MCA Defense Counsel in Texas: Disclosure Rules, Confession Limits and the HB 700 File

A Texas owner who signed an MCA after September 2025 signed under a statute the funder may not have mentioned, because Chapter 398 of the Finance Code now governs covered sales based financing with duties unknown to the old forms.

Machine shops in Garland, carriers through El Paso, and retailers in every county between them borrow against tomorrow receipts, while the funding contract prices the advance as if the statute were still a bill.

Before the first disclosure arrives, before counsel has tested the confession paragraph, the debits begin, and the owner meets the new law inside the old collection.

Disclosure Duties Under HB 700

Specific covered offers under one million dollars must carry stated cost, payment, security, and broker compensation disclosures, with existing operators under a registration transition running to December 31, 2026, and the enrolled text of HB 700 comes before any argument about what the owner was owed at signing.

September 1, 2025 divides the files into before and after, and counsel dates the agreement first, since coverage, timing, and remedies all turn on that line.

The statute creates no private right of action for the owner to file, a limit counsel states at the outset of the first conference, since a regulatory complaint proposes no vacatur by itself and the remedy runs through counsel rather than through the portal. How far the text reaches into any particular file is a matter for counsel rather than for this page.

Counsel assembles the offer papers before alleging the omission.

Confession Terms After Chapter 398

A covered contract containing a confession of judgment or similar provision is void and unenforceable under section 398.055, and that sentence changes the posture of every Texas file that carries such a paragraph. That decides the opening move.

The New York procedure, with its sworn affidavit and county restrictions, still governs judgments entered there, and the affidavit and county rules of the confession statute measure any paper that points north, though collectors will describe the distinction as a technicality, and counsel tests the affidavit rather than debating the label, building the record for the fight against the judgment.

The confession died in the statute. The lawsuit survived it. Counsel prepares for the survivor.

Adopted rules explain that automatic deposit account debits require a perfected first priority interest in all recipient accounts receivable (a condition many files fail on inspection, though inspection is counsel work rather than owner work), so the owner preserves the statements and lets counsel test the interest. How far the adopted rules reach into any particular file is a question for counsel rather than for this page.

Characterization Proof in a Texas File

Texas counsel still reaches for the New York appellate test that weighed reconciliation practice, finite term, and bankruptcy recourse, and the characterization analysis in LG Funding supplements the statute where the statute falls silent.

I have yet to see a disclosure packet that satisfies the statute on its face.

Counsel follows the debits through the thin months, compares the reconciliation given against the reconciliation promised, and asks what term the parties could name, because the ledger answers more honestly than the label, and the label was written by the party that profits from the ambiguity. Often we meet the owner after the second debit cycle rather than after the first letter.

You sign in Dallas and then you defend under two bodies of law.

Whether a Texas court would adopt those factors outright or reshape them under local doctrine remains an open question.

The statute and the case law travel together in counsel hands.

What a Best List Measures Besides Counsel

Federal guidance treats undisclosed paid order as distortion, judging disclosure by overall impression, and the endorsement guidance on material connections gives the Texas owner a lens for every directory that promises the best of anything.

The list measures spend. Counsel measures exposure.

Choosing Counsel and Settlement Help in Texas

The statute helps only the owner who invokes it through counsel. Counsel should date the agreement, test the disclosures, and challenge the confession paragraph, addressing the debit authority, the balance dispute, and the filing risk in the order the calendar requires, and the aim from the first hour is to ensure no payment plan concedes what the statute voids.

The owner should resist the urge to renegotiate by phone, even casually, and should simply gather and hold every demand for counsel before replying, since a promise made to stop the debits can harden into evidence used against the business.

Texas counsel dates coverage before discussing settlement. The owner brings the offer papers with the statements. The conference proceeds from documents.

This is where an outside assessment earns its place. Delancey Street, a debt relief company rather than a law firm, offers a free confidential initial review for MCA distress and coordinates legal matters with independently licensed counsel, and a Texas owner can request that assessment through Delancey Street while the questions above remain open.

The objective throughout is to ensure the disclosure packet receives extremely close attention before any figure is discussed, since what the funding party discloses, or withholds, at signing tells counsel how the matter will proceed. The forms were drafted in order to collect daily while disclosing little, and the anemic packet that resulted repays an extremely thorough comparison with the statute.

A bill becomes a shield only in counsel hands. The September statute changed the paper these disputes are fought on, and the Texas owner who brings that paper to counsel early recovers the advantage the signing gave to the other side.