---
title: "HB700: Relating to disclosures for certain commercial sales-based financing transactions, the effect of certain commercial sales-based financing contract provisions, and the registration of commercial sales-based financing brokers and providers; authorizing a fee and providing a civil penalty."
bill_number: HB700
session: Regular Session
status: Enacted
filed_date: 2025-03-14
signed_date: 2025-06-20
effective_date: 2025-06-20
primary_author: John McQueeney (R)
subjects:
  - Business & Commerce
  - Business & Commerce--General
  - Civil Remedies & Liabilities
  - Financial
  - Financial--General
  - MORTGAGE BROKERS & BANKERS
  - BANKING, TEXAS DEPARTMENT OF
  - FINANCE COMMISSION OF TEXAS
  - CONSUMER CREDIT COMMISSIONER, OFFICE OF
compliance_urgency: critical
cost_impact: medium
enforcing_agencies:
  - Finance Commission of Texas
  - Office of Consumer Credit Commissioner (OCCC)
canonical_url: "https://jdkey.com/texas-89th-legislature/hb700-89th-regular"
source: JD Key Consulting - Texas Legislative Intelligence
---

# HB700: Relating to disclosures for certain commercial sales-based financing transactions, the effect of certain commercial sales-based financing contract provisions, and the registration of commercial sales-based financing brokers and providers; authorizing a fee and providing a civil penalty.

**Status:** Signed into Law (June 20, 2025)
**Effective Date:** 2025-06-20

## Summary

## Executive Summary
HB700 establishes a comprehensive regulatory framework for non-bank commercial financing (Merchant Cash Advance, factoring, and revenue-based financing) in Texas. Providers and brokers dealing in transactions under $1 million must now register with the Office of Consumer Credit Commissioner (OCCC) and adhere to strict Truth-in-Lending-style disclosure requirements. While registration has a phase-in period, **conduct requirements and contract prohibitions are effective September 1, 2025.**

## Implementation Timeline
- **Effective Date:** September 1, 2025 (Statutory conduct requirements begin).
- **Compliance Deadline:**
    - **September 1, 2025:** You must provide financial disclosures and remove prohibited terms (Confessions of Judgment) from contracts.
    - **December 31, 2026:** Deadline for existing businesses to complete registration with the OCCC.
- **Agency Rulemaking:** The Finance Commission and OCCC must adopt rules regarding fees, forms, and "unfair or deceptive practices" by **September 1, 2026**.
    - *Regulatory Gray Zone:* Between Sept 1, 2025, and Sept 1, 2026, the law is in effect, but official agency forms will not exist. You must create good-faith interim disclosure forms to comply with the statute during this gap.

## Operational Changes Required

### Contracts
- **Confession of Judgment (COJ):** You must strip any COJ clauses from Texas contracts immediately. Inclusion renders the provision void and unenforceable.
- **Security Agreements:** To maintain the right to auto-debit (ACH) a borrower's account, you must possess a validly perfected first-priority security interest. Ensure your Security Agreements grant rights to deposit accounts and that your operations team files UCC-1s immediately upon closing.
- **Broker Agreements:** Update indemnification clauses to hold brokers liable if they fail to provide accurate fee data required for your disclosures.

### Hiring/Training
- **Sales Workflow:** Sales teams must be retrained to stop "closing on the fly." The law requires the borrower to sign a specific Disclosure Form *before* signing the final contract.
- **Underwriting:** Staff must be trained to calculate an "Estimated APR" for sales-based products, a metric previously not required for commercial financing in Texas.

### Reporting & Record-Keeping
- **The "Texas Disclosure":** You must generate and archive a disclosure document for every offer under $1 million, containing the Total Repayment Amount, Finance Charge, and Estimated APR.
- **Registration Updates:** You are required to notify the OCCC within **90 days** of any change in control, name, or address.
- **Annual Renewal:** Prepare for an annual reporting and renewal cycle due by January 31 of each year.

### Fees & Costs
- **Registration Fees:** Amounts are TBD by OCCC rulemaking but must cover regulatory costs.
- **Civil Penalties:** Budget for potential liabilities of **$10,000 per violation**. A systemic error in your disclosure software could result in cumulative penalties scaling with your loan volume.

