Vermont Follows Texas on Merchant Cash Advance Regulations

“Certain automatic debts prohibited. A provider shall not establish a mechanism for automatically debiting a recipient’s deposit account unless the provider holds a validly perfected security interest in the recipient’s account under Title 9A, with a first priority against the claims of all other persons.”

Vermont has followed Texas with an identical automatic debit prohibition on sales-based financing. The new law, identified as House Bill 648, goes into effect on July 1, 2027. Technically it only applies on deals where the funding amount is less than $1 million. COJs are banned, APRs are required, and nobody can solicit a Vermont-based business with funding unless they have a lending license. The full language can be viewed here.

The Governor signed the bill into law on June 16, 2026. While this law copied some of the language enacted in Texas, its actual origins is from the Factoring industry that took full credit for the Texas law.