Texas Legislature Introduces Bill Imposing Disclosure Requirements on Factoring Transactions

A bill has been introduced in the Texas State Legislature that would impose disclosure requirements on factoring transactions. S.B. 1918 was introduced in the Texas Senate by senator Tan Parker and H.B. 4359 was introduced in the Texas House by member Frederick Frazier. 

The proposed legislation is unique in that:

• It would only apply to factors and not apply to any other type of commercial lenders;

• It would generally apply to any factor that consummates more than five accounts receivable purchase transactions in Texas during any calendar year;

• It would apply to factoring transactions under $500,000; 

• It would require a factor to disclose the following: (i) total amount of funds provided to the business, (ii) total amount of funds disbursed, (iii) total amount to be paid to the factor, (iv) total dollar cost of the transaction, (v) the manner, frequency and amount of each payment and (vi) any prepayment penalties.

The Texas Attorney General is charged with enforcing the law. The AFA is monitoring this proposed legislation closely and is working to oppose it.