Quick Summary
Texas passed House Bill 700 in June 2025, creating the first comprehensive regulatory framework for merchant cash advances (MCAs) and sales-based financing in the state. The law introduces disclosure requirements, provider registration, and a major restriction on automatic ACH debits. If you have an active MCA or are considering one, an attorney can help you understand how these new protections apply.
Texas has become the latest state to put real guardrails around merchant cash advances, and if your business has an active MCA, the new rules may already affect you. House Bill 700 changes what MCA companies can and can’t do, from how they disclose costs upfront to whether they can keep pulling money directly from your bank account.
Understanding what the law requires, and what it means when a funder isn’t following it, is an important first step in protecting your business.
Struggling with your debt?
What Is Texas House Bill 700?
Texas House Bill 700 (HB 700) was signed by Governor Greg Abbott on June 20, 2025, adding Chapter 398 to the Texas Finance Code. The legislation establishes a formal regulatory framework for commercial sales-based financing, including merchant cash advances, which historically operated with limited oversight in the state.
Most provisions took effect September 1, 2025, with provider and broker registration requirements phasing in through December 31, 2026. The law applies broadly to any financing provider serving Texas businesses, even if the company is located out of state.
HB 700 follows similar laws enacted in New York and California, signaling a broader national trend toward regulating MCAs and increasing transparency for small business borrowers.
How Does the New Texas Law Protect Business Owners With MCAs?
HB 700 introduces three major protections for Texas business owners. These provisions are designed to give business owners more transparency, control, and due process when dealing with MCA providers.
Disclosure Requirements
For MCA transactions under $1 million, providers must now deliver written disclosures before the agreement is finalized. These disclosures must include:
- Total financing amount
- Disbursement amount
- Finance charges
- Total repayment amount
- Payment schedule
- All fees
- Collateral requirements
Business owners must sign these disclosures before the contract is finalized, ensuring they have an opportunity to review the true cost and structure of the agreement before moving forward. For many borrowers, this is the first time MCA pricing has been presented in a standardized and easy-to-understand format.
The ACH Debit Restriction
Arguably, one of the most consequential provisions of HB 700 is its restriction on automatic bank withdrawals.
The law prohibits MCA providers from automatically debiting a business bank account unless they hold a first-priority perfected security interest in that account. In practice, this is a high bar — especially for businesses that already have bank liens, prior blanket UCC filings, or other secured financing.
Because many MCA providers can’t meet this requirement, the rule is widely viewed in the industry as a de facto limitation on traditional daily ACH-debit MCA models. Some providers are shifting toward alternative structures, such as merchant-initiated payments or split-processing arrangements.
This change matters because many Texas businesses previously faced multiple simultaneous daily debits from different MCA companies, creating severe cash-flow pressure and increasing default risk.
Confession of Judgment Banned
HB 700 also declares Confession of Judgment (COJ) clauses void and unenforceable in Texas MCA contracts.
In the past, COJs allowed MCA companies to obtain court judgments without notice or a hearing — often in out-of-state courts — leaving business owners with little opportunity to defend themselves. Eliminating COJs represents a significant due-process protection and aligns Texas with a growing number of jurisdictions that limit or prohibit the practice.
What Should Texas Business Owners Do If They Have an Existing MCA?
If you currently have an MCA, now is the time to reassess your agreement in light of the new law. Consider the following steps:
- Review your contract to determine whether it complies with HB 700.
- Confirm whether your provider is (or will be) registered before the Dec. 31, 2026 deadline.
- Understand that COJ provisions may now be unenforceable.
- Seek legal guidance if your provider continues automatic debits without a qualifying security interest.
HB 700 violations can result in civil penalties of up to $10,000 per occurrence, though enforcement is handled by the Texas Office of Consumer Credit Commissioner (OCCC) rather than through private lawsuits.
Are Merchant Cash Advances Still Legal in Texas?
In short, yes. HB 700 didn’t ban merchant cash advances. Instead, it created a regulatory structure that dictates how these products can be offered and serviced.
Notably, the law doesn’t impose APR or fee caps, and the Finance Commission of Texas is expressly prohibited from setting them. The OCCC held an open forum in November 2025 and continues developing implementation rules, meaning the regulatory landscape is still evolving.
However, because the ACH restriction fundamentally changes how many MCA products operate, it’s critical to carefully evaluate any agreement. Seeking legal guidance is a smart move; an MCA attorney can help determine whether a specific contract complies with the new requirements.
How Tayne Law Group Can Help
Navigating new regulations while managing business debt can feel overwhelming, especially if your cash flow is already tight. Tayne Law Group can assist Texas business owners by:
- Reviewing MCA agreements for HB 700 compliance
- Explaining your rights under the new law
- Providing defense against aggressive MCA collection tactics
- Exploring debt-relief and restructuring options
If you’re unsure how HB 700 affects your situation, a consultation can help you understand your options and next steps. Give us a call at (866) 890-7337 or fill out our short contact form. We provide a no-obligation phone consultation to learn about your options and how we can help. We never sell or share your information and will keep your matter confidential.
What Is Texas House Bill 700?
