Cloudsquare lending platform now integrated with Forward Financing
July 28, 2025Los Angeles, CA – July 28, 2025 – Cloudsquare, the leading provider of Salesforce-powered merchant cash advance (MCA) solutions, has announced the addition of Forward Financing to its expanding library of lender connections, strengthening its position as the most advanced lending platform on the market.
This new lender API module enables brokers to submit applications, receive offers, and track deal statuses all from within the Cloudsquare Broker platform, eliminating friction and accelerating decision-making in one of the most competitive areas of alternative finance.
Key Features of the Forward Financing Module:
· Submission Status Tracking: Stay updated in real time with polling-based updates, no more inbox-hunting or status guessing.
· Offer Generation: Offers are delivered directly into Cloudsquare, streamlining your workflow.
· Declined Details: Receive clear reasons for declines, allowing teams to adjust and resubmit quickly.
· Document Upload: Upload and manage application files using a dedicated endpoint.
· Industry Picklists: Keep submissions clean and categorized with discrete industry values.
This enhancement is part of Cloudsquare’s ongoing mission to offer the most powerful and scalable lending platform in the industry, giving brokers access to more funders, faster automation, and an unmatched ability to scale.
Explore more about this connection here
About Cloudsquare
Cloudsquare is the most powerful end-to-end lending platform built natively on Salesforce. Designed to automate and streamline every stage of the lending lifecycle—from lead to funding to servicing—our platform helps financial organizations move faster, scale smarter, and close more deals with confidence. Trusted by top lenders and rated #1 on the Salesforce AppExchange, Cloudsquare combines AI-powered automation with unmatched configurability to transform how lending teams operate.
For media inquiries, please contact:
Cloudsquare Marketing Email: marketing@cloudsquare.io
Heron Raises $16M Series A to Bring the AI Revolution from Silicon Valley to American Businesses
July 15, 2025Backed by Insight Partners, Heron automates document-heavy workflows in insurance, lending, and finance — bringing reliable AI to businesses and allowing humans to focus on complex tasks
Heron, a startup using AI to automate workflows in business lending, equipment finance, and insurance, has raised $16 million in Series A funding led by global software investor Insight Partners, with participation from existing investors Y-Combinator, BoxGroup and Flex Capital. The Series A will support Heron’s next phase of expansion, helping the company scale its AI-driven solutions to more segments.
While many AI startups target developers or other technologists, Heron is at the frontier of deploying AI into real-life business operations in traditional industries like lending, banking, and insurance. Heron’s mission is to free up humans to focus on judgment-based work and complex edge cases while software handles the repetitive, monotonous work. Heron focuses on serving companies without large engineering departments, enabling more businesses to reap the rewards of the rapid advances in AI.
Heron’s system can automate time-consuming manual workflows end-to-end, completing tasks automatically or flagging edge cases for human review. That reliability has led many customers to fully offload entire processes to Heron — freeing up their teams to focus on critical work.
For example, SMB lenders employ teams of underwriting analysts that spend hours on repetitive intake work — scanning email inboxes for submissions, downloading and renaming files, checking packet completeness, manually entering data into CRMs, and running basic eligibility checks. Using Heron, these hours of work can be accomplished in seconds, and with higher accuracy, full auditability, and no manual overhead.
This focus on reliability and solving problems end-to-end has attracted more than 150+ customers to Heron, including insurance carriers and FDIC-insured banks, and enabled the company to process over 350,000 documents per week. One lender cut submission-to-decision time by 60%, while an insurer used Heron to automate over 80% of its inbound submission triage.
