Texas Governor Signs Sales-Based Financing ACH Prohibition Into Law

Texas Governor Greg Abbott has signed HB 700 which prohibits a sales-based financing provider from automatically debiting any merchant in the state unless they are in a perfected 1st position. And not just a 1st position MCA, a 1st position above anything else at all. It doesn’t matter if the funder doing the debiting is located out of state, only that the merchant be located in Texas.

The law broadly encompasses purchase transactions (MCAs) or loans where the payments ebb and flow with sales activity (revenue-based finance loans). Companies with a special bank relationship are exempt from the law. The exemption applies to: “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.”

The specific language detailing the prohibition is:

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.

The full law goes even further than the ACH ban, the extent of which can be viewed here. The law goes into effect on September 1, 2025.

Last modified: June 21, 2025

<!–

Interested in receiving DeBanked’s
Free Newsletter?
Subscribe below:

Your Name
Business Name
E-mail Address
	Business TypeLenderMerchant Cash Advance FunderISO/BrokerFunder/Broker HybridInvestorLead GeneraterLawyer/AccountantSoftware/service providerFactorPayment companyOther
SPAM CHECK. Write debank in all lowercase

–>