Texas just closed a HB 700 workaround

Texas just closed a HB 700 "workaround", and some vendors have gone quiet.

The OCCC's finalized rules for HB 700 (7 TAC §86.313, effective July 9) settled the two questions everyone in sales-based financing was asking.

First: what security interest do you actually need?

The rule confirms it's a validly perfected, first-priority security interest in ALL of the merchant's accounts receivable, perfected the normal way, by filing a UCC-1. Not a control agreement on the deposit account. That's workable for true first-position funders. For everyone behind them, the auto-debit door is shut.

Second: can a third-party service provider run the debits for you?

No. The adopted rule says it directly: a provider may not direct a third party to complete a debit it couldn't lawfully do itself. The regulator saw this workaround coming and named it. Same for prewritten checks and any payment authorization set up in advance to recur, where all of it counts as an automatic debit mechanism.

What's left for non-first-position deals?

Manual authorization from the merchant for EACH payment. Daily remittance means daily authorization. Weekly means weekly.

There may be compliant structures worth exploring, but they'll require real legal analysis, not a sales pitch. I've asked a vendor who publicly claimed to have Texas "figured out" but has gone quiet when asked direct compliance questions.

If your service provider says they've solved HB 700, ask them to put the legal reasoning in writing. Penalties run up to $10,000 per violation.

Do your own diligence. This one's too expensive to outsource.