“Anyone who tells you they use AI to automate work with 100% accuracy is probably lying to you. Instead of chasing accuracy, we focus on clearly understanding where our software is successful and where humans still need to review. This allows customers to use Heron in situations where millions of dollars are at stake and reap the rewards of the AI revolution in a reliable fashion that drives business outcomes,” said Johannes Jaeckle, co-founder and CEO of Heron
Founded in 2020 by Dom Kwok, Jamie Parker, and Johannes Jaeckle, Heron launched out of Y-Combinator’s Summer 2020 batch, initially building products for financial services companies with earlier generations of AI in the pre-ChatGPT era. The company eventually landed on a core insight: traditional industries weren’t waiting for flashy new tools — they were drowning in unstructured data, and paying millions of dollars a year to deal with it. In 2023, as LLMs matured, Heron pivoted to focus on AI document workflow automation. With minimal outside capital, the team tripled annualized revenue in 2024 and has continued to expand its presence in insurance and specialty finance this year.
“Heron’s AI models with vertical specific context automate the end-to-end data processing workflow, enabling automation and driving competitive differentiation in industries where speed to decisioning is of the essence,” said Philine Huizing, Managing Director at Insight Partners. “Heron’s founding team—Johannes, Jamie, and Dom—are an experienced trio that has proven their ability to adapt and execute. We’re thrilled to partner with them and the entire Heron team as they continue to scale up.”
The new capital will be used to scale Heron’s presence in insurance, equipment finance and SMB lending, while expanding into adjacent verticals that have shown demand for Heron’s solution. The company plans to grow its engineering and go-to-market teams in New York and London, and continues to invest in internal AI Tooling to enable a small team to serve more and more customers.
“We’ve proven we can win in one segment,” said Jaeckle. “Now we’re going workflow by workflow, industry by industry — giving people hours back in their day by eliminating time-intensive manual work.”
About Heron
Heron automates document-based workflows across industries like lending, insurance, and equipment finance. By turning unstructured documents into structured, actionable data, Heron helps companies process information faster, more accurately, and with less manual effort. Heron is based in New York and London, with the team bringing a wealth of experience from top-tier tech companies including Facebook, Spotify, N26, Revolut and Taptap Send.
Learn more at herondata.io
About Insight Partners
Insight Partners is a global software investor partnering with high-growth technology, software, and Internet startup and ScaleUp companies that are driving transformative change in their industries. As of December 31, 2024, the firm has over $90B in regulatory assets under management. Insight Partners has invested in more than 800 companies worldwide and has seen over 55 portfolio companies achieve an IPO. Headquartered in New York City, Insight has offices in London, Tel Aviv, and the Bay Area. Insight’s mission is to find, fund, and work successfully with visionary executives, providing them with tailored, hands-on software expertise along their growth journey, from their first investment to IPO. For more information on Insight and all its investments, visit insightpartners.com or follow us on X @insightpartners.
Idea Financial Hits Milestone, Will Still Fund in Texas
July 9, 2025
Idea Financial, a nationwide small business lender, recently surpassed $1 billion in funding since inception.
“This is a historic milestone,” said Larry Bassuk, president and co-founder of Idea Financial. “Only a few years ago, this company was just a concept with potential. Like many of the small businesses we serve, we started with confidence, grit, and the unyielding belief that we would succeed. Today, I can proudly announce that Idea Financial’s impact on the small business lending community is significant and positive. This moment belongs to our team, past and present, whose dedication has gotten us here.”
Because the company does term loans and lines of credit, it is not impacted by the recently-passed sales-based financing legislation in Texas and will continue to fund there like normal.
For background, Bassuk and Idea Financial CEO Justin Leto, actually started out in the legal profession as attorneys before taking a risk in small business lending. When AltFinanceDaily first interviewed the duo in 2019, they said, “We’re not from the finance space, we’re not from the alternative lending space either, we came at this opportunity with a different approach.”
At that time, Idea had only funded $50 million since inception. Much of Idea’s growth since then can be attributed to their broker business, which it is still growing.
“Brokers and referral partners are critical to Idea’s success,” the company said. “While our borrowers are our clients, we also consider brokers and referral partners as clients by our team. We value their business and have made it a focus to develop close, mutually beneficial relationships with them.”
“We have been so fortunate to work with such a talented team, all of whom have contributed to the incredible growth of Idea,” said Leto. “We identified a problem with small business funding when we embarked on this journey, and we are so proud to have played a role in providing the solution that has fueled so many Main Street success stories.”
