The Texas Legislature’s landmark HB 700, signed into law in September 2026, is reshaping how commercial financing—especially merchant cash advance (MCA) deals—are conducted across the state. The new rules compel all providers and brokers handling loans under $1 million to register with the Office of Consumer Credit (OCC), provide standardized disclosure statements, and prohibit a host of deceptive practices. For entrepreneurs seeking working‑capital solutions, understanding these changes is crucial before they sign on the dotted line.
While the regulations target a broad swath of nonbank lenders, several carve‑outs exist for banks, credit unions, certain technology companies, and other entities that fall under existing federal statutes. Nevertheless, the majority of small‑business owners who rely on MCAs or similar products will soon need to navigate a more regulated environment.
texasloanstoday.com has been closely monitoring these developments, offering up‑to‑date guidance for both lenders and borrowers. Their coverage highlights how the OCC’s upcoming rulebook will be drafted in early 2026 and finalized by August of that year.
The Core Requirements of HB 700
At its heart, HB 700 demands that any MCA provider or broker who engages a Texas consumer must:
- Register with the OCC – A mandatory filing through the Nationwide Mortgage Licensing System (NMLS) will become the new baseline for compliance.
- Disclose Terms in Plain Language – Providers must furnish standardized statements detailing total financing, disbursement amounts, finance charges, repayment schedules, and any other fee or collateral conditions.
- Avoid Unauthorized “Automatic” Debits – The law bars the use of automatic debit authorizations unless a valid security interest exists in the merchant’s deposit account.
The OCC’s own official guidance clarifies that “automatic” debit requests will be scrutinized heavily, and failure to comply could trigger civil penalties or criminal charges.
Why the Focus on Automatic Debits Matters
The automatic debit issue has emerged as a hot topic among small‑business owners. In practice, an MCA lender might set up a daily “rollover” that pulls money from a merchant’s account whenever sales dip below a threshold. While this can be convenient, it also exposes the business to sudden cash‑flow shocks and potential overdraft fees.
Under HB 700, lenders must now secure a legal claim—essentially a binding agreement with the merchant’s bank—to enforce such debits. If that claim is not in place, the lender risks having its attempt to collect deemed an illegal “debt collection” act, subjecting it to fines and possible civil litigation.
Implications for Lenders: Registration & Reporting
Lenders will need to file with the OCC by September 1, 2026. The registration process will likely mirror that of banks and credit unions but will incorporate additional disclosure requirements unique to MCAs.
- Annual Filing Fees – A nominal fee will be imposed on each registered entity, aimed at offsetting administrative costs for the OCC.
- Ongoing Reporting Obligations – Providers must submit quarterly updates detailing loan volumes, delinquency rates, and other key metrics. These reports will feed into the OCC’s public database, enhancing transparency.
The OCC’s own draft proposal indicates that non‑compliance could trigger a 10% penalty on the annual fee and, in extreme cases, revocation of registration.
The Role of Broker Disclosure
Brokers, who often act as intermediaries between merchants and lenders, face their own set of obligations. They must also register with the OCC and provide the same disclosure statements to clients. Failure to do so could expose them to fines up to $5 000 per violation.
In a recent industry survey, 68% of small‑business owners reported feeling “confused” by previous MCA contracts. The new rules aim to cut that fog by requiring clear, standardized language—an effort that experts say will reduce disputes and improve overall market health.
Consumer Protection Enhancements
Beyond registration, HB 700 imposes a suite of consumer‑friendly safeguards designed to curb predatory practices:
- No “Secret” Fees – Lenders cannot add fees after the contract is signed without explicit written consent.
- Prohibition on “Unlicensed” Lending Practices – Any activity that would normally require an OCC license, such as writing a promissory note, now must be done through a registered entity.
- Transparent Collateral Requirements – Providers must disclose exactly what collateral is being used and how it will be secured.
