MCA Laws in New Jersey: What Business Owners Need to Know
New Jersey has followed its neighbor New York in adopting some MCA protections, particularly around confessions of judgment and commercial financing transparency. Given New Jersey's proximity to New York. the epicenter of the MCA industry. many New Jersey business owners deal with New York-based MCA companies and benefit from understanding both states' laws.
This guide covers New Jersey's MCA regulations and what protections exist for business owners in the state.
Current MCA Regulations in New Jersey
New Jersey has taken a measured approach to MCA regulation. While it has not enacted a standalone MCA disclosure law like California or New York, the state has leveraged its existing consumer protection framework and followed New York's lead on key issues like confessions of judgment.
The New Jersey Department of Banking and Insurance (DOBI) has regulatory authority over financial services in the state, and MCA companies that operate in New Jersey are subject to the state's general business regulations.
Commercial Financing Oversight
New Jersey lawmakers have introduced legislation to require commercial financing providers to provide standardized disclosures to small businesses. While specific bills continue to move through the legislative process, the trend is clearly toward greater transparency requirements.
In the meantime, MCA companies operating in New Jersey are subject to the state's general business laws, which prohibit deceptive and fraudulent practices. The state has also signaled that it views the MCA industry as an area requiring increased regulatory attention.
Confession of Judgment Rules
New Jersey has significant protections against confessions of judgment. Under New Jersey Court Rules:
- Court review is required. Unlike some states where a COJ is automatically entered, New Jersey requires court review before a confession of judgment can be enforced. This gives the business owner an opportunity to challenge the COJ before a judgment is entered.
- Notice to the debtor. The debtor must receive notice of the COJ filing and have an opportunity to appear before the court.
- Strict procedural requirements. COJs must meet specific formatting and procedural standards to be valid in New Jersey.
- Judicial discretion. New Jersey judges have broad discretion to deny a COJ if they find it was obtained improperly or is unjust.
These protections are stronger than many states and reflect New Jersey's view that COJs should not be rubber-stamped without judicial oversight. If an MCA company tries to enforce a COJ against your New Jersey business, you will have the opportunity to present defenses to a judge.
Out-of-State COJ Judgments
If a COJ judgment was obtained in another state (like New York before the 2019 reforms), enforcing it in New Jersey requires domestication through New Jersey courts. The domestication process gives you another opportunity to challenge the judgment, and New Jersey courts have been willing to deny enforcement when the COJ was improperly obtained.
UCC Filing Rules
MCA companies file UCC-1 financing statements with the New Jersey Division of Revenue and Enterprise Services. These filings create a lien on your business receivables and are public record.
Key information for New Jersey business owners:
- Search for UCC filings through the New Jersey Division of Revenue website
- New Jersey UCC filings are effective for five years
- Demand a UCC-3 termination in writing after you satisfy the MCA. The funder has 20 days to file it.
- New Jersey's UCC Article 9 provides remedies for wrongful failure to terminate a filing, including damages
Consumer Protection Laws That Apply
New Jersey Consumer Fraud Act (NJCFA)
The NJCFA is one of the most powerful consumer protection statutes in the country, and it applies to commercial transactions. The law prohibits:
- Unconscionable commercial practices
- Deception, fraud, or misrepresentation in connection with the sale of merchandise or services
- False advertising or misleading marketing
The NJCFA is particularly powerful because it:
- Provides for treble damages (three times actual damages) in successful claims
- Awards attorney fees to prevailing plaintiffs
- Has a broad definition of "merchandise" that can encompass financing products
- Does not require proof that the defendant intended to deceive. only that the conduct was deceptive
If an MCA company misrepresented terms, hid fees, or used deceptive tactics, the NJCFA provides strong legal remedies for New Jersey business owners.
Department of Banking and Insurance
DOBI oversees financial services companies operating in New Jersey and can investigate complaints against MCA companies. If you have a complaint about an MCA company, filing with DOBI puts the company on the state's radar and contributes to regulatory oversight.
Recent Legislation and Court Cases
New Jersey's MCA regulatory landscape continues to evolve:
- Disclosure legislation. Lawmakers have introduced bills that would require MCA companies to provide standardized disclosures similar to California's SB 1235. These proposals continue to move through the legislative process.
- Attorney General activity. The New Jersey Attorney General's Division of Consumer Affairs has investigated complaints related to MCA practices and has the authority to bring enforcement actions.
- Court decisions. New Jersey courts have examined MCA agreements and, in some cases, reclassified MCAs as loans when they include fixed payments without true reconciliation. This reclassification subjects the MCA to New Jersey's Criminal Usury Act, which caps interest at 30% for business loans.
- Cross-border cooperation. New Jersey regulators work closely with New York regulators given the geographic overlap of the MCA industry.
What New Jersey Business Owners Should Do
- Know your COJ protections. New Jersey requires court review before a COJ can be enforced. If an MCA company threatens a confession of judgment, know that you will have a chance to challenge it before a judge.
- Ask for full disclosures. Even without a state mandate, demand the total payback amount, payment schedule, and effective APR in writing before signing any MCA.
- Understand NJCFA remedies. If an MCA company deceived you, the New Jersey Consumer Fraud Act provides powerful remedies including treble damages. Consult an attorney.
- Monitor your UCC filings. Check the NJ Division of Revenue for liens against your business.
- File complaints. Report problems to both DOBI and the NJ Attorney General's Division of Consumer Affairs.
Helpful Resources
- New Jersey Department of Banking and Insurance for financial regulation
- New Jersey Attorney General, Division of Consumer Affairs for complaints
- SBA New Jersey District Office for alternative financing
- New Jersey Small Business Development Centers for free business counseling
Related Resources
- What Is a Merchant Cash Advance? — understand how MCAs work before diving into the legal details
- MCA Laws by State — see how your state compares to others
- MCA Contract Red Flags — 8 warning signs in MCA contracts
- MCA Confession of Judgment — the most dangerous clause in your contract
- MCA Cost Calculator — calculate the true cost of any MCA offer
Frequently Asked Questions
Does New Jersey require MCA companies to disclose APR?
Can an MCA company enforce a confession of judgment in New Jersey?
What damages can I recover if an MCA company deceived me in New Jersey?
Where do I file a complaint about an MCA company in New Jersey?
Sources
- New Jersey Department of Banking and Insurance. Financial regulation in New Jersey.
- New Jersey Division of Consumer Affairs. Consumer and business protection enforcement.
- SBA New Jersey District Office. Federal small business resources for New Jersey.
- New Jersey Small Business Development Centers. Free business counseling and resources.