The Battle Against MCA in Texas
June 12, 2025David Roitblat is the founder and CEO of Better Accounting Solutions, an accounting firm based in New York City, and a leading authority in specialized accounting for merchant cash advance companies.To connect with David or schedule a call about working with Better Accounting Solutions, email david@betteraccountingsolutions.com.
Texas, a state associated with limited government intervention and freedom of business to operate and succeed in a capitalist society, stands at a crossroads.
Governor Greg Abbott has until June 22nd to decide whether to sign House Bill 700 into law—a decision that could fundamentally reshape how small businesses access capital in the Lone Star State. If he signs it, or simply lets the deadline pass without action, this sweeping legislation will take effect on September 1, 2025. The action will potentially cut off vital funding sources for thousands of Texas entrepreneurs, in a direct assault on the merchant cash advance industry that has been a lifeline for the people of his state.
The stakes couldn’t be higher. While supporters frame HB 700 as consumer protection, this bill targets sales-based financing—financial tools that have become lifelines for small businesses shut out of traditional bank lending.
Small business owners know the frustration of walking into a bank and walking out empty-handed all too well. Traditional lenders have tightened their belts, especially for newer businesses, minority-owned enterprises, and companies in industries deemed “risky.” When a restaurant owner needs quick capital to fix a broken freezer, or a contractor requires funds to purchase materials for a big job, they can’t wait weeks for a bank’s approval process. They need solutions now.
That’s where alternatives come in. Revenue-based financing provides capital based on future sales, not credit scores or lengthy financial histories. Yes, they can be more expensive than bank loans—but they’re also available when banks say no.
This financing drives business growth, job creation, and the health of Main Street. When small businesses can access capital quickly, they expand, hire employees, and strengthen their communities.
HB 700 goes far beyond simple disclosure requirements. While transparency is important—and most responsible providers already provide clear terms—this bill creates a regulatory maze that could price many providers out of the Texas market entirely.
The bill imposes sweeping new requirements that will fundamentally change how sales-based financing companies operate in Texas. Companies providing commercial sales-based financing must register with the Office of Consumer Credit Commissioner by December 31, 2026, including both direct providers and brokers, with mandatory annual renewals and fees.
For any financing under $1 million, sales-based financing providers must provide extensive disclosures covering everything from total financing amounts and disbursement details to payment schedules, additional fees, prepayment penalties, and even broker compensation arrangements. The operational restrictions go much deeper, voiding confession of judgment clauses entirely and requiring companies to obtain recipient signatures on all disclosures before finalizing any transaction.
Perhaps most problematic is the prohibition on automatic debiting of recipient accounts unless companies hold a “validly perfected first-priority security interest”—a legal standard that’s nearly impossible to meet in practice and effectively kills the streamlined payment processes that make revenue-based financing work for the funders, and by extension, the merchants.
The Finance Commission of Texas gains broad authority to identify and prohibit “unfair, deceptive, or abusive” practices, though interestingly, they cannot set maximum interest rates or fees. Violations carry steep civil penalties of $10,000 each, and the law applies to any provider offering services to Texas recipients via the Internet, regardless of where the company is physically located. These aren’t minor regulatory adjustments—they represent a complete overhaul that could drive legitimate capital providers out of the Texas market entirely.
This isn’t just bureaucratic red tape. It’s a fundamental misunderstanding of how modern business financing works. Revenue-based financing depends on streamlined payment processes tied to daily sales. Without this mechanism, the entire business model becomes unworkable.
If HB 700 becomes law, the consequences will ripple through Texas’s economy. Small businesses already struggling with inflation, labor shortages, and supply chain disruptions will lose access to flexible financing options. Rural businesses, minority-owned enterprises, and startups will be hit hardest—exactly the businesses Texas should be supporting.
The irony is stark. Texas has built its reputation as a business-friendly state, attracting companies fleeing overregulation in other states. HB 700 threatens to undermine that competitive advantage by making it harder for small businesses to access the capital they need to grow.
