AFA Secures Important Win for Factoring Industry in Texas

In March 2023, a bill was introduced in both the Texas Senate (SB 1918) by Senator Tan Parker and in the Texas House (HB 4359) by Representative Frederick Frazier to impose disclosure requirements on factoring transactions. After the bill was introduced, members of the American Factoring Association and International Factoring Association in Texas immediately went to work contacting the bill sponsors as well as key members of the House and Senate to explain the issues the bill would create for the factoring industry. 

AFA Board Member Cole Harmonson testified at a committee hearing on behalf of the industry.  The key points he made included: (i) the important funding factors provide to small businesses who cannot get funding from banks; (ii) that MCAs are the intended target of the disclosure bills, educating legislators and their staffs on the differences between factors and MCAs (including pointing out the Consumer Financial Protection Bureau’s recent Section 1071 rulemaking exempted factors but included MCAs in its coverage); (iii) why factors cannot comply with the disclosure legislation as drafted; and (iv) the effect that the disclosure statute in California is having on factors, with many factors deciding to no longer do business in the state.  

After significant effort, the bill ultimately died in committee and never reached the floor for a vote. 

“Thanks to the AFA board and legal counsel for staying on top of the issues that affect factors across the USA and to the Texas chapter of the IFA for mobilizing a grassroots effort to defeat the MCA’s lobbying effort, who mistakenly thought they could trick the Texas legislature, just like they do to their clients. We did not let them ‘California our Texas’ this time,” Harmonson said.  

“I am so proud of our Texas chapter members,” Jason Medley, a partner at Spencer Fane, said. “We all reached out in great numbers to let the legislators and committee staff know how displeased we were and how bad this would have been for factoring in Texas and for business in general. We were loud and on point, and they listened.”

This is a huge win for the factoring industry and demonstrates the importance of supporting the AFA and IFA, as this would not have happened if not for their efforts.