## Strategic Ambiguities
- **APR Calculation Methodology:** The statute requires disclosing an APR equivalent for variable-term products but does not yet specify the math (e.g., Historical Method vs. Underwriting Method). Until the OCCC rules are finalized in 2026, document your internal calculation logic clearly to defend against audit.
- **"Unfair or Abusive" Practices:** The Finance Commission has broad authority to define these terms later. This creates a risk that specific collection tactics or marketing claims currently in use could be banned retroactively or in the future.
- **"Specific Offer" Definition:** The disclosure trigger is a "specific offer." It is unclear if a preliminary term sheet qualifies. To mitigate risk, treat any document presenting a price and amount as a specific offer requiring full disclosure.

## Action Plan
1.  **Audit Contracts (Immediate):** Redline all Texas agreements to remove Confession of Judgment clauses and ensure Security Agreements cover deposit accounts.
2.  **Update CRM/LOS:** Configure your loan origination software to generate the required Disclosure Form and force a "two-signature" workflow (Disclosure first, Contract second).
3.  **Establish UCC Protocol:** Mandate UCC-1 filings for all accounts where you intend to use auto-debiting; second-lien positions lose the statutory right to auto-debit.
4.  **Draft Interim Disclosures:** Do not wait for OCCC forms. Work with counsel to create a compliant disclosure template for use starting September 1, 2025.

## Compliance Badges
- **Urgency:** **Critical** (Conduct rules apply Sept 2025)
- **Cost Impact:** **Medium** (Process/Legal costs > Registration fees)
- **Primary Enforcing Agency:** **Office of Consumer Credit Commissioner (OCCC)**

## Business Impact

- **Compliance Urgency:** Critical
- **Cost Impact:** Medium
- **Enforcing Agencies:** Finance Commission of Texas, Office of Consumer Credit Commissioner (OCCC)

## Key Compliance Information

### Rulemaking Deadlines

- **Finance Commission of Texas:** Adopt initial rules identifying unlawful, unfair, deceptive, or abusive acts or practices. by 2026-09-01
- **Office of Consumer Credit Commissioner:** Adopt rules setting registration/renewal fees and adopting the official registration form. by 2026-09-01

### New Penalties

- **Violation of Chapter 398 (e.g., failure to register, failure to disclose, prohibited contract terms).:** civil - $10,000 per violation
- **Inclusion of confession of judgment provisions (provision becomes void and unenforceable).:** contractual voidance - N/A

### Fee Changes

- **Provider and Broker Registration Fee:** Amount to be determined by OCCC rule (must cover costs) (effective Upon adoption of rules (deadline 2026-09-01))
- **Annual Renewal Fee:** Amount to be determined by OCCC rule (effective Annually on or before January 31)

### Reporting Requirements

- **Who:** Commercial Sales-Based Financing Providers and Brokers
  - **What:** Initial Registration
  - **When:** Before conducting business (Existing businesses: by Dec 31, 2026)
  - **To Whom:** Office of Consumer Credit Commissioner
- **Who:** Commercial Sales-Based Financing Providers and Brokers
  - **What:** Registration Renewal
  - **When:** Annually by January 31
  - **To Whom:** Office of Consumer Credit Commissioner
- **Who:** Commercial Sales-Based Financing Providers and Brokers
  - **What:** Update of Registration Information
  - **When:** Within 90 days of any change in information
  - **To Whom:** Office of Consumer Credit Commissioner
- **Who:** Providers (Offers < $1M)
  - **What:** Transaction Disclosures (Total cost, APR equivalent, fees, etc.)
  - **When:** Before finalizing the application (Must obtain signature)
  - **To Whom:** Recipient (The Borrower)

## Official Analysis

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# BILL ANALYSIS

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H.B. 700

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By: McQueeney

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Pensions, Investments
  & Financial Services

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Committee Report
  (Unamended)

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**BACKGROUND AND PURPOSE **



The bill author has informed
  the committee that commercial sales-based financing has become a popular
  financing option for small businesses desperate for credit and that, unlike
  traditional loans, this type of financing is repaid as a percentage of future
  sales or revenue. The bill author has also informed the committee that the
  financing is initially made to the small business, which promises to repay
  the full amount advanced plus a payback rate or factor rate that is a
  multiple of the amount advanced. The bill author has further informed the
  committee that this type of financing has raised significant concerns about
  predatory lending and that state attorneys general as well as the Federal
  Trade Commission have obtained high-profile judgments against such financing
  for predatory practices. H.B. 700 seeks to enact new law to provide clarity,
  safeguard small businesses, and promote fair lending practices with respect
  to the commercial sales-based financing industry.

** **

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**CRIMINAL JUSTICE IMPACT**

** **

It is the committee's opinion
  that this bill does not expressly create a criminal offense, increase the
  punishment for an existing criminal offense or category of offenses, or
  change the eligibility of a person for community supervision, parole, or
  mandatory supervision.