The voices of actual small business owners have been largely absent from this debate. Many don’t even know this legislation exists, despite its potential impact on their operations. Those who are aware express frustration that lawmakers are making decisions about their financing options without understanding their real-world needs.
Governor Abbott faces a clear choice. He can sign legislation that will likely drive responsible funders out of Texas, or he can recognize that small businesses need access to diverse financing options.
The goal should be protecting businesses from truly predatory practices while preserving their ability to access capital when traditional banks won’t help. That requires nuanced policy, not broad restrictions that treat all alternative finance providers as predators.
The battle against MCA regulation in Texas isn’t really about merchant cash advances—it’s about whether Texas will remain a place where small businesses can find the capital they need to thrive. Governor Abbott’s decision will determine not just the fate of HB 700, but the future of small business financing in Texas.
The countdown has begun. Texas small businesses are watching and waiting.
NMEF Announces Strategic Joint Venture With Oaktree to Accelerate Growth in FMV Leasing Platform
June 10, 2025JUNE 10, 2025, NORWALK, CT – North Mill Equipment Finance, LLC (“NMEF” or “North Mill”), a leading commercial equipment lessor located in Norwalk, Connecticut, today announced a new partnership with funds managed by Oaktree Capital Management, L.P. (“Oaktree”), a global investment firm with deep expertise in credit and asset-backed finance. The collaboration launches a joint venture designed to grow NMEF’s fair market value (FMV) equipment leasing platform, alongside Oaktree’s investment in the venture.
The combined capital commitment from Oaktree and NMEF will support the funding of $350 million in FMV equipment lease originations initially, with additional capital capacity available to continue funding the venture.
This partnership combines NMEF’s established origination network and servicing capabilities in the equipment leasing space with Oaktree’s institutional capital base and investment team. This new extension of NMEF’s platform will focus on FMV leases across a wide range of essential-use equipment including construction, medical, logistics, and manufacturing assets.
“This marks a major step forward in our efforts to deliver flexible, value-driven leasing solutions to the market,” said David Lee, Chairman and CEO of North Mill Equipment Finance. “We’re excited to work with a partner like Oaktree who shares our long-term vision and brings deep understanding of asset-backed investing.”
Under the terms of the agreement, NMEF will originate and service all transactions through their national network of independent originators and vendors. North Mill will also invest alongside Oaktree in the venture.
“We’ve built a strong and scalable platform, and this partnership allows us to bring it to a broader investor base,” said Lee Bergeron, Senior Vice President of Structured Products at NMEF. “Together with Oaktree, we’re well-positioned to meet growing demand for flexible equipment financing solutions.”
Paul Cheslock, Vice President of Structured Products at NMEF, added, “This collaboration gives us the capacity to do more of what we do best—helping businesses acquire the equipment they need with creative and sustainable financing options.”
From Oaktree’s perspective, the partnership is a natural fit with their investment strategy. “We’re pleased to partner with North Mill to support the next phase of growth for their FMV platform and bring long-term value to their customers,” said Rana Mitra, Managing Director at Oaktree. “We are excited to partner with an extremely high-quality originator and servicer like North Mill as we continue generating attractive asset-backed finance exposures for our investors,” said Brendan Beer, Portfolio Manager for Oaktree’s Asset-Backed Finance and Structured Credit strategy.
About North Mill Equipment Finance (NMEF)
NMEF is a national, premier lender who works with third-party referral (TPR) sources to finance small to mid-ticket equipment commercial leases and loans ranging from $15,000 to $3,000,000 and up to $5,000,000 for investment grade opportunities. NMEF accepts A – C credit qualities and finances transactions for many asset categories including but not limited to medical, construction, franchise, technology, vocational, manufacturing, renovation, janitorial and material handling equipment. NMEF is majority owned by an affiliate of InterVest Capital Partners. The company’s headquarters are in Norwalk, CT, with regional offices in Irvine, CA, Voorhees NJ, and Murray, UT. For more information, visit www.nmef.com. One of NMEF’s controlled affiliates, BriteCap Financial LLC, is a leading non-bank lender providing small businesses with fast, convenient financing alternatives such as working capital loans since 2003 from its main office in Las Vegas, NV. For more information, visit www.britecap.com.
