The Legal Ground You’re Standing On
Connecticut MCA law: the three facts that shape every option
Every resolution strategy — renegotiation, settlement, defense, refinancing — plays out differently depending on these three pieces of Connecticut law. A firm that can’t speak to them isn’t the best firm for a Connecticut file.
1Usury limits & the recharacterization question
Conn. Gen. Stat. § 37-4 caps interest at 12% — but § 37-9 exempts most true commercial credit: loans to businesses of $10,000–$250,000 are capped at a deposit-index rate plus 17 points, and loans over $250,000 have no cap at all. MCAs are structured as receivables purchases, so the 12% cap applies only on recharacterization, and Connecticut's doctrinal test is old and clear: usury attaches only to loans (Belden v. Lamb, 1846), and a loan requires an absolute obligation to repay (Bridgeport L.A.W. Corp. v. Levy, 1929). Notably, the recharacterization theory has not yet been comprehensively litigated against MCA funders in Connecticut courts — but Connecticut sits in the Second Circuit, where Fleetwood v. Richmond Capital (2023) affirmed MCA recharacterization under the three-factor test.
Sources: Conn. Gen. Stat. § 37-4 (12% cap) · Conn. Gen. Stat. § 37-9 (commercial exemptions) · Shipman & Goodwin — MCA litigation in Connecticut
2Confessions of judgment in Connecticut
Effectively unavailable — registration door closed Connecticut is one of the best-protected states against confessed judgments: state law provides no general cognovit mechanism, and — the distinctive part — Conn. Gen. Stat. § 52-604 expressly excludes any judgment "obtained by default in appearance or by confession of judgment" from the expedited foreign-judgment registration process. A New York confession against a Connecticut business cannot simply be filed here; the funder must bring a fresh Connecticut action where the merchant can appear and raise defenses. On top of that, for commercial financing contracts signed on or after July 1, 2024, Public Act 23-201 (§§ 36a-868/869) bars contract provisions waiving the merchant's right to notice, a judicial hearing, or a prior court order.
Sources: Conn. Gen. Stat. § 52-604 (confession-judgment exclusion) · CT Dept. of Banking — PA 23-201 commercial financing guidance
3Connecticut Public Act 23-201 (Commercial Financing Disclosures): what funders must tell you
Signed June 2023 and effective July 1, 2024 (Conn. Gen. Stat. §§ 36a-861–36a-872), Connecticut's law covers sales-based financing — MCAs — of $250,000 or less. With any specific offer, providers must disclose the total financing amount, disbursement amount, finance charge, total repayment amount, estimated repayment period and schedule, fees, prepayment charges, collateral, and broker compensation (no APR requirement, unlike California and New York). Providers and brokers had to register with the Banking Commissioner through NMLS by October 1, 2024, with exemptions for banks and low-volume providers. The same act bars contract waivers of notice and judicial-hearing rights. A Connecticut merchant can verify a funder's registration with the Department of Banking before signing anything.
Sources: Public Act No. 23-201 (official text) · CT Dept. of Banking — provider/broker registration information · Troutman Pepper — Connecticut disclosure and registration law
How funders actually enforce here: Funders holding New York confessions cannot shortcut collection in Connecticut — § 52-604 excludes confessed and default-in-appearance judgments from expedited registration, forcing a fresh Connecticut action where the merchant can defend. Judgments the merchant actually litigated can be domesticated normally. Funders also perfect UCC Article 9 liens, filed and searchable through the Secretary of the State's CONCORD system, and for contracts signed on or after July 1, 2024, PA 23-201 bars waivers of notice and judicial hearing before prejudgment remedies. Conn. Gen. Stat. § 52-604 (registration exclusion) · CT SOS — CONCORD UCC search · CT Dept. of Banking — PA 23-201 guidance
