The New York Law that Could Eradicate Merchant Cash Advances
A PROPOSED NEW YORK SENATE BILL THAT MIGHT LEAD TO THE END OF MERCHANT CASH ADVANCES!
New York Senate Bill S1726 was introduced to the NY State Assembly during its 2025 to 2026 term. The proposed bill was sponsored by New York State Senator Samra Brouk and co-sponsored by five other NY Senators. The purpose of the proposed law is to stop predatory lending and is duly dubbed “End Loan Sharking Act” (ELSA.)
Has ELSA (S1726) been passed into law?
It is important to note that at the time of this writing (January 13, 2026), S1726 has not been signed into law. In fact, it has not passed the State Legislature at this point. The most recent legislative action was having S1726 “committed to the Rules Committee in the Senate” on June 13, 2025. Therefore, the bill is pending in the Senate Rules Committee at this time. NY Senate Bill S1726 is also referred to in the NY State Assembly as A4918.
Exploring S1726 further.
Let us explore S1726 further, because if it passes into law, it would arguably mean the end of the predatory Merchant Cash Advance! Despite funders and lenders claiming the financing arrangement is not loan but rather a purchase and sale agreement of future receivables, S1726 would end this argument and limit an MCA to a maximum 25 percent APR (Annual Percentage Rate).
S1726 seeks to cap interest on a Merchant Cash Advance at 25%.
While very few are paying attention, S1726 may actually make it to the Governor’s desk for signature and into law. Were S1726 to pass, the business of Merchant Cash Advances would be capped at New York State’s highest interest rate for commercial lending, 25%. To charge more, would mean the lender or funder are committing a felony pursuant to current NY usury laws.
What is NY Senate Bill S1726?
S1726 acts like a consumer protection bill aiming to cap interest rates and fees on certain financing arrangements, including Merchant Cash Advances, by extending New York’s usury laws to cover all “financing arrangements,” not just traditional loans. Additionally, S1726 will require providers and originators of Merchant Cash Advances to be licensed through New York’s DFS (Dept of Financial Services).
Fees and costs will be taken into account when calculating usury in NY.
In addition to the powers already cited, S1726 rules that any and all underwriting, origination and fees, are to be added to the calculation in determining whether the financing instrument or MCA is charging 25 percent or less interest. Therefore, S1726 takes the definition of interest and expands it to include fees and expenses.
S1726 and additional powers granted to the NY Attorney General
S1726 also proposes to provide additional powers to the New York State Attorney General to regulate Merchant Cash Advances and their contracts. The law is structured to plug loopholes and nuances and specifically spells out a Merchant Cash Advance.