These provisions echo similar federal efforts under the CFPB’s “Open Banking” initiatives, which have already begun to reshape how consumer data is shared in loan origination processes.
Impact on Small‑Business Credit Scores
One of the less discussed outcomes of HB 700 is its potential influence on credit reporting. Because registered MCAs will now need to submit detailed reporting to the OCC, lenders may be compelled to share borrower data with major credit bureaus. This could lead to more accurate credit scores for small businesses that previously relied on informal lending.
For example, a Texas bakery that took an MCA in 2026 could see its credit profile updated by mid‑2026, potentially unlocking better loan terms down the line. Small‑business owners are advised to monitor their credit reports closely as new data streams in.
How the New Rules Fit into National Trends
Texas is not alone in tightening MCA regulations. Across the country, states like Colorado have introduced similar “state‑level usury” caps that apply within their jurisdiction regardless of where the lender sits. The convergence of state and federal rules signals a broader push toward standardizing nonbank lending.
| State | Key Provision | Effective Date |
|---|---|---|
| Texas | Mandatory registration & disclosure | Sept 1, 2026 |
| Colorado | State usury limits on in‑state borrowers | Aug 4, 2026 |
| California | Anti‑debit restrictions for MCAs | Jan 1, 2026 |
The ripple effect is evident: lenders are expanding their product lines to include “embedded finance” solutions—lending modules integrated directly into e‑commerce platforms like Shopify and PayPal. These embedded products often rely on real‑time sales data to adjust repayment terms, a model that aligns well with the new transparency mandates.
Embedded Finance: A Double-Edged Sword
While embedded finance offers speed and convenience for merchants, it also raises compliance questions. Lenders must ensure their embedded platforms register with the OCC if they cross the $1 million threshold. Failure to do so could result in enforcement actions or even criminal charges under the new law.
Industry analysts predict that by 2029, embedded finance will account for more than half of all MCA transactions in Texas. The growing popularity underscores the importance of staying ahead of regulatory changes.
Practical Steps for Small‑Business Owners
- Verify Lender Registration – Before signing any contract, check that the lender or broker is listed on the OCC’s public registry. A quick search on the OCC website can confirm compliance status.
- Demand a Disclosure Statement – The new law requires a standardized statement. If the provider cannot furnish one, consider walking away.
- Read the Fine Print About Debits – Look for clauses that authorize automatic debits. Ensure there is an explicit security interest in your deposit account.
- Track Your Credit Impact – Since reporting will be more robust, monitor how MCAs affect your credit file. You can request a copy of your business credit report annually from the major bureaus.
- Consult Legal Counsel – If you’re uncertain about any clause or foresee potential disputes, get a lawyer experienced in Texas commercial lending laws.
By taking these steps, entrepreneurs can safeguard themselves against predatory practices while still accessing the capital they need to grow.
Keeping an Eye on Future Rule Proposals
The OCC’s draft rule indicates that the agency plans to address “unethical marketing” and “misleading online advertising” in its 2026 proposal. Small businesses should watch for these changes, as they could affect how lenders advertise their products on digital platforms.
Additionally, federal agencies like the CFPB are revisiting data‑collection requirements under the 1071 rule, which could further influence how MCAs disclose information to borrowers and regulators alike.
The Bottom Line
Texas’s HB 700 is a landmark shift toward greater transparency and consumer protection in commercial lending. While the law imposes new burdens on lenders—registration, disclosure, and strict debit rules—it also offers small‑business owners clearer contracts and a safer borrowing environment.
As the OCC moves forward with rulemaking through early 2026 and finalizes regulations by August, both lenders and borrowers must stay informed. Resources such as texasloanstoday.com provide timely updates that help stakeholders navigate this evolving landscape.
For those looking to secure working capital while staying compliant, the new framework may feel like a double‑edged sword—one side tightening controls and the other opening doors to more responsible lending practices. The key will be to understand the rules, verify compliance, and choose partners that respect both the letter and spirit of HB 700.