Bill Text: TX HB700 | 2025-2026 | 89th Legislature | Enrolled

---

Bill Title: Relating to disclosures for certain commercial sales-based financing transactions, the effect of certain commercial sales-based financing contract provisions, and the registration of commercial sales-based financing brokers and providers; authorizing a fee and providing a civil penalty.

Sponsorship: Partisan Bill (Republican 2)

Status: (Passed) 2025-06-20 - Effective on 9/1/25 [HB700 Detail]

Download: Texas-2025-HB700-Enrolled.html

---

H.B. No. 700

AN ACT
relating to disclosures for certain commercial sales-based
financing transactions, the effect of certain commercial
sales-based financing contract provisions, and the registration of
commercial sales-based financing brokers and providers;
authorizing a fee and providing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 5, Finance Code, is amended by adding
Chapter 398 to read as follows:
CHAPTER 398. COMMERCIAL SALES-BASED FINANCING
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 398.001. DEFINITIONS. In this chapter:
(1) "Commercial sales-based financing" or "commercial
sales-based financing transaction" means an extension of
sales-based financing to a recipient by a provider, the proceeds of
which the recipient does not intend to use primarily for personal,
family, or household purposes.
(2) "Commercial sales-based financing broker" means a
person who, for compensation or the expectation of compensation,
obtains commercial sales-based financing for a recipient or offers
to obtain commercial sales-based financing for a recipient from a
provider.
(3) "Disbursement amount" means the amounts paid to
the recipient or on the recipient's behalf. The term does not
include any finance charges that are deducted or withheld at
disbursement.
(4) "Finance charge" means the cost of commercial
sales-based financing expressed as a dollar amount. The term
includes a charge payable, directly or indirectly, by the recipient
that is imposed, directly or indirectly, by the provider of the
financing as an incident to, or a condition of, the extension of
financing.
(5) "Person" means an individual, corporation,
partnership, limited liability company, joint venture,
association, joint stock company, trust, sole proprietorship or
other unincorporated organization, or other similar entity.
(6) "Provider" means a person who provides or will
provide commercial sales-based financing to a recipient or who
extends a specific offer of commercial sales-based financing to a
person applying for that financing or the person's authorized
representative.
(7) "Recipient" means a person, or the authorized
representative of a person, who applies for commercial sales-based
financing and is made a specific offer of commercial sales-based
financing by a provider. The term does not include a person acting
as a commercial sales-based financing broker.
(8) "Sales-based financing" means a transaction that
is repaid by the recipient to the provider of the financing:
(A) as a percentage of sales or revenue, in which
the payment amount may increase or decrease according to the volume
of sales made or revenue received by the recipient; or
(B) according to a fixed payment mechanism that
provides for a reconciliation process that adjusts the payment to
an amount that is a percentage of sales or revenue.
(9) "Specific offer" means the specific terms of
commercial sales-based financing. The term includes a price or
amount quoted to a recipient by a person providing the financing
based on information obtained from or about the recipient that, if
accepted by the recipient, would be binding on the provider,
subject to specific requirements in the financing terms.
(10) "Total repayment amount" means the sum of the
disbursement amount and finance charge.
Sec. 398.002. APPLICABILITY OF CHAPTER. This chapter
applies to a provider or a commercial sales-based financing broker
who offers, obtains, or provides commercial sales-based financing
services over the Internet to or for a recipient of this state,
regardless of whether the provider or broker maintains a physical
presence in this state.
Sec. 398.003. EXEMPTIONS. This chapter does not apply to a
provider or broker that is:
(1) a bank, out-of-state bank, bank holding company,
credit union, federal credit union, out-of-state credit union, or
any subsidiary or affiliate of those financial institutions;
(2) a person acting in the capacity of a technology
services provider to an entity exempt under this section as part of
the exempt entity's commercial sales-based financing program if the
person has no interest, arrangement, or agreement to purchase any
interest in the commercial sales-based financing extended in
connection with the program;
(3) a lender regulated under the Farm Credit Act of