About Oaktree
Oaktree is a leader among global investment managers specializing in alternative investments, with $203 billion in assets under management as of March 31, 2025. The firm emphasizes an opportunistic, value-oriented, and risk-controlled approach to investments in credit, equity, and real estate. The firm has more than 1,200 employees and offices in 25 cities worldwide. For additional information, please visit www.oaktreecapital.com.
QuickBooks Capital Continues to Grow
June 8, 2025Intuit’s small business loan program, QuickBooks Capital, is continuing to grow. It generated $35M more revenue in FY Q3 2025 than it did over the same period last year, according to the company’s latest earnings report. Considering Intuit’s total quarterly revenue was $7.8B, its funding business, a small percentage of the total in comparison, is only mentioned in detailed on occasion.
QuickBooks Capital benefits from having a funding button in the widely used QuickBooks Capital software, a feature so effective that they were effectively the sixth largest online small business lender that AltFinanceDaily tracked in 2024. Its two main products are a term loan and a line of credit.
North Dakota Law Regulates “Alternative Financing” as a “Loan”
May 30, 2025The state legislature in North Dakota recently passed House Bill 1127. This bill made a simple amendment to a 1970s-era law called the Money Brokers Act (“MBA”).
Despite its name, the MBA is not limited to brokers. It is the primary law regulating consumer and commercial lending in North Dakota. It applies to any person engaged in the act of arranging or providing loans. Such persons are called “money brokers” in the MBA.
This amendment adds a two-sentence definition of the word “loan”. When this amendment takes effect, the MBA will define “loan” as follows:
“Loan” means a contract by which one delivers a sum of money to another and the latter agrees to return at a future time a sum equivalent to that which the person borrowed. This includes alternative financing products as identified by the commissioner through the issuance of an order.
Is this is a big deal? Yes. Here’s why.
Until now, the MBA has always defined the term “money brokering” to include the act of providing “loans” but has never defined the term “loan”. As a result, forms of business financing that are not typically considered loans – such as factoring or revenue-based financing (also sometimes called “merchant cash advance”) would not be subject to the MBA. Adding this new definition of “loan” to the MBA creates significant risk that alternative forms of business financing will become subject to the regulatory burdens impose by MBA.
Those burdens are significant. The MBA requires money brokers to obtain a license from the North Dakota Department of Financial Institutions (“DFI”). The MBA also caps the maximum amount of fees and charges that can be impose by a money broker at a rate of 36% per year.
With this new definition, the North Dakota Department of Financial Institutions (“DFI”) can now issue an order designating any financing product as a loan subject to the MBA. Does the DFI intend to regulate revenue-based financing? That’s unknown at this time. The Commissioner of Financial Institutions provided a memorandum to the legislature stating that the new definition would allow DFI to ensure that North Dakota’s citizens “will have access to new lending products, without sacrificing safeguards”. It is possible that the Commissioner is intending to focus on consumer financing products and not commercial financing. Even if that’s the case, that’s small comfort.
There is still a problem with this law because the first sentence of the definition is simply too broad. It states that a “loan” includes a transaction with the following two features:
1. There is a contract by which a sum of money is delivered to another.
- A typical revenue-based financing is structured as a purchase of a merchant’s future revenue at a discounted purchase price. The purchase price is a sum of money delivered to the merchant.
- Invoice factoring transactions also involve a delivery of funds in the amount of the face value of the invoice minus a discount and/or a reserve.
2. At a future time, the person receiving that money agrees to return an “equivalent” sum.
- In revenue-based financing, the merchant agrees to deliver the purchased amount based on an agreed-upon percentage of the merchant’s revenue stream. Arguably this is a “sum of money” equivalent to the purchase price advanced to the merchant.
