Texas 2025 - 89th Regular

Texas House Bill HB700 Compare Versions

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1	1	89R8940 BCH-D
2	2	By: McQueeney H.B. No. 700
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7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to disclosures for certain commercial sales-based
10	10	financing transactions and the registration of commercial
11	11	sales-based financing brokers; authorizing a fee and providing a
12	12	civil penalty.
13	13	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
14	14	SECTION 1. Title 5, Finance Code, is amended by adding
15	15	Chapter 398 to read as follows:
16	16	CHAPTER 398. COMMERCIAL SALES-BASED FINANCING
17	17	SUBCHAPTER A. GENERAL PROVISIONS
18	18	Sec. 398.001. DEFINITIONS. In this chapter:
19	19	(1) "Commercial sales-based financing" or "commercial
20	20	sales-based financing transaction" means an extension of
21	21	sales-based financing to a recipient by a provider, the proceeds of
22	22	which the recipient does not intend to use primarily for personal,
23	23	family, or household purposes.
24	24	(2) "Commercial sales-based financing broker" means a
25	25	person, other than a financer, who, for compensation or the
26	26	expectation of compensation, offers commercial sales-based
27	27	financing to a recipient or offers to obtain commercial sales-based
28	28	financing for a recipient from a provider.
29	29	(3) "Disbursement amount" means the amounts paid to
30	30	the recipient or on the recipient's behalf. The term does not
31	31	include any finance charges that are deducted or withheld at
32	32	disbursement.
33	33	(4) "Finance charge" means the cost of commercial
34	34	sales-based financing expressed as a dollar amount. The term
35	35	includes a charge payable, directly or indirectly, by the recipient
36	36	that is imposed, directly or indirectly, by the provider of the
37	37	financing as an incident to, or a condition of, the extension of
38	38	financing.
39	39	(5) "Financer" means a person who provides or will
40	40	provide commercial sales-based financing to a recipient.
41	41	(6) "Person" means an individual, corporation,
42	42	partnership, limited liability company, joint venture,
43	43	association, joint stock company, trust, sole proprietorship or
44	44	other unincorporated organization, or other similar entity.
45	45	(7) "Provider" means a person who extends a specific
46	46	offer of commercial sales-based financing to a person applying for
47	47	that financing or the person's authorized representative. The term
48	48	includes a commercial sales-based financing broker.
49	49	(8) "Recipient" means a person, or the authorized
50	50	representative of a person, who applies for commercial sales-based
51	51	financing and is made a specific offer of commercial financing by a
52	52	provider. The term does not include a person acting as a commercial
53	53	sales-based financing broker.
54	54	(9) "Sales-based financing" means a transaction that
55	55	is repaid by the recipient to the provider of the financing:
56	56	(A) as a percentage of sales or revenue, in which
57	57	the payment amount may increase or decrease according to the volume
58	58	of sales made or revenue received by the recipient; or
59	59	(B) according to a fixed payment mechanism that
60	60	provides for a reconciliation process that adjusts the payment to
61	61	an amount that is a percentage of sales or revenue.
62	62	(10) "Specific offer" means the specific terms of
63	63	commercial sales-based financing. The term includes a price or
64	64	amount quoted to a recipient by a person providing the financing
65	65	based on information obtained from or about the recipient that, if
66	66	accepted by the recipient, would be binding on the provider,
67	67	subject to specific requirements in the financing terms.
68	68	(11) "Total repayment amount" means the sum of the
69	69	disbursement amount and finance charge.
70	70	Sec. 398.002. EXEMPTIONS. This chapter does not apply to a
71	71	provider that is:
72	72	(1) a bank, out-of-state bank, bank holding company,
73	73	credit union, federal credit union, out-of-state credit union, or
74	74	any subsidiary or affiliate of those financial institutions;
75	75	(2) a person acting in the capacity of a technology
76	76	services provider to an entity exempt under this section as part of
77	77	the entity's commercial sales-based financing program if the person
78	78	has no interest, arrangement, or agreement to purchase any interest
79	79	in the commercial sales-based financing extended in connection with
80	80	the program;
81	81	(3) a lender regulated under the Farm Credit Act of
82	82	1971 (12 U.S.C. Section 2001 et seq.); or
83	83	(4) a person who extends or brokers:
84	84	(A) a commercial sales-based financing
85	85	transaction secured by real property;
86	86	(B) a lease, as defined by Section 2A.103,
87	87	Business & Commerce Code;
88	88	(C) a purchase-money obligation, as defined by
89	89	Section 9.103, Business & Commerce Code;
90	90	(D) a commercial sales-based financing
91	91	transaction entered into under a commercial sales-based financing
92	92	agreement or commercial open-end credit plan of $50,000 or more in
93	93	which the recipient is:
94	94	(i) a dealer, as defined by Section
95	95	503.001, Transportation Code; or
96	96	(ii) a motor vehicle rental company or an
97	97	affiliate of a motor vehicle rental company; or
98	98	(E) a commercial sales-based financing
99	99	transaction in connection with the sale of products or services
100	100	that:
101	101	(i) the person manufactures, licenses, or
102	102	distributes; or
103	103	(ii) a parent company, subsidiary, or
104	104	affiliate of the person described by Subparagraph (i) manufactures,
105	105	licenses, or distributes.
106	106	Sec. 398.003. APPLICATION OF OTHER LAW. (a) A sales-based
107	107	financing transaction is not a form of an account purchase
108	108	transaction for purposes of Section 306.103, regardless of the
109	109	principal amount of the advance.
110	110	(b) Fees and charges paid, or charged under, a sales-based
111	111	financing transaction are considered interest for usury purposes
112	112	under state law, regardless of the principal amount of the advance.
