Full Breakdown
Texas MCA Disclosure Law HB 700

The enacted Texas statute answers fewer questions than its summaries promise, and it answers them in narrower language than either side of the funding debate admits.

House Bill 700 added Chapter 398 to the Finance Code for commercial sales based financing, effective September 1, 2025. Counsel asked about a Texas advance now works from enrolled text and adopted rules rather than from the introduced drafts that still circulate online.

Covered Transactions and Exemptions

Coverage turns on repayment tied to sales or revenue, including a fixed payment mechanism with reconciliation to a revenue percentage. The label on the offer does not decide the issue, and neither does the frequency of withdrawal.

Providers operating online fall within reach when they serve Texas recipients, even without a Texas office. Banks and certain related institutions stand outside the chapter under stated exemptions. Between those poles sits the ordinary dispute, where the documents must be read before anyone declares the statute applicable.

The contract was, if we are being precise, only the start of the coverage question. Funding date, recipient location, and the actual repayment mechanism complete it where the record permits an answer.

Simply assemble the offer, the executed agreement, and proof of funding before seeking an interpretation.

Required Disclosures for Covered Offers

For covered specific offers under $1 million, Section 398.051 requires figures that include the financing amount, the disbursement, the finance charge, and the total repayment. Payment amounts and timing, other charges, security terms, and broker compensation belong in the same disclosure, which the recipient signs before finalizing the application.

A merchant signs for one number and receives another, then services the first as though it were cash in hand. The file afterward reads less like a purchase than like a translation performed without the original page.

The distinction between the financing amount and the disbursement is extremely instructive, because a renewal can direct proceeds to several destinations at once, with charges retained at funding and a portion assigned to retire the prior balance, while only the remainder reaches the operating account, and each of those allocations must be reconciled to payoff records rather than to the broker description of new money, which as a rule emphasizes the headline figure and passes over the arithmetic in silence.

The disclosure describes this transaction, not the product line, and a form that could describe any advance describes none of them.

Where new money pays off an existing sales based balance, the statute demands added detail about amounts applied to specified charges and reductions in disbursement. Earlier drafts set different thresholds, so any summary built on an introduced version can misstate the obligation.

The July 2026 adopted rules address accurate disclosure before agreement and correction where figures prove inaccurate, and a corrected page does not rewrite the executed contract.

Stack the prior agreement and its account history against the new papers before finalizing the application. The final enrolled text of HB 700 controls that comparison. Mismatched balances should draw a written explanation before they become the opening entry of another obligation.

Automatic Debits and Confession Provisions

Section 398.055 declares a covered contract containing a confession of judgment provision, or a term of similar effect, void and unenforceable. Whether a given clause falls within that description remains a question of coverage and wording, not of industry custom.

But the debit rules invite the more common misunderstanding. The adopted rules condition automatic deposit account debits on a validly perfected first priority interest in all of the recipient accounts receivable, which restrains the practice without prohibiting every debit the way some commentaries suggest, and an owner reading commentary instead of the rule can mistake a conditional permission for the blanket ban it never became.

The statute voids the confession provision. It leaves the underlying payment obligation to other law.

That decides less than an anxious reader hopes. Ask counsel to ensure the debit practice is tested against the perfected interest the rules require and ensure the confession language receives a coverage answer before anyone relies on it.

Registration, Administration, and Enforcement Limits

The Office of Consumer Credit Commissioner administers the chapter. Operators within the existing business transition hold until December 31, 2026 to complete registration, which signals oversight without certifying any particular offer.

The adopted rules address misleading statements, undisclosed fees, and unauthorized debits. The July 2026 adopted rules for Texas sales based financing supply implementation detail the bill summaries omit. Check the effective date against the transaction history before asserting that a current duty governed an earlier event.

Section 398.005 withholds rulemaking authority over maximum charges, including annual percentage rates. The chapter is therefore no general cap on the cost of every Texas advance, and counsel must look elsewhere for any rate limit that might apply. Section 398.102 denies a private right of action under the chapter, so regulatory enforcement, contractual defense, and any independent claim travel on distinct tracks with distinct requirements.

The statute is not entirely clear on every boundary, which is part of the difficulty. A complaint to the regulator moves on one schedule while litigation deadlines run on another. The gap between a complaint and a remedy is extremely wide in this chapter, and neither track pauses for the other without a specific order or agreement.

Settlement Review Under the New Framework

A supported concern under the chapter can shape negotiation without guaranteeing any concession. Funders understand these disclosure duties better than their customers do, and most prefer the customer never tests that understanding.

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 while the commercial discussion proceeds alongside.

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 requirements 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.