California has significantly expanded the Rosenthal Fair Debt Collection Practices Act (RFDCPA) to cover certain commercial debts, including qualifying merchant cash advance transactions. Governor Newsom signed SB 1286, extending consumer-style protections to commercial debt collection for certain debts sold or assigned on or after July 1, 2025.
As a law firm that represents merchant cash advance (MCA) companies in commercial litigation nationwide and in Ohio, we believe MCA providers need to understand these changes, as they may signal a broader shift in regulatory oversight of commercial financing.
Key Changes Affecting MCA Companies:
1. Scope of Coverage
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- Applies to “covered commercial debt” under $500,000
- Includes transactions with commercial financing providers
- Covers both direct borrowers and personal guarantors
- Applies to transactions entered into, renewed, sold, or assigned after July 1, 2025
2. New Restrictions on Collection Practices
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- Prohibits harassment, false statements, and threats
- Restricts communication methods and frequency
- Requires specific disclosures and documentation
- Mandates responses to identity theft claim
3. Impact on MCA Operations
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- Affects collection practices for defaulted MCA transactions
- Creates new compliance obligations for communications with merchants
- Requires updates to documentation and record-keeping
- May increase operational costs and legal exposure
4. Personal Guarantor Protections
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- Extends protections to individual guarantors of business obligations
- Creates new considerations for enforcing personal guarantees
- May affect guarantee documentation requirements
While Durst Kerridge does not handle collections matters, these amendments highlight the increasing regulatory scrutiny of commercial financing. MCA companies operating in California should review their practices and documentation to ensure compliance with the expanded RFDCPA.
The bill text and redline changes to the RFDCPA can be viewed here: https://legiscan.com/CA/text/SB1286/id/2988067.
About Durst Kerridge
Durst Kerridge maintains an extensive commercial and complex civil litigation practice throughout Ohio and nationwide, with considerable representing merchant cash advance companies. To schedule a consultation, call (513) 621-4999 or reach out to Alex J. Durst or Paul R. Kerridge.
