TLDR:

  • Virginia passed the Sales-Based Financing Providers Act in 2022 to regulate merchant cash advances
  • New York extracted a $1 billion settlement from the same predatory lenders. New Jersey got $27 million.
  • Virginia has done nothing - zero enforcement actions in three years
  • My case was dismissed on procedurals. No court has ruled on whether my agreement violates Virginia law.
  • When laws exist but no one enforces them, the legal system becomes a collection agency for loan sharks

The Six-Minute Signature

In June 2023, I signed an 18-page merchant cash advance agreement in six minutes and forty-three seconds. DocuSign timestamps everything.

Twenty-nine minutes later, the provider’s internal system classified me as “RP High Risk.” They never told me that.

Two years later, I’ve been through three courts, had a heart procedure, lost clients, and watched my case get dismissed on procedural technicalities. No Virginia court has ruled on whether the agreement I signed violates Virginia law.

Meanwhile, in New York, the same industry just paid $1 billion in settlements.

This is not a story about one bad contract. This is a story about what happens when states pass laws and then refuse to enforce them.

The $1 Billion Industry That Operates With Impunity

In January 2025, New York Attorney General Letitia James announced a $1 billion settlement against Yellowstone Capital - one of the largest merchant cash advance providers in the country. Interest rates documented in the case reached 820% per year.

Over 18,000 small businesses were affected. More than 1,100 judgments against small business owners were vacated by the courts.

But Yellowstone wasn’t the worst. In February 2024, a federal court entered a $77 million judgment against Richmond Capital for the same predatory practices. Their interest rates approached 4,000% - almost 250 times the legal rate.

The FTC has banned multiple operators from the industry entirely. Their court filings documented what these companies really are.

This isn’t a few bad actors. This is an industry.

Loan Sharks in Suits: The Violence Behind the Paperwork

In Brazil, they call them agiotas - loan sharks who lend money at predatory rates and collect through intimidation and violence. In America, we have something more sophisticated. Or so we thought.

The FTC and New York Attorney General cases revealed that MCA companies don’t just use lawyers. They use threats. The court filings document collectors telling merchants:

“I am going to make you bleed.” - Threat made at a merchant’s synagogue

“Be thankful you’re not in New York, because your family would find you floating in the Hudson.”

“I know where you live. I know where your mother lives.”

In one case, a collector threatened to “break his jaw” if a merchant didn’t pay. In another, they threatened to destroy a merchant’s reputation by falsely accusing him of being a child molester.

But the industry figured out they don’t need violence. They have something better: the legal system itself.

Think about it. A traditional loan shark breaks your legs if you don’t pay. That’s illegal. They go to prison.

An MCA provider does something smarter:

  • They call it “not a loan” to avoid usury laws
  • They make you sign a personal guarantee
  • They include a confession of judgment (a pre-signed admission that you owe them)
  • They file a UCC lien on your business
  • When you can’t pay, they don’t send enforcers - they send lawyers
  • The courts collect for them. Legally. With the full power of the state.

They’ve turned the justice system into their collection agency.

Before New York banned the practice in 2019, MCA companies won more than 11,000 judgments in New York courts in a single year - many based on confessions of judgment that borrowers didn’t even know they had signed.

A Tale of Two States

The States That Fought Back

New York didn’t wait for victims to come forward. Attorney General Letitia James launched three major enforcement actions in two years:

Over $534 million in debt was cancelled. 18,000+ businesses got relief. 1,100+ predatory judgments were vacated in Rockland County alone.

New Jersey wasn’t far behind. Attorney General Platkin secured a $27.375 million settlement against the same Yellowstone Capital in January 2023 - two years before New York’s billion-dollar action.

These states saw predatory lending. They acted. They won.

Virginia’s Silence

Virginia passed the Sales-Based Financing Providers Act in 2022. The law requires registration, mandates specific disclosures, prohibits confession of judgment clauses, and says violations “shall be unenforceable.”

Documented Virginia AG enforcement actions against MCA providers since 2022: Zero.

The same companies that New York and New Jersey prosecuted operated in Virginia. The same predatory practices. The same 820% interest rates. The same threats.

But Virginia’s Attorney General Jason Miyares has filed no lawsuits. Issued no settlements. Taken no action.

I didn’t just wait for Virginia to act. I filed a complaint with Attorney General Miyares’ office documenting the violations in my agreement. I have his office’s response letter. They declined to pursue the matter.

