MCA Debt Collection: 6 Collection Tools and the Rules That Limit Them

Commercial debt collection is less regulated than consumer collection and more regulated than most funders' collection departments imply. The difference lies in where the limits come from. They are not collected in one statute with a familiar acronym. They are scattered across the Uniform Commercial Code, the procedural rules for judgments, the payment networks, and the orders courts and regulators have entered against particular funders.

Six tools account for most MCA debt collection. Each has a rule that limits it, and the rule is rarely the one the owner first looks for.

1. The Telephone, the Letter, and the Call to the Guarantor

The first limit owners reach for is the Fair Debt Collection Practices Act, and it does not apply. The statute defines a "debt" as an obligation of a consumer arising from a transaction "primarily for personal, family, or household purposes" (15 U.S.C. 1692a(5)). A merchant cash advance is a business transaction, and calling the individual guarantor does not convert it into a consumer one.

That exclusion is not a license. In January 2022 the FTC permanently barred RAM Capital Funding and its owner from the merchant cash advance and debt collection businesses, in a case concerning deceptive and illegal seizures from small businesses, and in February 2026 the First Department affirmed findings of repeated fraud against Richmond Capital Group and related parties in the Attorney General's case. Those were orders against specific respondents. They show that the absence of the FDCPA does not leave collection conduct unreviewable, only that the review arrives through other doors.

Keep every message. The rule that limits a call is often identified only after someone has read the call.

2. The Daily Debit That Continues After Default

A funder with a debit authorization will often keep presenting debits after a merchant falls behind. The limits here belong to the agreement, the bank, and in some states the statute book. Texas, for commercial sales-based financing contracts covered by its new Finance Code chapter 398, restricts automatic debits of a deposit account unless the provider holds a validly perfected, first-priority security interest of the kind the statute describes, and rules adopted in July 2026 elaborate on the requirement.

The payment network has its own vocabulary, and owners should learn it before using it. Nacha distinguishes a return for insufficient funds (R01) from returns asserting that a debit was not authorized (R10) or was inconsistent with the authorization (R11), and it separately provides a nonconsumer return code, R29, with a window of two banking days. None of those codes decides whether the debt is owed. A merchant who labels an authorized debit as unauthorized has not found a defense; the merchant has created a problem, which is the sort of thing a lawyer should hear about before the bank does.

3. The Notice to the Merchant's Customers

This is the tool that most alarms owners and is most often misunderstood, by both sides. It rests on Article 9 of the UCC. Under section 9-607(a), a secured party "if so agreed, and in any event after default," may notify an account debtor, meaning the merchant's customer, to make payment to the secured party. Section 9-406(a) supplies the consequence: once the customer receives an authenticated notice that the amount has been assigned and payment is to go to the assignee, the customer "may not discharge the obligation by paying the assignor."

So the customer who ignores a proper notice and keeps paying the merchant may end up paying twice, and the owner who tells customers to disregard the letter may be exposing them to exactly that result. The limits run the other way as well, and they are specific. Section 9-406(c) lets the customer ask for reasonable proof of the assignment, and if the funder does not seasonably furnish it, the customer may keep paying the merchant even after notice. Section 9-607(c) requires a secured party that undertakes to collect from account debtors, and has recourse against the merchant or a guarantor, to "proceed in a commercially reasonable manner." And the whole structure presupposes what it does not prove: a valid, attached security interest in the receivables, a default under the agreement, and a notice that reasonably identifies what was assigned.

Each of those is a factual question (whether the agreement granted a security interest in the particular receivables named, whether the default the letter recites actually occurred under the agreement's own definitions, whether the funder that sent the notice is the party that holds the interest or a servicer, an assignee, or a successor whose chain of title has never been shown to anyone), and a letter that assumes all of them does not establish any of them.

The uniform text uses "authenticated"; state enactments vary in wording, and New York's own version should be read for a New York dispute.

4. The Lawsuit or the Confession

Suit is the ordinary tool, and the ordinary limits apply: the funder must prove its claim, and the merchant may raise every defense the agreement and the law allow. The confession of judgment is the extraordinary tool, and it is narrower than it was. New York's CPLR 3218 now confines filing to the county where the defendant resided when it signed or resides when the affidavit is filed. In Texas, section 398.055 declares a covered commercial sales-based financing contract that contains a confession of judgment provision "void and unenforceable," though the chapter gives no private right of action.

5. The Restraint and the Levy After Judgment

A judgment opens the door to the tools that owners fear most, and those tools are the most tightly written. A restraining notice under CPLR 5222 lasts one year or until the judgment is satisfied or vacated, and a bank that withholds twice the amount due is not restrained as to the rest. An execution under CPLR 5230 goes to a sheriff and is returnable within sixty days, extendable in writing. A levy under CPLR 5232 becomes void after ninety days except as to property already transferred or paid, subject to extension.

And for an individual guarantor the limits tighten further. CPLR 5222-a requires an exemption notice and claim forms to be served with any restraining notice affecting a natural person's bank account, and a restraining notice served without them is void, with the bank directed not to restrain the account.

6. The Collector Who Is Not the Funder

Some files move to outside collectors or to buyers. The limits then depend on who that party is, what license if any its jurisdiction requires for commercial collection, and whether the assignment is documented. But the question to ask first is the simplest one: who holds the claim, and on what paper.

The Limit That Belongs to the Owner

Delancey Street negotiates business debt and is a settlement company, not a law firm, so it cannot challenge a notice, move against a restraint, or advise on bank return codes. Its first review costs nothing, is confidential, and runs in parallel with the licensed attorneys it coordinates with when collection turns into a legal question. An owner whose customers have received notices, whose account is restrained, or whose guarantor has been served should see a lawyer first. An owner facing calls and debits without a judgment may reasonably look at a negotiated resolution. Nothing in either route obliges a funder to accept less than it is owed, and nothing in collection law obliges an owner to accept more than the documents support.