Vermont Passes H.648 Targeting Sales-Based Financing and Factoring

F.I. Editorial Team
23 hours ago
2 min read

After Texas HB 700 was passed in 2025, many asked whether there could be a spread of similar type of legislation that other states would move forward to passing. Well we now have a state that has done just that.

As reported by CounselorLibrary, the Vermont legislature has passed House Bill 648, imposing licensing, disclosure, and practice restrictions on both sales-based financing and factoring providers. The bill copies key provisions from Texas HB 700, including the ACH debit ban and confession-of-judgment prohibition, and goes further by extending those restrictions to factoring. Unless Governor Phil Scott vetoes, the law takes effect July 1, 2027.

What Vermont H.648 Does

Licensing. Providers of factoring and sales-based financing must obtain a “lender” license. Brokers, lead generators, and anyone advertising these products online, by direct mail, or by phone must obtain a “loan solicitation license.”

Disclosures. Providers must deliver cost disclosures including APR, similar to the frameworks already in place in California (SB 1235) and New York.

ACH Ban. Copied directly from Texas HB 700: providers cannot establish automatic ACH debits from a recipient’s deposit account unless they hold a first-priority perfected security interest in the account under UCC Article 9. In practice, this is nearly impossible to achieve for most funders.

Confession of Judgment Ban. COJs and similar provisions are prohibited in any factoring or sales-based financing contract.

Venue and Governing Law. Contracts must be governed exclusively by Vermont law. All disputes must be brought in Vermont courts. If arbitration is required, face-to-face proceedings cannot be held outside Vermont.

Exemptions. Transactions of $1 million or more, banks and financial institutions, and sellers financing their own goods or services are exempt.

Why It Matters

Two things make this bill stand out. First, it goes beyond Texas by targeting factoring alongside sales-based financing. Texas HB 700 only covers sales-based financing. Vermont is treating both product types under the same regulatory framework, a significant expansion that could affect invoice factoring companies that don’t consider themselves part of the MCA ecosystem.

Second, the factoring and financing language was added to HB 648 just last week, tucked into a larger banking, insurance, and securities bill. That kind of last-minute insertion limits industry input and debate, a pattern that should concern anyone in alternative lending regardless of where they operate.

Vermont is a small market. But the precedent matters. If other states use Vermont’s bill as a template the way Vermont used Texas, the factoring industry, which has largely avoided MCA-style regulation, could find itself subject to the same licensing, disclosure, and practice restrictions.