1971 (12 U.S.C. Section 2001 et seq.); or
(4) a person who extends or brokers:
(A) a commercial sales-based financing
transaction secured by real property;
(B) a lease, as defined by Section 2A.103,
Business & Commerce Code;
(C) a commercial sales-based financing
transaction entered into under a commercial sales-based financing
agreement or commercial open-end credit plan of $50,000 or more in
which the recipient is:
(i) a dealer, as defined by Section
503.001, Transportation Code; or
(ii) a motor vehicle rental company or an
affiliate of a motor vehicle rental company; or
(D) a commercial sales-based financing
transaction in connection with the sale of products or services
that:
(i) the person manufactures, licenses, or
distributes; or
(ii) a parent company, subsidiary, or
affiliate of the person described by Subparagraph (i) manufactures,
licenses, or distributes.
Sec. 398.004. APPLICATION OF OTHER LAW. A sales-based
financing transaction is not a form of an account purchase
transaction for purposes of Section 306.103, regardless of the
principal amount of the advance.
Sec. 398.005. ADMINISTRATION OF CHAPTER; RULEMAKING. (a)
The Office of Consumer Credit Commissioner shall administer,
implement, and enforce this chapter.
(b) Except as provided by Subsection (d), the Office of
Consumer Credit Commissioner may:
(1) bring enforcement actions for:
(A) violations of rules adopted under Subsection
(c);
(B) failures to make disclosures required by
Section 398.051; or
(C) failures to register as required by Section
398.053;
(2) terminate or suspend registrations; and
(3) assess civil penalties.
(c) The Finance Commission of Texas shall adopt rules
applicable to providers and commercial sales-based financing
brokers that identify unlawful, unfair, deceptive, or abusive acts
or practices related to a transaction subject to this chapter.
Rules adopted under this subsection must identify and prohibit
specific acts or practices by providers or brokers that:
(1) the commission considers unfair because:
(A) the act or practice causes or is likely to
cause substantial injury to a recipient that the recipient cannot
reasonably avoid; and
(B) the injury outweighs the benefits to
recipients or to market competition;
(2) are material acts or practices that will or likely
will mislead a recipient who, given the circumstances, has a
reasonable interpretation of the act or practice;
(3) materially interfere with a recipient's ability to
understand a term or condition of a commercial sales-based
financing transaction; or
(4) take unreasonable advantage of:
(A) a recipient's lack of understanding of the
material risks, costs, or conditions of the commercial sales-based
financing transaction; or
(B) a recipient's inability to protect the
recipient's interest in selecting or using a commercial sales-based
financing product.
(d) The Finance Commission of Texas may not adopt a maximum
annual percentage rate, finance charge, or fee for commercial
sales-based financing transactions.
SUBCHAPTER B. REGULATION AND DISCLOSURE REQUIREMENTS
Sec. 398.051. DISCLOSURES. (a) If a provider extends a
specific offer of commercial sales-based financing of less than $1
million to a recipient in this state, the provider shall disclose to
the recipient:
(1) the total amount of the financing;
(2) the disbursement amount;
(3) the finance charge;
(4) the total repayment amount;
(5) the estimated period for the periodic payments to
equal the total repayment amount under the terms of the financing;
(6) the payment amounts as follows:
(A) if the payment amounts are fixed, the amounts
and the frequency of payments; or
(B) if the payment amounts are variable:
(i) a payment schedule or a description of
the method used to calculate the amounts and frequency of payments;
and
(ii) the amount of the average projected
payments per month;
(7) a description of all other potential fees and
charges not included in the finance charge, including draw fees,
late payment fees, and returned payment fees;
(8) any finance charge the recipient will be required
to pay if the recipient pays off or refinances the commercial
sales-based financing before the transaction is scheduled to be
repaid in full;
(9) any additional fees, not included in the finance
charge, the recipient will be required to pay if the recipient pays
off or refinances the commercial sales-based financing before the
transaction is scheduled to be repaid in full;
(10) a description of collateral requirements or
security interests, if applicable; and
(11) a statement outlining whether the provider will
pay compensation directly to a commercial sales-based financing
broker in connection with the specific offer of sales-based
financing and, if applicable, the amount of the compensation.
(b) If, as a condition of obtaining commercial sales-based
