Texas Now Registers Merchant Cash Advance Brokers, Not Only Funders. The Deadline Is 31 December 2026, and an ISO With No Texas Office Is Still Inside It.

Most of the state commercial financing laws of the past four years have been disclosure laws, and a merchant-services team could reasonably treat them as the funder's problem. Texas broke that pattern. House Bill 700 registers brokers as well as providers, reaches a business with no Texas presence at all, and gives anyone already in the market until 31 December 2026 to register.

If an ISO places merchant cash advance deals alongside its processing business, or lets its agents do so, the obligation is the ISO's own and not the funder's.

What Chapter 398 Is, and When Each Piece Took Effect

HB 700 passed the Texas House on 12 May 2025 and the Senate on 26 May 2025, and took effect on 1 September 2025 as Chapter 398 of the Finance Code, Commercial Sales-Based Financing. The Act gave the Finance Commission of Texas and the Office of Consumer Credit Commissioner until 1 September 2026 to adopt implementing rules, and gave existing market participants until 31 December 2026 to register.

Both regulator deadlines were met. The Finance Commission adopted 7 TAC Chapter 86, Subchapter C — sections 86.301 to 86.307, 86.310 to 86.313 and 86.320 to 86.322 — filed with the Secretary of State on 19 June 2026 and effective 9 July 2026. The OCCC opened NMLS to new Commercial Sales-Based Finance filings on 1 September 2026. That leaves the rest of this year as the whole of the runway.

Section 398.001(8) defines sales-based financing as a transaction repaid either as a percentage of sales or revenue, where the payment moves with volume, or under a fixed payment mechanism with a reconciliation process that adjusts the payment to a percentage of sales or revenue. The fixed-daily-debit-with-reconciliation structure most of the market writes is inside that definition, not outside it.

Who Counts as a Broker

Section 398.001(2) defines a commercial sales-based financing broker as a person who, for compensation or the expectation of compensation, obtains commercial sales-based financing for a recipient, or offers to obtain it from a provider. There is no volume threshold and no carve-out for someone whose main business is something else. An ISO whose representatives introduce merchants to a funder and are paid for it fits the words as written.

Section 398.002 closes the out-of-state argument: the chapter applies to a provider or broker who offers, obtains or provides these services over the internet to or for a recipient in Texas, whether or not it maintains a physical presence there. Texas merchants in the portfolio are a Texas footprint for this purpose.

Section 398.003 exempts a narrow set: banks, credit unions and their subsidiaries and affiliates; a technology services provider to an exempt entity that holds no interest in the financing; Farm Credit Act lenders; financing secured by real property; leases; transactions of $50,000 or more where the recipient is a motor vehicle dealer or rental company; and financing tied to products the person or an affiliate makes or distributes. An ISO brokering to a non-bank funder sits in none of them.

The Registration Itself

Section 398.053 bars a person from engaging in business as a provider or broker for compensation in Texas unless it registers with the OCCC before conducting business. The form requires legal and assumed names, the principal office address, which may be outside Texas, a Texas agent for service of process, and any judgment, memorandum of understanding, cease and desist order or conviction — against the business, anyone controlling it, or a director or officer — related to a violation of law, fraud, breach of trust or money laundering.

Adopted section 86.307 sets the fee at $1,000 for the initial registration and $1,000 for each annual renewal, adjustable against the Consumer Price Index, with discretion to discount or reduce. Filing runs through NMLS; an entity with an existing NMLS account applies through it rather than creating a second.

The renewal calendar is the one place where the statute and the agency do not read the same on their face. Section 398.053(b) says a registrant files its renewal on or before 31 January each year after the initial registration. The OCCC publishes a renewal window opening 1 November and closing at midnight on 31 December, with reinstatement until 11:59 p.m. on 28 February, after which a registration is designated Terminated Failed-To-Renew. Work to the OCCC's published window and confirm the current cycle with the agency rather than relying on either date alone.

The Disclosure, and the Line That Names the Broker's Pay

Section 398.051 puts the disclosure duty on the provider, not the broker, and applies where the specific offer is for less than $1 million. Eleven items must be disclosed, among them the total amount of financing, the disbursement amount, the finance charge, the total repayment amount, the payment amounts and frequency, all other potential fees such as draw, late payment and returned payment charges, any charge triggered by early payoff or refinancing, collateral requirements, and a statement of whether the provider will pay compensation directly to a broker and, if so, how much.

