MCA Laws in Massachusetts: What Business Owners Need to Know
Massachusetts is one of the more consumer-friendly states in the country, and that reputation extends to its approach toward merchant cash advances. While the state does not have MCA-specific legislation on the books, its strong regulatory agencies and broad consumer protection statutes give business owners meaningful tools to push back against predatory practices.
This guide covers the current state of MCA regulation in Massachusetts and what protections are available to you.
Current MCA Regulations in Massachusetts
Massachusetts does not have a law specifically designed to regulate merchant cash advances. MCAs are not classified as loans under state law, which means they fall outside the jurisdiction of traditional lending regulations like interest rate caps and licensing requirements for lenders.
However, Massachusetts takes a proactive approach to financial regulation through its Division of Banks, which oversees financial services companies operating in the state. The Division of Banks monitors the commercial financing space and has the authority to investigate companies that engage in unfair or deceptive practices.
Division of Banks Oversight
The Massachusetts Division of Banks is part of the Office of Consumer Affairs and Business Regulation. While MCA companies are not required to hold a lending license in Massachusetts, the Division of Banks can still take action against companies that violate state consumer protection laws or engage in fraudulent activity. The Division also serves as a resource for business owners who want to verify whether a financial services company is operating lawfully in the state.
Confession of Judgment Rules
Massachusetts provides strong protections against confessions of judgment. Under Massachusetts law:
- Confessions of judgment are heavily restricted and generally disfavored by Massachusetts courts
- Massachusetts courts require that any judgment be entered through proper legal proceedings where the defendant has an opportunity to be heard
- Out-of-state COJ judgments, such as those obtained in New York, face significant hurdles before they can be domesticated and enforced in Massachusetts
- The state's strong due process protections mean that a business owner must receive proper notice and an opportunity to contest any claim
If an MCA company threatens you with a confession of judgment, know that Massachusetts courts are unlikely to enforce it without giving you a chance to respond. Speak with an attorney right away.
UCC Filing Rules
MCA companies operating in Massachusetts file UCC-1 financing statements with the Massachusetts Secretary of the Commonwealth. These filings establish a public record of the MCA company's claim on your future receivables.
What you need to know about UCC filings in Massachusetts:
- You can search for UCC filings against your business through the Massachusetts Secretary of the Commonwealth online portal
- UCC filings are effective for five years from the filing date
- When you pay off an MCA, the funder is required to file a UCC-3 termination statement within 20 business days after receiving your written demand
- If the funder refuses to terminate the filing, you may have a claim under the Massachusetts Uniform Commercial Code for damages caused by the continued filing
Check your UCC filings regularly. Multiple filings from different MCA companies can make it very difficult to qualify for traditional bank financing.
Consumer Protection Laws That Apply
Massachusetts has one of the strongest consumer protection statutes in the country, and it applies broadly to business transactions as well.
Chapter 93A: Consumer Protection Act
Massachusetts General Laws Chapter 93A prohibits unfair or deceptive acts or practices in trade or commerce. This statute is a powerful tool for business owners dealing with predatory MCA companies because:
- It applies to business-to-business transactions, not just consumer transactions
- It allows for treble (triple) damages if the court finds that the violation was willful or knowing
- It requires a demand letter before filing suit, which often leads to settlements
- Attorney's fees are recoverable, making it financially viable to pursue smaller claims
If an MCA company misrepresented the terms of your agreement, charged hidden fees, or engaged in aggressive collection tactics, Chapter 93A may provide you with a strong legal remedy.
Attorney General Enforcement
The Massachusetts Attorney General's office is known for aggressive enforcement of consumer protection laws. The AG has the authority to investigate MCA companies, issue civil investigative demands, and bring enforcement actions. Business owners can file complaints directly with the AG's office.
Recent Legislation and Court Cases
Massachusetts has seen increasing attention to commercial financing practices in recent years:
- AG investigations. The Massachusetts Attorney General's office has investigated commercial financing companies for deceptive practices, including misleading representations about costs and terms.
- Chapter 93A litigation. Massachusetts courts have heard cases where business owners used Chapter 93A to challenge MCA agreements with unconscionable terms. Several cases have resulted in favorable outcomes for borrowers.
- Disclosure proposals. State legislators have discussed proposals to require standardized disclosures for commercial financing products, similar to California's SB 1235. While no law has been enacted yet, the conversation is ongoing.
- Federal coordination. Massachusetts has participated in multi-state efforts to address predatory commercial financing, working with other state regulators and the FTC.
What Massachusetts Business Owners Should Do
If you are considering an MCA in Massachusetts or already have one, take these steps:
- Request full cost disclosures upfront. Even though Massachusetts does not mandate standardized disclosures, ask for the total cost of financing, the estimated APR, and the payment schedule in writing before you sign anything.
- Check UCC filings against your business. Search the Massachusetts Secretary of the Commonwealth database to see if any MCA companies have filed liens on your receivables.
- Know your Chapter 93A rights. If an MCA company has engaged in unfair or deceptive conduct, you may be entitled to treble damages under Massachusetts law. Consult an attorney who is familiar with Chapter 93A claims.
- Do not sign a confession of judgment. Massachusetts courts disfavor COJs, but it is still best to avoid signing one in the first place. Push back on any MCA agreement that includes a COJ clause.
- File complaints when needed. Report predatory MCA companies to the Massachusetts Attorney General and the Division of Banks.
Helpful Resources
- Massachusetts Division of Banks for financial services regulation and complaints
- Massachusetts Attorney General for consumer and business protection enforcement
- SBA Massachusetts District Office for alternative financing resources
- Massachusetts Small Business Development Center Network for free business counseling
Frequently Asked Questions
Does Massachusetts have MCA-specific regulations?
Can an MCA company enforce a confession of judgment in Massachusetts?
What is Chapter 93A and how does it protect me from predatory MCAs?
Where do I file a complaint against an MCA company in Massachusetts?
Sources
- Massachusetts Division of Banks. Regulatory oversight of financial services in Massachusetts.
- Massachusetts General Laws Chapter 93A. Text of the Massachusetts consumer protection statute.
- SBA Massachusetts District Office. Federal small business resources for Massachusetts businesses.
- Massachusetts Small Business Development Center Network. Free counseling and resources for Massachusetts small businesses.