7 Disclosure Violations That Void or Weaken an MCA in Texas in Practice

A missing disclosure page does not erase a Texas MCA by itself. The disclosure page was blank. The payment obligation stood.

Before September 2025 an owner disputing a Texas advance argued from fairness and from the agreement itself. After Chapter 398 of the Finance Code took effect on September 1, 2025, the argument runs from a checklist the legislature wrote in advance, governing specific offers under 1 million dollars with a precision that surprises owners who expected broader protection.

Missing Core Cost Figures

Section 398.051 requires the total financing amount, the disbursement amount, the finance charge, and a total repayment amount the owner can test against the debits. Often we see files where the owner remembers a single number from the sales conversation and cannot locate the other three.

A file fourteen pages long can still omit the four numbers the statute requires. The distinction between the financing amount and the disbursement is extremely instructive, because charges retained at funding can reduce the cash reaching the operating account to a fraction of the headline figure. Resist the urge to treat the funded deposit as the loan amount, even briefly. The sales conversation emphasizes the headline figure in order to move the owner past the arithmetic.

Where any of the four figures is missing, counsel holds a documented gap under a cited section. The gap weakens the collection posture and supports a complaint, though Section 398.102 creates no private right of action and the gap alone vacates nothing. That outcome is narrower than an anxious reader hopes on first reading.

Payment Terms and Projected Averages

For variable payments the statute requires a schedule or a description of the calculation method plus the average projected monthly payment. A page stating only a daily percentage leaves the owner unable to test any given debit, which is precisely the condition in which overcollection hides for months.

The estimated period for periodic payments to equal total repayment belongs in the same disclosure, and its absence removes the only calendar the owner can hold against the debit history. The missing average is extremely difficult to reconstruct from statements alone, since each debit looks regular in isolation and only the absent method would prove otherwise.

Before the first payment leaves the account, before counsel has reviewed the terms, the owner should possess this page with the method and the average stated in writing.

Simply demand the calculation method and the average projection before authorizing the first debit.

Fees and Early Payoff Charges

All other potential fees outside the finance charge belong in the disclosure, including draw fees, late payment fees, and whatever the account can generate when a debit returns unpaid. Any charge for early payoff or refinancing must appear with its amount.

An undisclosed early payoff charge converts a planned exit into a second negotiation, and owners discover the charge at the exact moment their position is weakest. A merchant plans an exit through a corridor whose tolls are posted only after entry, and the toll keeper collects at each door.

Identify every fee in the disclosure, compare each to the agreement, and construct a response that addresses both the missing pages and the practical effect on the payoff figure the business can perform. Ask counsel to ensure the payoff figure reflects every fee the disclosure omitted.

Collateral and Security Descriptions

A description of collateral requirements and security interests belongs in the disclosure where applicable. Its absence leaves the owner unaware that receivables stand pledged until a filing appears in the public record or a second lender declines the application for reasons nobody explains. There are exemptions, though the files that reach counsel rarely turn on them.

The lien the owner never read still encumbers the account it names.

Broker Compensation Statements

The provider must state whether it will pay compensation to a broker in connection with the specific offer and, where applicable, the amount. Compensation paid in silence purchases a peculiar loyalty, and the loyalty runs toward the funding rather than the borrower, visible only later when the guidance is revealed to have served the transaction throughout.

Owners learn of the payment only when the disclosure is finally produced, if production ever occurs. Counsel should review and analyze the compensation line against every promise the broker made about independence.

Renewal Accounting and Signatures

Where new money must retire an existing sales based balance, the statute demands added figures showing amounts applied to specified charges and any reduction in the disbursement. Renewal disclosures fail here at a rate initial disclosures do not match, in most of the files we have seen, though the sample is not scientific.

The renewal describes new money. The accounting describes where it went.

The renewal page was, if we are being precise, not a disclosure at all where the required figures are absent. The provider must obtain the recipient signature before finalizing the application, so an unsigned page proves the sequence ran backward.

The July 2026 adopted rules for Texas sales based financing address accurate disclosure before agreement and correction where figures prove inaccurate. A corrected page does not rewrite the executed contract, and counsel must test every figure against bank records rather than against memory.

Confession Provisions and Automatic Debits

Section 398.055 declares a covered contract containing a confession of judgment provision, or a term of similar effect, void and unenforceable. Only one provision in the chapter voids. The rest create advantage.

But the debit rules invite the more common misunderstanding. A provider may not establish automatic debits unless it holds a validly perfected first priority interest in all of the recipient accounts receivable. That changes the posture of the entire file, though the change favors preparation rather than celebration.

Whether a given clause counts as similar in effect is a question I cannot answer from this desk. The funding industry understands this chapter better than its customers do. It prefers the comparison never happens.

Delancey Street offers a free confidential initial review for businesses carrying MCA balances, and it coordinates legal questions with licensed counsel on a separate engagement. It is a debt settlement company, not a law firm, so interpretation of Chapter 398 belongs with counsel. The final enrolled text of HB 700 controls, and the owner should ensure the file is tested against the enrolled sections.

Most owners call after the renewal has funded. I understand the timing.

The useful result is a file the owner can act on: the enrolled checklist matched to the actual papers, a forecast the business can perform, and written terms stating what payment resolves and what survives it. Statutes frame the discussion. Documents decide it.