For an ISO, that eleventh item is the substance of the law: broker compensation on a Texas deal becomes a disclosed, signed line in front of the merchant. Section 398.052 requires the recipient's signature on the disclosures before the application is finalised, and adopted section 86.310 requires the disclosure at or before the specific offer, corrected disclosures if one proves inaccurate, and a contract that explains how to complain to the OCCC.

Section 398.051(b) covers the refinance. Where the provider requires payoff of an existing sales-based financing balance as a condition of the new deal, it must disclose how much of the new money goes to prepayment charges and to unpaid finance charges not forgiven at renewal, and the dollar amount by which the disbursement is reduced to pay down the old balance.

Two Contract Terms That Stop Working

Section 398.055 makes a contract containing a confession of judgment provision, or anything similar, void and unenforceable. Section 398.056 is the one for the operations team: a provider or broker may not establish a mechanism for automatically debiting a recipient's deposit account unless it holds a validly perfected security interest in that account under Chapter 9 of the Business and Commerce Code, with first priority against all other claims.

Section 398.004 removes a defence rather than a term. Finance Code section 306.103 makes the parties' characterization of an account purchase transaction as a purchase conclusive that it is not a transaction for the use, forbearance or detention of money — the mechanism by which a receivables purchase escapes usury analysis. Section 398.004 provides that sales-based financing is not an account purchase transaction for the purposes of section 306.103, regardless of the amount advanced.

Enforcement, and What the Rules Prohibit

The OCCC administers and enforces the chapter under section 398.005. Section 398.101 sets a civil penalty of $10,000 for each violation, and adopted section 86.321 confirms a maximum administrative penalty of $10,000 per violation alongside injunctions that may include restitution. Section 398.102 creates no private right of action.

Section 398.005(c) required the Finance Commission to identify unfair, deceptive and abusive acts by rule, while section 398.005(d) forbids it from setting any maximum rate, finance charge or fee. Adopted section 86.312 is the resulting list: misleading statements in advertisements, disclosures or contracts, charging fees not specifically disclosed or contracted for, debiting without authorization, failure to maintain records, and any device or subterfuge used to evade the requirements. Several of those describe sales conduct, which is where a broker's exposure sits.

Adopted section 86.311 sets recordkeeping: a transaction file holding the written agreement, each disclosure and an account history, kept for the later of four years from the transaction or two years from the final entry. Section 86.311(c) puts the disclosures a broker provided in the broker's own file. A broker that keeps nothing because it never funded anything has a records problem, not an exemption.

Texas Is Not the Only One, and the Others Do Not Match

Virginia was first to register brokers: HB 1027, enacted in 2022, required providers and sales-based financing brokers to register with the State Corporation Commission by 1 November 2022. Utah's Commercial Financing Registration and Disclosure Act, SB 183, made it unlawful from 1 January 2023 to engage in a commercial financing transaction as a provider without registering with the Department of Financial Institutions. Connecticut's Public Act 23-201 requires providers and brokers to register with the Department of Banking, with disclosures beginning 1 July 2024. California, New York, Florida, Georgia, Kansas and Missouri impose disclosure obligations without a sales-based financing registration of the Texas kind — which is not the same as no licence at all. California's Financing Law licenses those who make or broker commercial loans, and the DFPI looks at the substance of a transaction rather than what it is called, so a product marketed as an advance is not automatically outside it. The definitions do not line up state to state.

What to Check Before the End of the Year

• Whether anyone in the organisation — a house agent, a sub-ISO, a referral partner paid on placement — obtains or offers to obtain sales-based financing, and whether any of those merchants are in Texas.
• Which legal entity would hold the registration, and whether it already has an NMLS account.
• The disclosure history required by section 398.053(d), across the entity, its control persons, directors and officers.
• A Texas agent for service of process, which an out-of-state business may not have.
• Whether funder disclosures on Texas deals carry the broker compensation statement, and whether the figure matches what is actually paid.
• Whether any automatic debit on a Texas deal is supported by a perfected first-priority security interest, and whether any live contract still carries a confession of judgment.
• Where the broker's own copies of disclosures are retained, and for how long.

None of this needs a new system so much as a field and a report. A CRM that already records which agent placed which merchant, and in which state, answers the first question in an afternoon, and the rest follows. Registering costs $1,000 and a form. Discovering in January that a producing agent has been brokering Texas paper unregistered since September 2025 is a different conversation, and section 398.101 prices it per violation.