The Legal Ground You’re Standing On
Vermont 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 Vermont law. A firm that can’t speak to them isn’t the best firm for a Vermont file.
1Usury limits & the recharacterization question
Vermont's general usury cap is 12% (9 V.S.A. § 41a), but § 46 lets parties exceed it for corporate obligations and business-purpose financing, so most genuinely commercial credit escapes the cap. Where it applies, the penalties are unusually sharp: a lender who knowingly contracts for excess interest forfeits all interest and charges and may collect only half the principal, with misdemeanor criminal penalties on top (§ 50). The bigger story is legislative: Vermont's Act 142 (signed June 16, 2026) will directly license and regulate MCA providers regardless of the loan-versus-sale characterization, effective July 1, 2027 — the newest and most comprehensive state MCA regime in the country.
Sources: 9 V.S.A. § 41a (12% cap) · 9 V.S.A. § 46 (business exceptions) · 9 V.S.A. § 50 (forfeiture; criminal penalties)
2Confessions of judgment in Vermont
Restricted now; banned in MCAs from July 2027 Vermont voids confession powers in consumer contracts (9 V.S.A. § 2456), and its confession procedure (12 V.S.A. §§ 4671–4673) requires the debtor to confess personally before the court — pre-signed MCA cognovit clauses don't fit it. And the door is closing completely: Act 142 (signed June 2026) prohibits confessions of judgment in covered sales-based financing transactions outright, effective July 1, 2027, alongside limits on out-of-state choice-of-law and venue clauses.
Sources: 9 V.S.A. § 2456 (consumer confessions void) · 12 V.S.A. ch. 165 (confession procedure) · H.648 / Act 142 (2026) — bill status
3Vermont Act 142 (H.648, 2026) — MCA licensing and disclosure: what funders must tell you
Signed June 16, 2026 and effective July 1, 2027, Vermont's Act 142 is the newest — and among the most comprehensive — state MCA regimes: providers of merchant cash advances, revenue-based financing, and factoring must obtain Vermont lender licenses, and before consummating a covered transaction must disclose the finance charge, estimated APR, total repayment amount, payment terms, fees, collateral requirements, and refinancing information, with the recipient's acknowledgment. The law also bans confessions of judgment in covered transactions, limits out-of-state choice-of-law and venue clauses, and regulates arbitration provisions. Administered by the Department of Financial Regulation. It post-dates the March 2026 multi-state surveys, making Vermont the eleventh disclosure state — and the first to require full licensing of MCA providers alongside New York-style APR disclosure.
Sources: H.648 / Act 142 — approved June 16, 2026 (official bill status) · Mondaq — Vermont enacts commercial financing licensing and disclosure
How funders actually enforce here: Vermont is one of only two states (with California) that never adopted the Uniform Enforcement of Foreign Judgments Act — an out-of-state MCA judgment cannot simply be registered here. The funder must bring a new, independent civil action on the judgment in Vermont (within eight years, 12 V.S.A. § 506), where the merchant can appear and defend. Once a Vermont judgment issues, it liens real property only when recorded (§ 2901), and accounts are reached through trustee process (§ 3011 et seq.). Funders file UCC-1 liens through the Vermont Secretary of State. The practical effect: Vermont merchants get a second bite at defenses most states' merchants never see. 12 V.S.A. § 506 (new action required on foreign judgments) · 12 V.S.A. § 3011 (trustee process) · Vermont Secretary of State — UCC liens