Let that sink in. A Virginia business owner brings documented violations of Virginia law directly to the Attorney General - violations visible in the contract itself, violations of a law his office is supposed to enforce - and nothing. No investigation. No action. Not even a referral.

New York’s Letitia James didn’t wait for perfect cases. She investigated an industry, found systematic violations, and extracted a billion dollars for small businesses. Jason Miyares received a complaint with the violations spelled out and did nothing.

When I raised three documented violations of Virginia law in my own case - violations visible in the contract itself - no court addressed them. Trial court ruled for the provider without addressing the statutory arguments. Appeals court dismissed on a deadline I missed during a cardiac ablation procedure. Supreme Court dismissed on a technicality about how I phrased my assignments of error.

Three courts. Zero rulings on whether the agreement violates Virginia law.

New York fought back. New Jersey fought back. Virginia passed a law and did nothing.

The Veto That Protected Predators

It gets worse.

In 2025, the Virginia legislature tried to fix this. Senate Bill 1252 would have closed the loopholes that let MCA providers evade usury laws. It explicitly targeted “devices, subterfuges, or pretenses” used to disguise loans as something else - exactly what happened to me.

The bill passed the Senate 38-0. Unanimous. Republicans and Democrats agreed: these practices needed to stop.

Governor Glenn Youngkin vetoed it.

His reasoning? The bill was too “vague and expansive” and might capture “legitimate financial activities” and hinder “access to credit.”

Let me translate: the Governor decided that protecting the MCA industry’s ability to charge 820% interest rates was more important than protecting Virginia small businesses from predatory lending.

This wasn’t bad luck. This wasn’t a gap in the law. This was a policy choice. The legislature saw the problem, passed a fix with unanimous support, and the Governor killed it.

I’m not just a victim of a predatory lender. I’m a victim of that veto.

How the MCA Debt Trap Works

Here’s what they tell you:

  • “This isn’t a loan - it’s a purchase of your future receivables”
  • “Payments flex with your sales - slow month, lower payment”
  • “No credit check required”
  • “Fast approval - money in your account tomorrow”
  • “No collateral needed”

Here’s the reality:

The “not a loan” claim lets them avoid usury laws. Traditional lenders can’t charge 100%+ interest. MCA providers claim they’re not lenders, so the caps don’t apply.

The “flexible payments” promise disappears when you read the fine print. My agreement had fixed weekly payments of over two thousand dollars - regardless of sales. And if I defaulted? I’d personally signed an “irrevocable, absolute, and unconditional” guarantee for the full amount.

The “no credit check” pitch means they don’t care if you can afford it. They’ve already calculated that between the personal guarantee, the confession of judgment clause, and the UCC lien on your business, they’ll get their money one way or another.

The numbers in my case:

  • I received: roughly thirty thousand dollars
  • Total repayment: nearly fifty thousand dollars
  • Weekly payment: over two thousand dollars (fixed)
  • Effective APR: Over 100%

Virginia’s law defines what “sales-based financing” means: payments must “increase or decrease according to the volume of sales.”

I argue my agreement violates the law in three ways:

1. The Personal Guarantee Contradicts the Definition

Virginia Code § 6.2-2228 says sales-based financing means payments vary with sales. My agreement includes an unconditional personal guarantee for the full amount regardless of sales. You can’t have both. These concepts are mutually exclusive.

2. The Modified Disclosure Form

Virginia regulations prohibit ANY modifications to the mandatory disclosure form. The provider added an extra paragraph. That appears to be a strict liability violation.

3. The Impossible Math

The disclosure says fees are “deducted at disbursement” AND “included in Finance Charge.” Both cannot be true. This makes the actual cost indeterminable - exactly what disclosure laws are supposed to prevent.

The law says violations “shall be unenforceable.” Mandatory language.

Two Years, Three Courts, Zero Rulings on the Merits

The MCA provider sued me for the balance. Here’s what happened:

Trial Court (January 2025): Ruled for the provider. The judge didn’t address the statutory arguments in the final order.

Court of Appeals (June-July 2025): I missed my brief deadline during a medical crisis - I had a cardiac ablation procedure on June 23. The court dismissed my appeal three days later. I filed for reinstatement the next day, still recovering. Denied.

Supreme Court (December 2025): Dismissed on a technicality. My assignments of error addressed the wrong court level.

Total courts that ruled on whether the agreement violates Virginia law: Zero.

