Texas MCA Law (HB 700): Registration, CoJ, Debits

Texas MCA law now sits in Finance Code Chapter 398, added by HB 700. From Sept 1, 2025, providers and brokers serving Texas recipients face registration, cost disclosures on offers under $1 million, a rule that voids contracts with confession of judgment clauses, and limits on automatic account debits.

This is orientation only, not legal advice (reviewed Nov 5, 2026). For questions about a contract you signed, talk to a licensed Texas attorney.

Last updated: Nov 5, 2026

Key facts (official statute)

• The Act took effect Sept 1, 2025 (Act Section 3).
• Providers and brokers already in business on that date must register by Dec 31, 2026 (Act Section 2(a)). The ongoing duty to register is in Sec. 398.053.
• A contract with a confession of judgment or similar provision is void and unenforceable (Sec. 398.055).
• Automatic debiting of a deposit account is barred unless the provider or broker holds a validly perfected, first-priority security interest in that account under Business & Commerce Code Chapter 9 (Sec. 398.056).
• Disclosures are required for specific offers under $1 million to a recipient in Texas (Sec. 398.051).
• The civil penalty is $10,000 per violation, and the chapter creates no private right of action (Sec. 398.101, 398.102).

What did Texas MCA law change under HB 700?

HB 700 added a new chapter to the Texas Finance Code. The statute does not use the phrase "merchant cash advance." It uses "commercial sales-based financing," and most MCA-style deals tied to a business's sales fall into that bucket. On this page we use "MCA" for short.

The statute does not turn every MCA into a bank loan. It adds registration, disclosures, and two hard contract rules: one on confessions of judgment and one on automatic debits.

Chapter 398 reaches providers and brokers who deal with "a recipient of this state, regardless of whether the provider or broker maintains a physical presence in this state" (Sec. 398.002). Banks, credit unions, and some other listed parties are exempt (Sec. 398.003).

The Office of Consumer Credit Commissioner (OCCC) administers the chapter (Sec. 398.005(a)). The Finance Commission must adopt rules naming unfair, deceptive, or abusive acts, with initial rules due by Sept 1, 2026. The commission may not set a maximum rate, finance charge, or fee (Sec. 398.005(d)). So the law does not cap factor rates.

You can read the full text of Texas Finance Code Chapter 398 on the state's statute site.

Who must register, and what is the Dec 31, 2026 deadline?

Under Sec. 398.053(a), a provider or a commercial sales-based financing broker paid for its work in Texas must register with the OCCC "before conducting business."

The Act gives a grace period to those already in business. Anyone acting as a provider or broker on Sept 1, 2025 must register by Dec 31, 2026 (Act Section 2(a)). New entrants have no grace period. They register before they start.

After that, registration renews on or before January 31 each year (Sec. 398.053(b)). The OCCC sets the form and fee by rule. The chapter itself does not list a fee amount, so we don't either.

If a funder is still unregistered after the deadline, that is an OCCC enforcement issue. The statute does not give merchants a private lawsuit over it (Sec. 398.102).

Are confession of judgment clauses void under Texas MCA law?

This is the rule many owners ask about first. Sec. 398.055 reads:

"A commercial sales-based financing contract that contains a confession of judgment provision or any similar provision is void and unenforceable."

Read it closely. The statute does not just strike the clause. It says the whole contract containing that provision is void and unenforceable. It also covers "any similar provision," not only documents labeled confession of judgment.

One thing the statute text does not settle is how this applies to contracts signed before Sept 1, 2025. We are not going to guess. If you signed an older deal with a CoJ, that is a question for a licensed Texas attorney.

For general background, see our guides on confession of judgment, MCA confession of judgment, and CoJ defense basics.

What automatic debit and ACH rules does Chapter 398 set?

Texas did not ban ACH. What Sec. 398.056 does is attach a condition to automatic debits:

"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."

In plain terms, daily or weekly pulls are not automatically illegal. The statute ties automatic debiting to a first-priority, perfected security interest in the deposit account itself. Whether a given funder has that is a fact and paperwork question. It depends on the documents and on who else claims the account.

If your agreement authorizes automatic debits, look for language about a security interest in your deposit account. That is the part of the contract this section cares about.