- Factoring is a bit more complicated. In recourse factoring, a factoring client sometimes is required to repurchase an invoice from the factor if the invoice is not paid on time. The repurchase price is based on the face value of the invoice. Arguably this is a “sum of money” equivalent to the face value of the invoice minus a discount and/or a reserve.
Even if the DFI does not order that revenue-based financing or factoring are loans, a North Dakota court could take the position that the definition of “loan” is now so broad that these products are already loans under the revised MBA. No DFI order is needed.
If a North Dakota court concludes these products are now subject to regulation under the MBA, including its 36% rate cap, then this opens the door for North Dakota businesses that obtain financing to sue any provider that imposes charges that effectively exceed that rate cap.
It’s not clear whether the North Dakota legislature understands what it just did. This amendment was part of a legislative package that was primarily focused on data security. The addition of the “loan” definition would be difficult to find if you weren’t looking for it. House Bill 1127 passed with almost unanimous support. Did all those legislators understand that this law could drive away products that offer working capital to businesses that badly need liquidity and don’t have access to a bank line of credit? I doubt it.
Does this mean that providers of alternative financing should stop funding in North Dakota? That’s a business decision. We’ll certainly be watching to see if the DFI provides any guidance on any kind of “alternative financing” product it considers to be a loan. But providers of revenue-based financing and factoring should start thinking about whether they might need an MBA license North Dakota and whether they can live with the MBA’s 36% rate cap.
According to the North Dakota legislature’s website, this change in the MBA is likely to take effect on August 1, 2025. That gives you some time to think about whether North Dakota is still a viable market for your financial products.
Dodd-Frank 1071: Regulatory Uncertainty in Small Business Financing
May 28, 2025Jeffrey S. Paige is the Chief Legal Officer of CFG Merchant Solutions. Visit: https://cfgmerchantsolutions.com
A Changing Regulatory Landscape for Commercial Finance in New York & Beyond
When President Trump returned to office on January 20, 2025, he signed several executive orders with significant implications, particularly for New York’s commercial finance sector and the revenue-based financing industry. One such order was a regulatory freeze that could impact rules issued by the Consumer Financial Protection Bureau (CFPB), specifically those concerning small business financing data collection under Dodd-Frank Section 1071. The rationale behind this freeze is that the CFPB, an agency not directly controlled by Congress, exceeded its intended regulatory scope.
Trump’s order not only halts the issuance of new rules but also mandates the withdrawal of any rules previously sent to the Office of the Federal Register. More critically, it directs agency heads to “consider postponing” any rules that have been published but have not yet taken effect, creating a 60-day review period for reassessment of their legal and policy implications.
“Should actions be identified that were undertaken before noon on January 20, 2025, that frustrate the purpose underlying this memorandum, I may modify or extend this memorandum to require that department and agency heads consider taking steps to address those actions,” the order concludes. This places Section 1071 in limbo, leaving financial institutions uncertain about compliance obligations moving forward.
However, New York funders may still need to prepare. Under 12 U.S.C. § 5552 of the Dodd-Frank Act, individual states (including their respective financial regulators and attorneys general) have the authority to enforce federal consumer financial law, specifically, the Consumer Financial Protection Act and 18 enumerated consumer laws such as TILA, EFTA, FDCPA, GLBA, and regulations issued by the CFPB. Simply put, New York has the ability to enforce these laws and regulations, including Section 1071, by bringing suit in federal or state courts or other appropriate proceedings against any “covered person or service provider” as defined and not excluded by the Dodd-Frank Act’s terms. It is therefore prudent for non-exempt lenders and funders to take a proactive approach.
What Is Dodd-Frank 1071?
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, sought to address vulnerabilities in the financial system exposed during the 2008 financial crisis. On March 30, 2023, Section 1071 amended the Equal Credit Opportunity Act (ECOA), empowering the CFPB to collect and report key data from financial institutions on small business financing. The compliance deadline varies based on the size of the institution, with the earliest deadline set for July 18, 2025, affecting Tier 1 providers, defined as high-volume financial institutions.