113	113	Sec. 398.004. ADMINISTRATION OF CHAPTER; RULEMAKING. (a)
114	114	The Texas Department of Banking shall administer, implement, and
115	115	enforce this chapter.
116	116	(b) The Finance Commission of Texas shall adopt rules as
117	117	necessary to administer and implement this chapter.
118	118	SUBCHAPTER B. REGULATION AND DISCLOSURE REQUIREMENTS
119	119	Sec. 398.051. DISCLOSURES. (a) If a provider extends a
120	120	specific offer of commercial sales-based financing of more than
121	121	$500,000 to a recipient in this state, the provider shall disclose
122	122	to the recipient:
123	123	(1) the total amount of the financing;
124	124	(2) the disbursement amount;
125	125	(3) the finance charge;
126	126	(4) the total repayment amount;
127	127	(5) the estimated period for the periodic payments to
128	128	equal the total repayment amount under the terms of the financing;
129	129	(6) the payment amounts as follows:
130	130	(A) if the payment amounts are fixed, the amounts
131	131	and the frequency of payments; or
132	132	(B) if the payment amounts are variable:
133	133	(i) a payment schedule or a description of
134	134	the method used to calculate the amounts and frequency of payments;
135	135	and
136	136	(ii) the amount of the average projected
137	137	payments per month;
138	138	(7) a description of all other potential fees and
139	139	charges not included in the finance charge, including draw fees,
140	140	late payment fees, and returned payment fees;
141	141	(8) any finance charge the recipient will be required
142	142	to pay if the recipient pays off or refinances the commercial
143	143	sales-based financing before the transaction is repaid in full;
144	144	(9) any additional fees, not included in the finance
145	145	charge, the recipient will be required to pay if the recipient pays
146	146	off or refinances the commercial sales-based financing before the
147	147	transaction is repaid in full; and
148	148	(10) a description of collateral requirements or
149	149	security interests, if applicable.
150	150	(b) If, as a condition of obtaining commercial sales-based
151	151	financing, the provider requires the recipient to pay off the
152	152	outstanding balance of an existing commercial sales-based
153	153	financing from the same provider, the provider shall disclose to
154	154	the recipient:
155	155	(1) the amount of the new commercial sales-based
156	156	financing used to pay off the portion of the outstanding balance of
157	157	the existing commercial sales-based financing that consists of:
158	158	(A) prepayment charges required to be paid; and
159	159	(B) any unpaid interest expense that was not
160	160	forgiven at the time of renewal of the transaction; and
161	161	(2) if the disbursement amount will be reduced to pay
162	162	down any unpaid portion of the outstanding balance, the actual
163	163	dollar amount by which the disbursement amount will be reduced.
164	164	Sec. 398.052. SIGNATURE. The provider shall obtain the
165	165	recipient's signature on the disclosures required by Section
166	166	398.051 before finalizing the application for the commercial
167	167	sales-based financing transaction.
168	168	Sec. 398.053. BROKER REGISTRATION. (a) A person may not
169	169	engage in business as a commercial sales-based financing broker for
170	170	compensation in this state unless, before conducting business, the
171	171	person registers with the Texas Department of Banking. The
172	172	registration is effective on receipt by the department of a
173	173	completed registration form as provided by Subsection (d) and the
174	174	required registration fee and remains effective until renewal.
175	175	(b) On or before January 31 of each year after filing an
176	176	initial registration, a broker shall file a renewal registration
177	177	form with the required renewal registration fee.
178	178	(c) The broker shall pay a registration fee on filing an
179	179	initial registration and a renewal registration fee on filing a
180	180	renewal registration.
181	181	(d) The registration or renewal registration form must
182	182	include:
183	183	(1) the name of the broker;
184	184	(2) the name under which the broker transacts
185	185	business, if different from the name of the broker;
186	186	(3) the address of the broker's principal office,
187	187	which may be outside this state; and
188	188	(4) the name and address in this state of a designated
189	189	agent for service of process.
190	190	(e) The Finance Commission of Texas shall:
191	191	(1) by rule set the registration fee and registration
192	192	renewal fee in amounts sufficient to cover the registration costs;
193	193	and
194	194	(2) adopt a form to be used for a registration or
195	195	renewal registration under this section.
196	196	Sec. 398.054. UPDATE OF REGISTRATION STATEMENT. A
197	197	commercial sales-based financing broker shall update information
198	198	contained in the registration statement not later than the 90th day
199	199	after the date on which the information changes.
200	200	SUBCHAPTER C. ENFORCEMENT
201	201	Sec. 398.101. CIVIL PENALTY. A person who violates this
202	202	chapter is subject to a civil penalty of $10,000 for each violation,
203	203	not to exceed $100,000 for all aggregated violations.
204	204	Sec. 398.102. DECEPTIVE TRADE PRACTICE. A violation of
205	205	this chapter is considered a deceptive trade practice under
206	206	Subchapter E, Chapter 17, Business & Commerce Code, and is
207	207	actionable under that chapter.
208	208	Sec. 398.103. PRIVATE RIGHT OF ACTION NOT AUTHORIZED. This
209	209	chapter does not create a private right of action against any person
210	210	based on compliance or noncompliance with this chapter.
211	211	SECTION 2. (a) Not later than January 1, 2026, a person
212	212	engaging in business as a commercial sales-based financing broker
213	213	on the effective date of this Act must register under Section
214	214	398.053, Finance Code, as added by this Act.
215	215	(b) Not later than December 1, 2025, the Finance Commission
216	216	of Texas shall adopt rules setting the registration and
217	217	registration renewal fees and adopting a form for the registration
218	218	of commercial sales-based financing brokers as required under
219	219	Section 398.053, Finance Code, as added by this Act.
220	220	SECTION 3. This Act takes effect September 1, 2025.