What disclosures must Texas merchants receive?

Sec. 398.051 requires cost disclosures when a provider makes a specific offer under $1 million to a recipient in Texas. The details of what goes on that disclosure are set out in the statute, and it is worth reading the section itself.

A few practical points:

• Threshold. The rule applies to specific offers under $1 million.
• Signature first. The recipient signs the disclosures before the application is finalized (Sec. 398.052).
• Refinancing. When new financing pays off an existing sales-based financing deal, extra disclosures apply (Sec. 398.051(b)).

If you received an offer after Sept 1, 2025 and never saw or signed a disclosure, keep a copy of what you did get. It may matter later.

What should Texas merchants check in their MCA contracts?

This is an inventory, not legal advice. Pull your agreement and go through it with these questions:

1. Does the agreement call itself a purchase of future receipts or sales-based financing?
2. Is there a confession of judgment or any "similar" consent-to-judgment clause?
3. How are automatic debits authorized, and does the contract mention a security interest in your deposit account?
4. Is there a personal guarantee, a UCC filing, or default and reconciliation terms?
5. Does the paperwork show the total repayment amount, finance charge, and fees in the way a Sec. 398.051 disclosure would on a new offer?
6. Does the provider or broker seem set up to register with the OCCC?

If the real problem is cash flow, read about MCA debt restructuring and MCA debt settlement. If a judgment was already entered, see CoJ filed against me. It also helps to understand how MCA debt relief actually works before you sign anything new.

Who does the law cover geographically?

The chapter looks at where the recipient is, not where the funder sits. Sec. 398.002 covers providers and brokers who deal with "a recipient of this state," including over the Internet, even with no Texas office. The disclosure rule in Sec. 398.051 speaks of a "recipient in this state."

That is as far as we go. Chapter 398 does not rewrite every rule about out-of-state contracts or judgments, and we won't claim it does.

What are the penalties, and can a merchant sue under Chapter 398?

A person who violates the chapter "is subject to a civil penalty of $10,000 for each violation" (Sec. 398.101). The OCCC administers the chapter.

Sec. 398.102 says the chapter does not create a private right of action. A merchant cannot sue under Chapter 398 alone because a funder skipped registration or a disclosure. Other claims outside this chapter may exist depending on the facts. That is a question for a licensed attorney.

Frequently asked questions

What is Texas MCA law under HB 700?

Texas HB 700 added Finance Code Chapter 398 on commercial sales-based financing. From Sept 1, 2025 it requires provider and broker registration, cost disclosures on offers under $1 million, voids contracts with confession of judgment clauses, and limits automatic deposit-account debits. Orientation only, not legal advice.

When do MCA providers have to register in Texas?

Anyone already acting as a provider or broker on Sept 1, 2025 must register under Sec. 398.053 by Dec 31, 2026. New entrants must register with the Office of Consumer Credit Commissioner before conducting business. Renewals are due on or before January 31 each year after.

Are confession of judgment clauses enforceable on Texas MCAs?

Under Sec. 398.055, a commercial sales-based financing contract that contains a confession of judgment provision or any similar provision is void and unenforceable. How that applies to older contracts is a question for counsel. See our confession of judgment guide for general background.

Did Texas ban ACH or automatic MCA debits?

No, not outright. Sec. 398.056 bars a provider or broker from setting up automatic debiting of a recipient's deposit account unless they hold a validly perfected, first-priority security interest in that account under Business & Commerce Code Chapter 9.

Do Texas merchants get a private lawsuit under Chapter 398?

No. Sec. 398.102 says the chapter does not create a private right of action. OCCC oversight and a $10,000 civil penalty per violation still apply (Sec. 398.101). Claims outside this chapter are a question for a licensed attorney.

What should I do if my Texas MCA contract has a CoJ or aggressive debit terms?

Inventory the contract, don't ignore any court papers, and talk to a licensed Texas attorney about your signed deal. For cash-flow options, see MCA debt restructuring or MCA debt settlement.

Primary sources

• Texas Finance Code Chapter 398: https://statutes.capitol.texas.gov/Docs/FI/htm/FI.398.htm
• Enrolled H.B. 700 (89(R)): https://capitol.texas.gov/tlodocs/89R/billtext/html/HB00700F.htm