Reporting MCA Scams, Fraud & Predatory Lending to Authorities

The complaint is the mechanism. Not the lawsuit, not the legislative hearing, not the investigative exposé. When 18,000 small businesses lost a collective $534 million to a single network of merchant cash advance companies operating under the Yellowstone Capital name, the enforcement action that dissolved those obligations did not begin with a prosecutor's intuition. It began with individual merchants filing complaints with the New York Attorney General's office, one at a time, over a period of years, each complaint a single notation in what would become the evidentiary record for the largest MCA enforcement action in the country's history.

A merchant who has been defrauded and does not report the fraud has made a choice that extends beyond the merchant's own circumstance. The report is an act of construction. Without it, the regulatory apparatus has nothing to examine.

The answer depends on the nature of the violation, the location of the merchant, and the identity of the funder. In practice, a merchant who has experienced predatory conduct from a merchant cash advance company should file with multiple agencies simultaneously. There is no prohibition against concurrent reporting. There is no penalty for redundancy. The agencies themselves recognize that the same conduct may implicate federal consumer protection statutes, state usury laws, and commercial lending regulations in a single transaction.

The Federal Trade Commission accepts fraud reports through reportfraud.ftc.gov. The FTC does not resolve individual disputes. What the FTC does is aggregate. It collects complaints into a database that informs enforcement priorities, identifies patterns, and triggers investigations. The FTC's $20.3 million judgment against Jonathan Braun and his permanent ban from the MCA industry originated in this aggregation process. One complaint did not produce that outcome. The accumulation did.

The Consumer Financial Protection Bureau maintains a complaint portal at consumerfinance.gov/complaint. The CFPB's authority over merchant cash advances has been a subject of institutional contestation for several years, and the agency's operational capacity has contracted and expanded in unpredictable intervals. As of this writing, the Bureau continues to accept and process complaints. Whether that remains the case in six months is a question without a confident answer.

Every state attorney general's office accepts complaints against commercial entities engaged in deceptive or predatory practices. In the MCA context, the state attorney general has proven to be the most consequential enforcement body. The Yellowstone Capital settlement was a state action. The investigation into Yellowstone's network of 25 affiliated entities, the determination that the agreements constituted loans disguised as receivables purchases, the cancellation of $534 million in merchant obligations, all of this occurred under the authority of the New York Attorney General.

And the enforcement posture has intensified. In early 2026, state attorneys general across the country initiated a coordinated series of consumer protection actions targeting predatory lending, deceptive financing arrangements, and abusive collection practices. The pattern suggests a shared institutional recognition that merchant cash advance abuses have reached a threshold that demands coordinated response.

Your state attorney general's complaint portal is, in most cases, available online. The filing requires no attorney. It requires no fee. It requires a description of the conduct, copies of the agreement and any correspondence, and a willingness to provide the information under oath or affirmation. That is the entire obligation.

Before February 17, 2026, the New York Attorney General's enforcement authority under General Business Law Section 349 was limited to conduct that was consumer-oriented and deceptive. The merchant cash advance industry occupied an uncomfortable position within that framework: the merchants were businesses, not consumers, and the conduct was often abusive without being, in the technical statutory sense, deceptive.

The FAIR Business Practices Act dissolved that limitation. The statute now prohibits unfair and abusive acts against small businesses and nonprofits. Unfairness is defined through a substantial injury standard. Abusiveness encompasses conduct that exploits unequal bargaining power, that interferes with the merchant's capacity to understand the terms of the transaction, that takes unreasonable advantage of the merchant's reliance on the funder's representations.

For a merchant in New York reporting MCA misconduct, the FAIR Act means the complaint is received into a regulatory environment that now possesses the statutory authority to act upon it. That was not the case 13 months ago.

As of January 1, 2025, California's Rosenthal Fair Debt Collection Practices Act extends consumer-style protections to small business debts, including merchant cash advances. A merchant in California may now demand debt verification, challenge harassment, and report violations to the Department of Financial Protection and Innovation with the expectation that the DFPI possesses enforcement authority over the conduct described.

But California did not stop at collection practices. SB 362, signed by the Governor in October 2025, strengthened the state's Commercial Financing Disclosures Law. The statute prohibits providers from using the terms "interest" or "rate" in a manner that could mislead the recipient and requires the disclosure of an estimated annual percentage rate at any point during the offering process where financing details are discussed. A merchant who received an MCA offer in California without an APR disclosure, or with a disclosure designed to obscure rather than reveal the cost of capital, may report that omission to the DFPI as an independent violation.