The Federal Vacuum

The states are supposed to be the last line of defense because the federal government has largely abdicated.

The FTC has taken action against the worst actors - the ones who threaten to break jaws and make people “bleed.” But their enforcement is limited. They can ban individual operators. They can’t regulate an industry.

The CFPB has been ambivalent. In February 2025, a federal court ruled that MCAs are credit under the Equal Credit Opportunity Act. But by November 2025, the CFPB proposed excluding MCAs from its small business lending data collection rule entirely.

The agency that should be protecting small businesses is walking away.

Add the Trump administration’s regulatory freeze, and federal oversight is effectively frozen. States are the only game in town.

New York gets it. New Jersey gets it. Virginia passed a law and went home.

The Predators Feeding on Predators

Here’s something nobody tells you: there’s an entire secondary industry of companies that promise to “help” you get out of MCA debt.

Google “MCA debt relief” or “merchant cash advance help.” You’ll find dozens of companies promising to negotiate with your MCA provider, restructure your debt, or make it all go away.

I engaged services to help me navigate this. Between debt relief services and legal fees, I paid an amount that rivaled the original funds I received. They didn’t solve anything.

The ecosystem is designed to extract money from desperate small business owners at every stage:

  1. Stage 1: You need money. MCA provider takes their cut.
  2. Stage 2: You can’t pay. Debt relief takes their cut.
  3. Stage 3: You get sued. Lawyers take their cut.
  4. Stage 4: You lose. Collection agencies take their cut.

Everyone gets paid except you.

What You Should Know Before Taking a Merchant Cash Advance

If you’re still considering an MCA, here’s what I wish someone had told me:

Red Flags to Watch For

  • “This is not a loan” - This phrase exists to avoid consumer protection laws
  • Personal guarantee - If they need your personal guarantee, it’s not really “sales-based”
  • Confession of judgment clause - Lets them get a judgment against you without trial
  • Daily or weekly ACH debits - Fixed payments, regardless of sales
  • Reconciliation only if no default - The “flexible payment” promise disappears the moment you have trouble
  • Pressure to sign quickly - I signed in six minutes. Don’t.

Questions to Ask

  1. What is the effective APR? (They won’t want to tell you)
  2. Can payments actually decrease if my sales drop?
  3. What triggers a default?
  4. What happens to the “flexible payment” structure if I default?
  5. Why do you need a personal guarantee if this is based on business revenue?

Alternatives to Consider

  • SBA microloans
  • Community Development Financial Institutions (CDFIs)
  • Revenue-based financing from reputable providers (with transparent terms)
  • Negotiating with existing creditors
  • Business credit cards (yes, even at 24% APR - still better than 100%+)

What You Can Do

If you’re a Virginia small business owner - or if you care about whether Virginia enforces its own laws - here’s what you can do:

File Complaints

Demand Enforcement

Virginia passed a law in 2022. It’s been three years. Zero enforcement actions.

New York’s Attorney General Letitia James didn’t wait for perfect cases. She investigated an industry, found systematic violations, and took action.

Virginia’s Attorney General could do the same. The question is whether anyone will demand it.

Demand Legislative Action

Governor Youngkin vetoed SB 1252 - the bill that would have closed the loopholes protecting predatory lenders. The bill passed the Senate 38-0. Unanimous bipartisan support.

Contact your state legislators. Ask them:

  • Why did Governor Youngkin veto SB 1252?
  • Will you override the veto or reintroduce the bill?
  • What are you doing to protect Virginia small businesses from 820% interest rates?

Find your Virginia legislators: Virginia General Assembly

Share This Story

Other Virginia small business owners are signing these agreements right now, thinking they’re getting “sales-based financing” with “flexible payments.” They’re not. They’re getting debt traps with 100%+ effective interest rates and personal guarantees that will follow them for years.

The MCA industry counts on silence. They count on shame. They count on victims who close their businesses and move on without fighting back.

Don’t make it easy for them.

Resources

State Enforcement Actions:

Federal Actions:

Virginia Law:

Investigative Journalism:

Joel Zamboni is a technology consultant based in Northern Virginia. He writes about technology, philosophy, and - as it turns out - predatory lending and institutional failure.

Keywords: merchant cash advance, MCA, business cash advance, fast business funding, working capital loan, no credit check business loan, small business financing, predatory lending, sales-based financing, Virginia small business, Virginia Attorney General, consumer protection