Texas House Bill 700 (HB 700) was signed by Governor Greg Abbott on June 20, 2025, adding Chapter 398 to the Texas Finance Code. The legislation establishes a formal regulatory framework for commercial sales-based financing, including merchant cash advances, which historically operated with limited oversight in the state.
Most provisions took effect September 1, 2025, with provider and broker registration requirements phasing in through December 31, 2026. The law applies broadly to any financing provider serving Texas businesses, even if the company is located out of state.
HB 700 follows similar laws enacted in New York and California, signaling a broader national trend toward regulating MCAs and increasing transparency for small business borrowers.
How Does the New Texas Law Protect Business Owners With MCAs?
HB 700 introduces three major protections for Texas business owners. These provisions are designed to give business owners more transparency, control, and due process when dealing with MCA providers.
Disclosure Requirements
For MCA transactions under $1 million, providers must now deliver written disclosures before the agreement is finalized. These disclosures must include:
- Total financing amount
- Disbursement amount
- Finance charges
- Total repayment amount
- Payment schedule
- All fees
- Collateral requirements
Business owners must sign these disclosures before the contract is finalized, ensuring they have an opportunity to review the true cost and structure of the agreement before moving forward. For many borrowers, this is the first time MCA pricing has been presented in a standardized and easy-to-understand format.
The ACH Debit Restriction
Arguably, one of the most consequential provisions of HB 700 is its restriction on automatic bank withdrawals.
The law prohibits MCA providers from automatically debiting a business bank account unless they hold a first-priority perfected security interest in that account. In practice, this is a high bar — especially for businesses that already have bank liens, prior blanket UCC filings, or other secured financing.
Because many MCA providers can’t meet this requirement, the rule is widely viewed in the industry as a de facto limitation on traditional daily ACH-debit MCA models. Some providers are shifting toward alternative structures, such as merchant-initiated payments or split-processing arrangements.
This change matters because many Texas businesses previously faced multiple simultaneous daily debits from different MCA companies, creating severe cash-flow pressure and increasing default risk.
Confession of Judgment Banned
HB 700 also declares Confession of Judgment (COJ) clauses void and unenforceable in Texas MCA contracts.
In the past, COJs allowed MCA companies to obtain court judgments without notice or a hearing — often in out-of-state courts — leaving business owners with little opportunity to defend themselves. Eliminating COJs represents a significant due-process protection and aligns Texas with a growing number of jurisdictions that limit or prohibit the practice.
What Should Texas Business Owners Do If They Have an Existing MCA?
If you currently have an MCA, now is the time to reassess your agreement in light of the new law. Consider the following steps:
- Review your contract to determine whether it complies with HB 700.
- Confirm whether your provider is (or will be) registered before the Dec. 31, 2026 deadline.
- Understand that COJ provisions may now be unenforceable.
- Seek legal guidance if your provider continues automatic debits without a qualifying security interest.
HB 700 violations can result in civil penalties of up to $10,000 per occurrence, though enforcement is handled by the Texas Office of Consumer Credit Commissioner (OCCC) rather than through private lawsuits.
Are Merchant Cash Advances Still Legal in Texas?
In short, yes. HB 700 didn’t ban merchant cash advances. Instead, it created a regulatory structure that dictates how these products can be offered and serviced.
Notably, the law doesn’t impose APR or fee caps, and the Finance Commission of Texas is expressly prohibited from setting them. The OCCC held an open forum in November 2025 and continues developing implementation rules, meaning the regulatory landscape is still evolving.
However, because the ACH restriction fundamentally changes how many MCA products operate, it’s critical to carefully evaluate any agreement. Seeking legal guidance is a smart move; an MCA attorney can help determine whether a specific contract complies with the new requirements.
How Tayne Law Group Can Help
Navigating new regulations while managing business debt can feel overwhelming, especially if your cash flow is already tight. Tayne Law Group can assist Texas business owners by:
- Reviewing MCA agreements for HB 700 compliance
- Explaining your rights under the new law
- Providing defense against aggressive MCA collection tactics
- Exploring debt-relief and restructuring options
If you’re unsure how HB 700 affects your situation, a consultation can help you understand your options and next steps. Give us a call at (866) 890-7337 or fill out our short contact form. We provide a no-obligation phone consultation to learn about your options and how we can help. We never sell or share your information and will keep your matter confidential.
FAQ
When did the new Texas MCA law take effect?
Most provisions became effective September 1, 2025. The provider/broker registration deadline is December 31, 2026.
Can MCA companies still debit my bank account in Texas?
Only if they hold a first-priority perfected security interest in your deposit account. Most MCA providers can’t meet this requirement, however. Contact an attorney if you believe an MCA provider is debiting your account illegally.
What disclosures should I receive before signing an MCA in Texas?
For transactions under $1 million, disclosures include the total financing amount, disbursement amount, finance charges, total repayment, payment schedule, all fees, and collateral requirements. You must review and sign these disclosures before the transaction finalizes.
What happens if an MCA provider violates HB 700?
Providers who violate these new laws are subject to a $10,000 civil penalty per violation. Keep in mind, there is no private right of action — enforcement is handled by the OCCC.
Does HB 700 apply to out-of-state MCA companies?
Yes. The law applies to any provider offering commercial sales-based financing to Texas recipients, regardless of physical presence in the state.