The goal of Section 1071 is to identify and address disparities in small business financing by analyzing key metrics such as:
- Demographics of business owners (race, gender, ethnicity).
- Financing terms, rates, and credit outcomes.
- Geographic data, including trends in underserved regions.
By requiring funders to disclose this information, the regulation seeks to foster accountability and ensure that small businesses—especially those owned by minorities and women—have equitable access to credit and capital.
CFPB & Section 1071 Timeline
2010: Dodd-Frank Act Enacted
- Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is established.
2011: CFPB Established
- The Consumer Financial Protection Bureau (CFPB) is created as an independent agency overseeing consumer financial protection laws, including small business lending regulations under Section 1071.
2017: CFPB Faces Legal Challenges
- Industry groups challenge the CFPB’s authority and structure, arguing that it lacks proper congressional oversight.
- Under the Trump administration, regulatory focus shifts toward deregulation, and CFPB rulemaking efforts on Section 1071 slowed down.
2020: U.S. Supreme Court Decision – Seila Law v. CFPB
- The Supreme Court rules that the president can remove the CFPB director at will, weakening its independence but allowing it to continue functioning.
2021: Biden Administration Revives Section 1071 Rulemaking
- The CFPB under Director Rohit Chopra prioritizes implementing Section 1071, aiming to enhance transparency in small business lending.
2022-2023: CFPB Proposes & Finalizes Section 1071 Rule
- The proposed rule is released in 2022, requiring lenders to collect and report loan application data, including business owner demographics.
- In March 2023, the final rule is issued, with compliance deadlines set for 2024 and 2025 based on lender size.
2023-2024: Legal Pushback & Court Challenges
- Industry groups file lawsuits, arguing that Section 1071 creates excessive regulatory burdens and violates constitutional limits on CFPB authority
- In October 2023, a Texas court stays the rule for certain plaintiffs, pausing enforcement for some lenders.
- In 2024, additional lawsuits escalate concerns over the rule’s implementation.
January 20, 2025: Trump Returns to Office & Freezes Regulations
- On his first day back in office, President Trump issues an executive order freezing pending regulations, including Section 1071.
- The order:
- Blocks new CFPB rulemaking,
- Withdraws rules not yet finalized,
- Delays implementation of already published rules for a 60-day review period.
- President Trump’s justification: The CFPB is an unelected agency that overstepped its authority, and its rules should be reassessed.
2025: Uncertainty & State-Level Action
- The CFPB’s authority remains in question, leaving financial institutions uncertain about compliance requirements.
- New York may independently implement similar reporting requirements, as it has done with previous commercial financing regulations.
- Many New York funders continue preparing for potential state-level enforcement despite the federal freeze.
How Alternative Financing Providers Can Adapt
Funders in the alternative financing space should remain agile and prepare for multiple scenarios. Even if Section 1071 is rolled back, transparency and fair funding practices remain critical for fostering trust and maintaining credibility in the market.
Steps funders can take include:
- Investing in technology to automate compliance processes, ensuring readiness for future regulations.
- Engaging with industry stakeholders to advocate for practical regulatory approaches that balance fairness and business efficiency.
- Maintaining transparency in financing practices to build stronger relationships with merchants and partners.
Looking Ahead
As the financial industry navigates the potential rollback of Dodd-Frank 1071 (Republican Congressman Roger Williams of Texas has introduced H.R. 976 seeking to do just that), alternative financing companies should focus on long-term strategies that prioritize both compliance and innovation. This is especially true in New York, where the legislature is currently considering a bill called the Fair Business Practices Act, modeled after Title X of Dodd-Frank, that would among other things expand the New York Attorney General’s enforcement powers and enhance penalties in this industry sector for UDAP violations. This further signals that New York as well as other states is seeking to fill any void left by the weakening of the CFPB. Whether the regulation remains in effect or is dismantled, financial institutions should stay proactive in adapting to changes while ensuring fair access to capital for small businesses.
