Vermont Passes H.648 Targeting Sales-Based Financing and Factoring
Updated: Jul 2
After Texas HB 700 was passed in 2025, many wondered if other states would follow suit with similar legislation. Now, Vermont has taken that step.
As reported by CounselorLibrary, the Vermont legislature has passed House Bill 648. This new law imposes licensing, disclosure, and practice restrictions on both sales-based financing and factoring providers. The bill mirrors key provisions from Texas HB 700, including the ACH debit ban and confession-of-judgment prohibition. It goes further by extending these restrictions to factoring. Unless Governor Phil Scott vetoes it, the law will take effect on July 1, 2027.
What Vermont H.648 Does
Licensing Requirements
Providers of factoring and sales-based financing must obtain a “lender” license. This requirement extends to brokers, lead generators, and anyone advertising these products online, through direct mail, or by phone. They must secure a “loan solicitation license.”
Disclosure Obligations
Providers are required to deliver cost disclosures that include the Annual Percentage Rate (APR). This aligns with frameworks already established in California (SB 1235) and New York.
ACH Debit Ban
A significant provision copied directly from Texas HB 700 is the ACH debit ban. 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 quite challenging.
Confession of Judgment Ban
The law prohibits Confessions of Judgment (COJs) and similar provisions 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 necessary, face-to-face proceedings cannot occur outside Vermont.
Exemptions
Certain transactions are exempt from these regulations. These include transactions of $1 million or more, banks and financial institutions, and sellers financing their own goods or services.
Why It Matters
Two aspects make this bill noteworthy. First, it expands 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. This significant expansion could impact invoice factoring companies that don’t see themselves as part of the MCA ecosystem.
Second, the language regarding factoring and financing was added to HB 648 just last week. It was tucked into a larger banking, insurance, and securities bill. Such last-minute changes limit industry input and debate. This pattern should concern anyone in alternative lending, regardless of their operational base.
Vermont may be a small market, but the precedent it sets is significant. If other states adopt Vermont’s bill as a template, similar to how Vermont used Texas's, the factoring industry could face the same licensing, disclosure, and practice restrictions that have affected sales-based financing.
Related Funder Intel Coverage
We’ve been closely tracking the state-by-state regulatory wave. Here’s our coverage of the Texas law that served as Vermont’s blueprint:
