Texas Senate Bill 2677 targets predatory lending practices by MCAs

The Senate Committee on Business and Commerce convened on May 1, 2025, to discuss significant legislative measures impacting the commercial financing landscape in Texas. Central to the meeting was Senate Bill 2677, aimed at regulating merchant cash advances (MCAs) and addressing predatory lending practices.

Several stakeholders provided testimony regarding the bill. An Austin attorney expressed strong support for SB 2677, citing the detrimental effects of the MCA industry on traditional lending practices. He highlighted predatory tactics, such as hidden fees and the use of confessed judgments, which he argued undermine fair lending standards. He presented a case involving a small equipment lender in Uvalde, Texas, who faced severe consequences due to MCA practices that violated intercreditor agreements.

Conversely, representatives from the MCA industry voiced concerns about the bill's potential impact on their operations. Robert Perales, an Austin-based MCA provider, stated his neutrality towards the bill, emphasizing the importance of transparency and ethical practices in the industry. He acknowledged past issues but insisted that the industry is working to combat bad practices.

Alexis Shapiro, general counsel at Ford Financing, opposed the bill as currently written, arguing that it could jeopardize the sales-based financing sector, which provides crucial funding to small businesses that struggle to access traditional loans. She warned that the bill could inadvertently favor competitors in the factoring industry, potentially harming small business customers.

Kate Fisher, representing the revenue-based finance coalition, echoed similar sentiments, supporting the bill's transparency goals but opposing specific provisions that could threaten the viability of sales-based financing in Texas. She noted that the bill's regulatory framework could impose burdens that only California currently has for commercial transactions.

The committee also discussed House Bill 12, introduced by Senator Parker, which aims to enhance the sunset review process for state agencies. This bill proposes mid-cycle reviews and efficiency audits to ensure that regulations remain relevant and effective. Supporters of HB 12 emphasized the need for greater accountability and public participation in the regulatory process.

As the meeting concluded, both SB 2677 and HB 12 were left pending, indicating ongoing discussions and potential revisions to address the concerns raised by various stakeholders. The outcomes of these legislative efforts could significantly reshape the financing landscape for small businesses in Texas, balancing the need for consumer protection with the operational realities of financing providers.