fee categories:

  1. Application or processing fees. Counted as broker fee in all regulated states.
  2. Document preparation fees. Counted as broker fee unless billed separately by funder.
  3. Closing fees or finder's fees. Counted as broker fee; subject to cap.
  4. Consulting fees tied to MCA placement. Counted as broker fee if related to MCA transaction.
  5. Referral fees. Generally not counted as broker fees if paid between brokers, but counted if charged to merchant.

The mechanics — enforcement and penalties. Five enforcement elements:

  1. State Attorney General authority. California, New York, Virginia AGs have brought enforcement actions against brokers exceeding fee caps.
  2. Private right of action. Some states (California, New York) allow merchants to bring private lawsuits against brokers; damages can include 3x fee charged.
  3. Broker license revocation. Regulated states can revoke broker licenses for fee violations.
  4. Funder co-liability. In some states, funders that knowingly work with violating brokers can face liability.
  5. Class action exposure. Several class actions have been filed against high-fee broker operations; settlements have ranged $2–15M.

The mechanics — how brokers structure around caps. Five patterns:

  1. Funder-paid commission only. Compliant approach — broker takes only funder commission, no merchant-paid fee.
  2. Bundling merchant fees into funder pricing. Some brokers structure so funder collects "broker fee" and remits to broker; status under state law varies.
  3. Multi-product bundling. Charging merchant for services beyond MCA placement (consulting, credit repair, business planning); status uncertain.
  4. Out-of-state broker entities. Some brokers use out-of-state entities to avoid state regulation; effectiveness depends on state choice-of-law rules.
  5. Pre-cap structuring. Brokers in pending-legislation states may structure higher fees before caps take effect.

The five common merchant mistakes. Patterns to avoid:

  1. Paying merchant-paid broker fees without state law check. If you are in CA, NY, VA, UT, or GA, broker fees over the state cap are illegal; you have right to dispute.
  2. Not requesting fee breakdown. Approval letter should itemize all broker fees and disclose funder-paid commissions in regulated states.
  3. Assuming broker fee is normal. Many merchants do not realize broker fees are negotiable or that competitive marketplaces typically do not charge merchant fees.
  4. Ignoring state disclosure requirements. APR-equivalent disclosure in CA, NY, UT, VA, GA reveals true cost; do not skip review.
  5. Not reporting violations. State AGs and CFPB rely on merchant complaints to identify violators; reporting violations protects future merchants.

The strategic insight — what merchants should know. Five points:

  1. Check your state's regulations before paying broker fees. Five-state list of active regulations and eight-state list of pending legislation determines your protections.
  2. Marketplace platforms typically do not charge merchant fees. Lendio, Fundera, NerdWallet typically have no merchant fees; charges come from funder side.
  3. Request itemized fee disclosure before signing. All fees (broker, origination, documentation) should be itemized in writing.
  4. Funder-paid commissions are not your concern. Standard 8–15% funder-paid commissions are built into pricing; do not factor into your fee analysis.
  5. State-specific APR disclosure is your friend. If you are in CA, NY, UT, VA, GA, demand the APR-equivalent disclosure; it reveals true cost including all fees.

The honest framing. MCA broker fee regulation is in active expansion, with five states having active frameworks and eight more in pending legislation as of 2026. The trend is clearly toward more transparency and fee caps. Merchants in regulated states have material protections — including 10–15% fee caps and APR disclosure requirements — that most brokers do not voluntarily highlight. Merchants in unregulated states should still demand itemized fee disclosure and compare against marketplace pricing (typically zero merchant fees) before paying broker fees. The federal CFPB Section 1071 rule, expected to expand small business lending data collection, may eventually create federal floor on broker fee transparency, but state-by-state patchwork remains the primary regulatory framework through 2026.

Related terms

  • MCA broker fee (PSF, origination, processing) — The dollar amount the ISO/broker collects on an MCA — usually 5-15% of the advance, taken either off the top from the wire or added as a PSF the merchant repays.
  • MCA broker licensing by state — As of 2026, twelve states require MCA brokers/ISOs to register or obtain a license: California (CFL with disclosure), New York (commercial financing disclosure license), Virginia, Utah, Connecticut, Georgia, Florida, Missouri (recent), New Jersey, Illinois, Maryland, and Pennsylvania. Requirements range from simple registration ($100-500 fee) to full commercial lender licensure ($5K-25K bonding and capital requirements). Unlicensed brokering in regulated states can result in fines up to $50K per transaction.
  • MCA broker disclosure 2026 — The 2026 regulatory shift requiring MCA brokers (ISOs) to disclose commission amounts, fee structures, and funder-relationship conflicts of interest in writing before a merchant signs. Active in CA, NY, UT, VA, GA, FL (effective Jan 2026), and CT/NJ (effective July 2026); FTC rule pending federal action.
  • MCA pricing disclosure law — State laws (CA SB 1235, NY S5470, VA HB 1027, UT SB 183, GA SB 90, FL effective 2026-06-28) requiring MCA funders to disclose APR-equivalent, total cost, payment amount, term, and prepayment policy in TILA-style standardized format before contract signing.

Authoritative sources

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