** **

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**RULEMAKING AUTHORITY **



It is the committee's opinion
  that rulemaking authority is expressly granted to the Finance Commission of
  Texas in SECTION 1 of this bill.

** **

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**ANALYSIS **



H.B. 700 amends the Finance
  Code to require a provider who extends a specific offer of commercial
  sales-based financing of more than $500,000 to a recipient in Texas to
  disclose to the recipient the following:

· the total amount of the financing, the disbursement amount, the
  finance charge, and the total repayment amount;

· the estimated period for the periodic payments to equal the
  total repayment amount under the terms of the financing;

· for fixed payment amounts, the amounts and the frequency of
  payments;

· for variable payment amounts, a payment schedule or a
  description of the method used to calculate the amounts and frequency of
  payments and the amount of the average projected payments per month;

· a description of all other potential fees and charges not
  included in the finance charge, including draw fees, late payment fees, and
  returned payment fees;

· any finance charge the recipient will be required to pay if the
  recipient pays off or refinances the commercial sales-based financing before
  the transaction is repaid in full;

· any additional fees, not included in the finance charge, the
  recipient will be required to pay if the recipient pays off or refinances the
  commercial sales-based financing before the transaction is repaid in full;
  and

· a description of collateral requirements or security interests,
  if applicable.



H.B. 700 requires the provider,
  if as a condition of obtaining commercial sales-based financing the provider
  requires the recipient to pay off the outstanding balance of an existing
  commercial sales-based financing from the same provider, to disclose to the
  recipient the following:

· the amount of the new commercial sales-based financing used to
  pay off the portion of the outstanding balance of existing commercial
  sales-based financing that consists of prepayment charges required to be paid
  and any unpaid interest expense that was not forgiven at the time of renewal
  of the transaction; and

· if the disbursement amount will be reduced to pay down any
  unpaid portion of the outstanding balance, the actual dollar amount by which
  the disbursement amount will be reduced.

The bill requires the provider
  to obtain the recipient's signature on the disclosures required by the bill's
  provisions before finalizing the application for the commercial sales-based
  financing transaction.



H.B. 700 requires a person to register
  with the Texas Department of Banking before engaging in business as a
  commercial sales-based financing broker for compensation in Texas. The bill
  establishes that the registration is effective on receipt by the department of
  a completed registration form and the required registration fee and remains
  effective until renewal. The bill requires a broker to file a renewal
  registration form with the required renewal registration fee on or before
  January 31 of each year after filing an initial registration and to pay a
  registration fee on filing an initial registration and a renewal registration
  fee on filing a renewal registration. The registration or renewal
  registration form must include the following:

· the name of the broker;

· the name under which the broker transacts business, if
  different from the name of the broker;

· the address of the broker's principal office, which may be
  outside of Texas; and

· the name and address in Texas of a designated agent for service
  of process.

The bill requires a person
  engaging in business as a commercial sales-based financing broker on the
  bill's effective date to register with the department not later than January
  1, 2026.



H.B. 700 requires the Finance
  Commission of Texas to do the following:

· by rule set the registration fee and registration renewal fee
  in amounts sufficient to cover the registration costs; and

· adopt a form to be used for a registration or renewal
  registration under the bill's provisions.

The bill requires the finance
  commission to adopt rules setting the fees and adopting a registration form not
  later than December 1, 2025. The bill requires a commercial sales-based
  financing broker to update information contained in the registration
  statement not later than the 90th day after the date on which the information
  changes.



H.B. 700 subjects a person who
  violates the bill's provisions to a civil penalty of $10,000 for each
  violation, capped at $100,000 for all aggregated violations. A violation of
  the bill's provisions is considered a deceptive trade practice under the
  Deceptive Trade Practices-Consumer Protection Act and is actionable under Business
  & Commerce Code provisions relating to deceptive trade practices. The
  bill's provisions expressly do not create a private right of action against
  any person based on compliance or noncompliance with its provisions.