financing, the provider requires the recipient to pay off the
outstanding balance of an existing commercial sales-based
financing, the provider shall disclose to the recipient:
(1) the amount of the new commercial sales-based
financing used to pay off the portion of the outstanding balance of
the existing commercial sales-based financing that consists of:
(A) prepayment charges required to be paid; and
(B) any unpaid interest expense or finance
charges that were not forgiven at the time of renewal of the
transaction; and
(2) if the disbursement amount will be reduced to pay
down any unpaid portion of the outstanding balance, the actual
dollar amount by which the disbursement amount will be reduced.
Sec. 398.052. SIGNATURE. The provider shall obtain the
recipient's signature on the disclosures required by Section
398.051 before finalizing the application for the commercial
sales-based financing transaction.
Sec. 398.053. PROVIDER AND BROKER REGISTRATION. (a) A
person may not engage in business as a provider or a commercial
sales-based financing broker for compensation in this state unless,
before conducting business, the person registers with the Office of
Consumer Credit Commissioner. The registration is effective on
receipt by the commissioner of a completed registration form as
provided by Subsection (d) and the required registration fee and
remains effective until renewal or termination by the Office of
Consumer Credit Commissioner.
(b) On or before January 31 of each year after filing an
initial registration, a provider or broker shall file a renewal
registration form with the required renewal registration fee.
(c) The provider or broker shall pay a registration fee on
filing an initial registration and a renewal registration fee on
filing a renewal registration.
(d) The registration or renewal registration form must
include:
(1) the name of the provider or broker;
(2) the name under which the provider or broker
transacts business, if different from the name of the provider or
broker;
(3) the address of the provider's or broker's
principal office, which may be outside this state;
(4) the name and address in this state of a designated
agent for service of process; and
(5) any judgment, memorandum of understanding, cease
and desist order, or conviction against the provider or broker, or
any person that otherwise controls the provider or broker or a
director or officer of the provider or broker, related to a
violation of law, act of fraud, breach of trust, or money
laundering.
(e) The Office of Consumer Credit Commissioner shall:
(1) by rule set the registration fee and registration
renewal fee in amounts sufficient to cover the registration costs;
and
(2) adopt a form to be used for a registration or
renewal registration under this section.
Sec. 398.054. UPDATE OF REGISTRATION STATEMENT. A provider
or commercial sales-based financing broker shall update
information contained in the registration statement not later than
the 90th day after the date on which the information changes.
Sec. 398.055. UNENFORCEABILITY OF CERTAIN CONTRACT
PROVISIONS. A commercial sales-based financing contract that
contains a confession of judgment provision or any similar
provision is void and unenforceable.
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.
SUBCHAPTER C. ENFORCEMENT
Sec. 398.101. CIVIL PENALTY. A person who violates this
chapter is subject to a civil penalty of $10,000 for each violation.
Sec. 398.102. PRIVATE RIGHT OF ACTION NOT AUTHORIZED. This
chapter does not create a private right of action against any person
based on compliance or noncompliance with this chapter.
SECTION 2. (a) Not later than December 31, 2026, a person
engaging in business as a commercial sales-based financing broker
or provider on the effective date of this Act must register under
Section 398.053, Finance Code, as added by this Act.
(b) Not later than September 1, 2026:
(1) the Finance Commission of Texas shall adopt
initial rules under Section 398.005(c), Finance Code, as added by
this Act; and
(2) the Office of Consumer Credit Commissioner shall
adopt rules setting the registration and registration renewal fees
and adopting a form for the registration of providers and
commercial sales-based financing brokers as required under Section
398.053, Finance Code, as added by this Act.
SECTION 3. This Act takes effect September 1, 2025.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 700 was passed by the House on May 12,
2025, by the following vote: Yeas 116, Nays 28, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 700 on May 28, 2025, by the following vote: Yeas 98, Nays 23, 3
present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 700 was passed by the Senate, with
amendments, on May 26, 2025, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor