May 27, 2025
On the night of May 26, 2025, the Texas Senate passed HB 700 that regulates sales-based financing transactions and requires providers and brokers of sales-based financing transactions to register with the Texas Office of Consumer Credit Commissioner. BizFinLaw reported on companion bill SB 2677 in March. HB 700 lacks the proposed interest rate cap of SB 2677 but includes a proposed ban on ACH payments in most circumstances.
Under the latest version of the bill, a provider or broker of sales-based financing transactions must register with the OCCC by December 31, 2026. Additionally, a provider must give the recipient certain disclosures before consummation of a sales-based financing transaction. The required disclosures do not include an APR.
The proposed ban on most ACH debits was added by Senator Charles Perry (R-Lubbock) just before passage of the bill in the Senate. The amendment prohibits a sales-based financing provider or broker from automatically debiting a recipient's deposit account unless the provider or broker has a first-priority security interest against the claims of all other persons in the recipient's account. This prohibition on ACH debits would likely operate as a de facto ban on sales-based financing transactions in Texas. The amendment to HB 700 reads as follows:
Sec. 398.056. CERTAIN AUTOMATIC DEBITS PROHIBITED. A provider or commercial sales-based financing broker may not establish a mechanism for automatically debiting a recipient's deposit account unless the provider or broker holds a validly perfected security interest in the recipient's account under Chapter 9, Business & Commerce Code, with a first priority against the claims of all other persons.
The bill now returns to the House, where lawmakers will decide whether to pass the bill as adopted by the Senate or send it to a conference committee to reconcile the House and Senate versions. The bill must pass or fail by the time the Texas Legislature adjourns on Monday, June 2. If HB 700 passes and Governor Greg Abbott signs it into law, it will take effect on September 1, 2025 (except for the registration requirement, as mentioned above). We at BizFinLaw will keep you posted on the latest developments regarding this bill and other matters relevant to the commercial financing industry.