Texas MCA Disclosure Law HB 700: 5 Provisions Business Owners Should Read

The early summaries of the Texas law describe a statute the legislature did not pass.

House Bill 700 added Chapter 398 to the Finance Code for commercial sales based financing, effective September 1, 2025, with agency rules adopted in July 2026. Provider bulletins present the chapter as a complete ban on MCA practices or, in the next paragraph, as a minor paperwork formality. The enacted text supports neither account. What follows reads the provisions in their enacted order, with the exemptions and limitations given the same attention as the headline requirements.

1. Coverage and Exemptions

The chapter defines its subject through repayment tied to sales or revenue, including fixed payment mechanisms reconciled to a revenue percentage. Providers serving Texas recipients fall inside the framework even without a Texas office, a reach the drafters included in order to catch the remote funder, which answers the out of state funder question before counsel has finished reading the agreement.

Specified entities and transactions stand outside. Banks and certain related institutions are excluded, and the exclusion matters because an expensive bank obligation is not converted into a covered transaction by hardship alone. The business should not assume coverage from frequent withdrawals or from advance terminology in the marketing. Simply assemble the offer, the executed agreement, and the funding date before seeking an interpretation, so counsel can identify which rules touch this transaction and which questions the file leaves open.

And the statutory label begins the inquiry rather than ending it. Whether this holds for a renewal funded before September 2025 but collected after is a question the dates must answer before the provisions can.

2. The Disclosure Package

For covered specific offers below one million dollars, Section 398.051 requires the financing amount, the disbursement, the finance charge, and the total repayment, alongside payment amounts, timing, other charges, broker compensation, and relevant security terms. The recipient signs the disclosures before the application is finalized, which makes the signature page a substantive event rather than a formality.

The final enrolled version of HB 700 supplies these requirements in their binding form. Earlier drafts carried different thresholds. The financing figure and the disbursement figure describe different sums. An owner may accept a substantial nominal amount while receiving far less usable cash, because the transaction retires another obligation or retains charges at funding, and that gap is what the disclosure package exists to expose.

Where new financing requires an existing sales based balance to be paid, further disclosure concerning the sums applied to that balance is required. The adopted rules address accurate disclosures before agreement and corrections where information proves inaccurate. A corrected disclosure does not rewrite an executed contract or erase the earlier violation (which defenders of current industry practice will present as full compliance, though the underlying obligation and its history remain what they were).

Have counsel review and analyze the offer, the disclosures, and the funding record together, and ensure the figures describe the same transaction. When they do not, the file, that accreting stack of versions and corrections, contains the discrepancy in the provider own hand.

3. Renewals and Refinancing

Begin with the financing amount. Subtract the charges retained at funding. Subtract the sum assigned to the prior obligation. The remainder should match the cash delivered, subject to any other disclosed deductions.

Keep the previous agreement and its account history beside the new documents. The new instrument cannot establish by itself that every prior payment was credited or that the payoff figure was correct. For a renewal, trace the new financing amount through the deductions to the operating account, identifying what retired the earlier balance and whether the old obligation was discharged or folded into the new transaction. Most owners discover the old balance inside the new one.

4. Debits, Confessions, and Limits of the Chapter

Section 398.055 declares a covered financing contract containing a confession of judgment provision or similar term void and unenforceable. The operative words are covered and similar, and both require legal assessment of the actual language rather than the provider assurance that the clause is standard. Standard language is void with some frequency, and frequency never cured a defective clause.

Automatic deposit account debits require a validly perfected first priority security interest in all of the recipient accounts receivable under the adopted rules. The condition is extremely specific. It prohibits nothing in general and excuses nothing in particular, functioning the way a smoke detector functions in a building already condemned: present in the text, of limited use until someone tests whether it works.

Section 398.005 restricts rulemaking on maximum charges, so the chapter should not be described as a general Texas cap on MCA cost; whether another law constrains the price is a separate inquiry. Section 398.102 denies a private right of action under the chapter, so an owner should ask counsel to distinguish regulatory enforcement, contractual defenses, and any other claim the applicable law supports. Those routes share a factual origin and nothing else: forum, burden, and the remedy available at the end all differ.

The July 2026 adopted rules supply the implementation detail a bare reading of the bill will miss. Check the effective date and transaction history before asserting that a current requirement governed an earlier event.

5. Registration, Enforcement, and the Settlement Use

The statute assigns administration and enforcement to the Office of Consumer Credit Commissioner, with registration obligations for covered operators and a December 31, 2026 transition deadline for existing businesses. Registration signals regulatory visibility. It certifies nothing about the suitability of any offer, and counsel should ensure the distinction stays clear when a provider presents its registered status as an endorsement.

A complaint to the regulator and a response to a lawsuit proceed on separate calendars with separate consequences. Keep each responsibility assigned with confirmation retained, and resist the urge to read a violation as a self executing remedy without examining the provision that supplies it, even casually.

Delancey Street offers a free confidential initial review focused on MCA distress, as a debt settlement company rather than a law firm, with legal interpretation of HB 700 left to independently licensed counsel. The negotiation assessment should address current cash, the account history, and a proposal the business can perform, and the owner needs written terms identifying what payment resolves, or leaves unresolved, and whether guarantees or security rights survive. A supported legal concern may prove extremely useful in the discussion, though it guarantees no particular concession.

Texas now gives the business specific documents to demand and specific practices to examine. The useful outcome is a decision founded on the enacted requirements and the actual agreement, with neither the statute nor the settlement promise asked to carry weight it cannot bear.