7 Disclosure Issues to Check in a Texas MCA File Under HB 700

The disclosure page determines less than the borrower hopes and more than the funder concedes.

Texas now requires specific cost and payment disclosures before certain sales based financing offers become contracts. Seven check items below follow the enrolled text of House Bill 700 with the adopted rules, and each item states what the law requires beside the remedy the law provides.

Cost and Payment Disclosures for Covered Offers

Section 398.051 lists eleven disclosure items for a specific offer under one million dollars, beginning with the figures that define price. The statute gives the phrase specific offer a defined meaning, and only an offer within that meaning triggers the eleven items. The provider must state the total financing amount with the disbursement amount and the finance charge and the total repayment amount, followed by the estimated payoff period, with accuracy measured against the offer itself.

Payment terms receive their own subdivision, with fixed amounts and frequency stated directly and variable schedules described by method with the average projected monthly payment. The owner signed because the business needed the funds that week. Any honest reading starts there.

The provider shall obtain the signature of the recipient on the disclosures before the application is finalized. Where a page proves inaccurate, the provider must notify the recipient and supply a corrected page. The violation occurred even where a corrected page arrives later, since the correction supplies accurate information without erasing the earlier failure. Our reading covers the enrolled text and rules.

Fees and Prepayment Terms

Beyond the finance charge sits a second schedule of charges. The disclosure must describe all other potential fees outside the finance charge with any charge owed upon early payoff or refinance. The adopted rules treat the assessment of a fee that was never disclosed or contracted for as an unfair practice in its own right. The fee pages repay extremely close attention, since departure costs hide there in plain sight.

We review the fee schedule, identify the charges outside the finance charge, and construct a comparison of the cost of exit against the cost of continuance. The comparison answers the only question the fee pages pose, which is what departure costs.

Collateral and Broker Compensation Statements

The provider must describe collateral requirements or security interests where applicable, and must state whether compensation flows to a broker in connection with the specific offer with the amount of that compensation. Most providers know the line the broker compensation occupies. They prefer the recipient not to ask.

Exemptions remove certain transactions from these duties, including banks and real property secured transactions with other categories the statute names. Counsel ensures coverage is confirmed before the checklist is applied, since the file invites questions of timing, of coverage, and whether the transaction falls inside the chapter at all.

Renewal and Refinance Disclosures

Renewal carries its own disclosure where new financing is conditioned on payoff of an existing balance. The provider must disclose the new financing applied to prepayment charges with unforgiven interest or finance charges, and any reduction of the disbursement in dollars. A renewal that conceals its payoff cost recreates the debt it claims to resolve.

Whether stacked renewals were the abuse this subdivision was written to expose is a question the rulemaking history leaves open.

Related prohibitions reach further into renewal practice. The adopted rules bar a lien filed without an authenticated agreement, along with unauthorized debits and violations of a signed intercreditor agreement. Simply state that no funds move until counsel reviews the disclosure, and resist the urge to treat a missing page as a canceled debt. No new authorization, even casually given by phone, should leave the business while the review is pending.

Confession of Judgment Provisions

A commercial sales based financing contract that contains a confession of judgment provision or any similar provision is void and unenforceable. The clause is void under Section 398.055. Counsel assesses what survives the stricken clause file by file.

The clause falls under Section 398.055. What remains belongs to a different analysis.

New York practice differs, since entry there follows a sworn affidavit procedure with county restrictions rather than a categorical bar, as the confession of judgment procedure shows. That is the difference between a violation and a defense.

Automatic Debits and Registration

In September 2025 the statute took effect, and files signed after that date carry a different checklist from the files that preceded it. A provider or broker may not establish automatic debits from a deposit account without a validly perfected security interest of first priority against competing claims, measured for all accounts receivable under business and commerce code chapter 9. The rule reaches arrangements built from multiple prewritten checks.

Registration stands as a separate duty beside disclosure. No person may act as provider or broker for compensation without registration with the credit commissioner, with updates due within ninety days of any change and yearly renewal for one thousand dollars. A peculiar feature of the transition calendar gave existing operators until the end of 2026 to register. The line between an estimate and a misstatement is not drawn in the text, and counsel draws it file by file.

Internet providers serving Texas recipients fall within the chapter without a local office, and registration signals compliance with a filing duty rather than endorsement. Counsel protects and preserves the proof of every filing, since paper is the only witness that never forgets. Seldom will a provider volunteer the broker amount before the recipient asks, which is why counsel asks in writing.

What a Violation Buys the Borrower

Each violation carries a civil penalty of ten thousand dollars, with suspension or termination of registration where warranted. The Finance Commission may identify and prohibit unfair practices, though it may not set a maximum rate or charge or fee for these transactions.

The chapter creates no private right of action, so a complaint initiates public enforcement rather than private recovery. A violation supports a penalty proceeding. The debt itself stands unaffected. Whether courts will read the voidness language to reach renewal paper signed before the effective date is beyond prediction from this desk.

A Settlement Conversation With Delancey Street

Delancey Street works with businesses carrying MCA balances and other business debt as a settlement company, not a law firm. Independent counsel handles the legal work while advisors review and analyze the disclosure file, with more information through the Delancey Street site.

A first conversation ensures each disclosure carries its conditions, even where the outlook is extremely uncertain. A first call costs nothing and assumes nothing. It is the beginning of a diagnosis.