🛡️ The Regulatory Tightening in Alternative Finance: What Brokers Need to Know in 2025

Why staying compliant isn’t optional—and how brokers can lead with confidence.

The alternative finance space is evolving rapidly, and so are the rules that govern it. As more merchants turn to alternative funding solutions, regulators are stepping in to enforce transparency, fairness, and accountability. For brokers, this shift represents both a challenge and an opportunity to stand out from your competition by leading with trust.

🔍 Key Regulatory Developments Reshaping the Space

1. AI Underwriting Faces Bias & Transparency Crackdown

Artificial Intelligence is transforming underwriting—but not without raising red flags. Regulators are paying close attention to how AI is used in credit and funding decisions, particularly around bias, lack of transparency, and explainability.

The Consumer Financial Protection Bureau (CFPB) has already issued guidance requiring lenders to explain adverse decisions, even if made by AI. [CFPB, 2023] Additionally, New York’s Department of Financial Services (DFS) is expected to issue new guidelines on the fair use of AI in underwriting later this year.

Forbes reports that financial firms must now implement human oversight and ensure their AI models are trained on diverse data sets to reduce discriminatory outcomes. [Forbes Technology Council, 2025] Another Forbes article emphasizes that fintechs should adopt ethical AI standards now to stay ahead of intensifying regulatory pressure.

🔍 What this means for brokers:
Before aligning with a funding partner, dig into how their AI works:

• Do they provide explainable decisions?
  
• Is there human oversight in place?
  
• Do they test for bias and maintain audit trails?
  

Bottom Line: If your merchant can’t understand why they were denied, that’s a red flag. Transparency isn’t just about compliance—it’s how you build trust, renewals, and long-term relationships.

2. Merchant Cash Advances Under Intensified Regulatory Scrutiny

States like New York, California, and Connecticut are leading the charge on tightening disclosure requirements around MCAs. The New York Small Business Truth in Lending Act mandates that providers of commercial financing, including MCAs, disclose key terms such as the total amount of financing, disbursement amount, finance charge, and the estimated APR. This law aims to enhance transparency and allow small businesses to make informed financing decisions. nysenate.gov

But it’s not just regulators raising concerns.

According to McKinsey, one of the key reasons merchants return for funding—or walk away—is trust. Poor disclosure practices, hidden fees, and MCA stacking all contribute to merchant dissatisfaction and long-term reputational damage for brokers. Their research shows that transparent, relationship-driven funding options are now a core differentiator in the small business lending landscape. [McKinsey: SME Lending Reinvented, 2023]

3. Data Privacy and Cybersecurity Take Center Stage

As financial services digitize, cybersecurity and data privacy are now front-line regulatory priorities.

The Deloitte Global Future of Cyber Survey reports that nearly 70% of organizations now view cybersecurity as essential to brand trust and risk resilience. Yet many smaller providers lack robust protections, putting themselves—and their brokers—at risk.

🔐 What this means for brokers:

• Vet your funders’ cybersecurity practices and breach protocols.
  
• Secure your systems, including CRMs, cloud tools, and communications.
  
• Position yourself as a guardian of client data. Trust can be lost in a single breach.

💡 How Brokers Can Win in This New Environment

✅ Stay Informed

Keep up with sources like Forbes, American Banker, and Finextra. Regulatory awareness is now a business asset.

✅ Choose Compliant Partners

Don’t just chase high commissions. Partner with funders who invest in long-term risk management and ethical practices.

✅ Educate Your Clients

Merchants who understand their options are far more likely to renew and refer. As @AngieMarks, Nexi’s Director of ISO Relations, recently shared in an interview:

“Clear communication is crucial. It’s important to explain the details of alternative financing options, like MCAs, so merchants understand how these products work and what to expect. Transparency builds trust and sets realistic expectations.”

✅ Build Your Internal Compliance Playbook

Use pre-approved templates, scripts, and disclosures that reflect the latest laws. Doing so protects you and positions you as a professional.

🚀 How Nexi Helps Brokers Stay Ahead

At Nexi, we don’t just keep up with a changing industry—we help brokers and their merchants stay ahead of it.

Our Reverse Consolidation Weekly Purchase Program was built with transparency and merchant success in mind:

✅ Clear Terms, No Fine Print

No stacking traps. No hidden fees. Just responsible funding that helps businesses regain control.

✅ Break Free from MCA Debt

Nexi helps businesses streamline existing MCAs by purchasing a portion of their future receivables. This:

• Extends payment terms
  
• Reduces financial strain
  
• Restores stability
  Some merchants save up to 50% compared to continuing with stacked MCAs.
  

✅ Streamlined Payments

Simplify multiple MCA obligations into a single, manageable plan, reducing complexity and day-to-day stress.

✅ Freed-Up Cash Flow

With lower daily/weekly obligations, merchants can reinvest in what matters: new equipment, expansion, payroll, and growth.

✅ Simplified Debt Management

Structured repayment means merchants can move from survival mode to strategic planning.

By partnering with Nexi, brokers gain a funder who puts compliance, clarity, and merchant well-being at the heart of every deal.

👉 Subscribe to Nexi Insider for the latest funding strategies, market trends, and broker insights.

👉 Let’s talk.

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