The disclosure requirement seems like a small thing. It is not a small thing. An MCA funder that charges an effective annual rate of 350 percent relies on the merchant's inability to calculate that figure from the terms presented. The moment a statute requires the funder to state the number, the transaction changes character.

Specificity is the determinant of utility. A complaint that states "the MCA company acted unfairly" contributes nothing to an enforcement record. A complaint that states "on March 3, 2026, a representative of the company called my place of business seven times between 8:00 a.m. and 11:00 a.m., spoke to two employees, and stated that a court order had been issued requiring seizure of business assets, when no such order existed" contributes a documented instance of a specific violation on a specific date involving a specific misrepresentation.

The complaint should include the name of the MCA company and any affiliated entities. It should include the date the agreement was executed and the amount of the advance. It should include the daily or weekly payment amount and the total repayment obligation. It should include any communications, written or recorded, in which the funder made threats, misrepresented legal proceedings, contacted third parties, or engaged in conduct the merchant believes to be fraudulent or coercive.

Preserve the voicemails. Photograph the letters with their envelopes and postmarks. Print the emails. Screenshot the text messages. These artifacts are not incidental to the complaint. They are the complaint.

There is a line between predatory lending and criminal enterprise, and certain MCA operations have crossed it with such velocity that the distinction collapsed entirely. Joseph LaForte, who directed Par Funding, was sentenced in March 2025 to 15 and a half years in federal prison. The charges were RICO conspiracy, securities fraud, and tax evasion. The fraud loss was calculated at $404 million. The enterprise employed a person the government designated as an enforcer, who received a separate sentence of 11 and a half years for obstruction of justice and retaliation against witnesses.

When does a merchant's experience with an MCA company warrant a criminal complaint rather than a regulatory one? When the conduct involves threats of physical harm. When the funder fabricates the existence of court orders or law enforcement involvement. When the funder engages in identity theft, unauthorized ACH withdrawals after the merchant has revoked authorization, or the systematic destruction of business relationships through knowing misrepresentations to the merchant's clients.

A criminal complaint may be filed with local law enforcement, with the FBI's Internet Crime Complaint Center, or with the United States Attorney's office in the district where the conduct occurred. The Par Funding prosecution was conducted by the Eastern District of Pennsylvania. It demonstrated that federal prosecutors regard certain MCA operations as criminal organizations subject to RICO prosecution. That designation was not rhetorical.

It serves the merchant who files it, and it serves every merchant who will encounter the same funder in the subsequent months. Regulatory agencies identify enforcement targets through complaint volume. A funder that generates 300 complaints in a 12-month period occupies a different position in the enforcement queue than a funder that generates three. The merchant who files complaint number 47 does not know that complaint number 47 will be the one that moves the file from the monitoring category to the active investigation category. No one knows which complaint performs that function. This is precisely why each one matters.

That phrase describes the evidentiary foundation of the Yellowstone settlement. It also describes the only method by which a regulatory body operating with limited resources and competing enforcement priorities can identify which participants in the merchant cash advance industry have transitioned from aggressive commerce into systematic fraud.

A merchant who has settled an MCA dispute, who has extricated the business from a predatory agreement, who has endured the process and emerged with the enterprise intact, may feel that reporting the conduct is unnecessary. The matter is concluded. The cost of revisiting it, even through a complaint form, seems unjustified by any personal benefit.

We understand that calculation. We also understand that it is the calculation the funder depends upon.

Every merchant who settles and does not report allows the funder to approach the next merchant with an unblemished regulatory record. The funder's impunity is constructed from the silence of former victims, each of whom reasonably concluded that the individual act of reporting would change nothing. In isolation, that conclusion is defensible. In aggregation, it is the reason the funder still operates.

File with the state attorney general first. This is the body with the most direct enforcement authority over MCA misconduct following the legislative expansions of 2025 and 2026. File with the FTC second, through reportfraud.ftc.gov, to contribute to the federal aggregation database. If the conduct involves unauthorized ACH withdrawals, file a complaint with the CFPB. If the conduct involves threats of violence or fabricated legal process, file with local law enforcement and the FBI's IC3 portal. If you are in California, file with the DFPI.

And retain counsel. The complaint and the legal defense are not alternative strategies. They are concurrent instruments that operate on different timelines and through different institutional channels. The complaint builds the public enforcement record. The legal defense protects the individual business. Neither substitutes for the other.

We have assisted merchants in preparing complaints to state and federal agencies, in documenting patterns of conduct that individual merchants could not perceive from within their own isolated experience, and in coordinating the regulatory and litigation strategies that produce resolution. The process is not rapid. The process is, however, the process. And it begins with a merchant who decides that what happened to the business deserves a record.

A record is a permanent thing. The conduct it describes is not.