H.B. 700 defines the following
  terms:

· "commercial sales-based financing" or
  "commercial sales-based financing transaction" as an extension of
  sales-based financing to a recipient by a provider, the proceeds of which the
  recipient does not intend to use primarily for personal, family, or household
  purposes;

· "commercial sales-based financing broker" as a
  person, other than a financer, who, for compensation or the expectation of
  compensation, offers commercial sales-based financing to a recipient or
  offers to obtain commercial sales-based financing for a recipient from a
  provider;

· "disbursement amount" as the amounts paid to the
  recipient or on the recipient's behalf, excluding any finance charges that
  are deducted or withheld at disbursement;

· "finance charge" as the cost of commercial
  sales-based financing expressed as a dollar amount, including a charge
  payable, directly or indirectly, by the recipient that is imposed, directly
  or indirectly, by the provider of the financing as an incident to, or a
  condition of, the extension of financing;

· "financer" as a person who provides or will provide
  commercial sales-based financing to a recipient;

· "person" as an individual, corporation, partnership,
  limited liability company, joint venture, association, joint stock company,
  trust, sole proprietorship or other unincorporated organization, or other
  similar entity;

· "provider" as a person who extends a specific offer
  of commercial sales-based financing to a person applying for that financing
  or the person's authorized representative, including a commercial sales-based
  financing broker;

· "recipient" as a person, or the authorized
  representative of a person, who applies for commercial sales-based financing
  and is made a specific offer of commercial financing by a provider, excluding
  a person acting as a commercial sales-based financing broker;

· "sales-based financing" as a transaction that is
  repaid by the recipient to the provider of the financing as a percentage of
  sales or revenue, in which the payment amount may increase or decrease
  according to the volume of sales made or revenue received by the recipient,
  or according to a fixed payment mechanism that provides for a reconciliation
  process that adjusts the payment to an amount that is a percentage of sales
  or revenue;

· "specific offer" as the specific terms of commercial
  sales-based financing, including a price or amount quoted to a recipient by a
  person providing the financing based on information obtained from or about
  the recipient that, if accepted by the recipient, would be binding on the
  provider, subject to specific requirements in the financing terms; and

· "total repayment amount" as the sum of the
  disbursement amount and finance charge.



H.B. 700 exempts from
  applicability of its provisions a provider that is any of the following:

· a bank, out-of-state bank, bank holding company, credit union,
  federal credit union, out-of-state credit union, or any subsidiary or
  affiliate of those financial institutions;

· a person acting in the capacity of a technology services
  provider to an entity exempt from the bill's provisions as part of the
  entity's commercial sales-based financing program if the person has no
  interest, arrangement, or agreement to purchase any interest in the
  commercial sales-based financing extended in connection with the program;

· a lender regulated under the federal Farm Credit Act of 1971;
  or

· a person who extends or brokers any of the following:

o a commercial sales-based financing transaction secured by real
  property;

o a lease or a purchase-money obligation, as defined by provisions
  of the Uniform Commercial Code  Leases or the Uniform Commercial Code  Secured
  Transactions, respectively;

o a commercial sales-based financing transaction entered into
  under a commercial sales-based financing agreement or commercial open-end
  credit plan of $50,000 or more in which the recipient is a dealer, as defined
  by Transportation Code provisions relating to dealer's and manufacturer's
  vehicle license plates, or a motor vehicle rental company or an affiliate of
  a motor vehicle rental company; or

o a commercial sales-based financing transaction in connection
  with the sale of products or services that the person manufactures, licenses,
  or distributes or that a parent company, subsidiary, or affiliate of such
  person manufactures, licenses, or distributes.

The bill establishes that a
  sales-based financing transaction is not a form of an account purchase
  transaction for purposes of statutory provisions relating to account purchase
  transactions, regardless of the principal amount of the advance and that fees
  and charges paid, or charged under, a sales-based financing transaction are
  considered interest for usury purposes under state law, regardless of the
  principal amount of the advance.



H.B. 700 requires the Texas
  Department of Banking to administer, implement, and enforce the bill's
  provisions and requires the Finance Commission of Texas to adopt rules as
  necessary to administer and implement the bill's provisions.

** **

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**EFFECTIVE DATE **



September 1, 2025.

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## Topics

- Business & Commerce
- Business & Commerce--General
- Civil Remedies & Liabilities
- Financial
- Financial--General
- MORTGAGE BROKERS & BANKERS
- BANKING, TEXAS DEPARTMENT OF
- FINANCE COMMISSION OF TEXAS
- CONSUMER CREDIT COMMISSIONER, OFFICE OF

## Author

**Primary Author:** John McQueeney (R)

## Source Links

- [Full Interactive Analysis](https://jdkey.com/texas-89th-legislature/hb700-89th-regular)
- [Texas Legislature Online](https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=HB700)
- [LegiScan](https://legiscan.com/TX/bill/HB700/2025)

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*Analysis provided by [JD Key Consulting](https://jdkey.com). For questions about Texas legislative strategy, contact us at [jdkey.com/contact](https://jdkey.com/contact).*