Texas Banking Regulations: What Small Lenders Need to Know in 2026

Texas banking regulations have never moved this fast. Between landmark federal rule changes, a sweeping state licensing overhaul, and fresh consumer protection laws targeting the merchant cash advance industry, small lenders operating in Texas are navigating one of the most active regulatory environments in recent memory.

If you run a community bank, a non-depository lending operation, or a small commercial finance business in Texas, 2026 is not the year to play catch-up. The Texas Office of Consumer Credit Commissioner (OCCC) has completed a major migration to the Nationwide Multistate Licensing System (NMLS), new CFPB rules are reshaping small business data reporting obligations, and HB 700 — Texas’s landmark commercial sales-based financing law — now requires registration and disclosure compliance that affects thousands of lenders across the state.

The good news is that the regulatory landscape, while complex, is manageable if you understand what changed, what is coming, and what it means for your day-to-day operations. This guide breaks all of it down in plain language. No jargon, no filler — just a clear-eyed look at what the Texas Finance Code, the OCCC, the CFPB, and the Finance Commission of Texas are requiring from small lenders right now and through the end of 2026.

Whether you are a veteran loan originator or a newer player in the Texas consumer credit market, the information below will help you stay compliant, competitive, and out of the crosshairs of regulators.

Texas Banking Regulations Overview: The Agencies That Govern Small Lenders

Before getting into the specifics of 2026 changes, it is worth understanding who actually holds regulatory power over small lenders in Texas. The system involves multiple agencies, and confusing their jurisdictions is a common and costly mistake.

The Texas Department of Banking

The Texas Department of Banking has been dedicated to excellence in Texas banking since 1905. It oversees state-chartered banks, trust companies, and foreign bank agencies operating in Texas. If your institution holds a state bank charter, this is your primary regulator. The Department maintains a Law and Guidance Manual that is updated quarterly and includes select chapters from the Texas Constitution, the Texas Finance Code, and Title 7 of the Texas Administrative Code.

The Department’s Banking Commissioner has authority to issue cease and desist orders, removal orders, and enforcement actions. Compliance failures are not treated lightly — they can result in fines, license revocation, and in serious cases, criminal penalties.

The Texas Office of Consumer Credit Commissioner (OCCC)

The OCCC is the agency that most non-bank and non-depository lenders deal with daily. Its mission is to regulate non-bank financial services and to foster a fair, lawful, and healthy financial services market for all Texans. The OCCC licenses and examines a wide range of regulated lenders, including:

• Consumer loan companies operating under Chapter 342 of the Texas Finance Code
• Residential Mortgage Loan Originators (RMLOs)
• Property tax lenders
• Motor vehicle sales finance companies
• Credit access businesses (payday and auto-title lenders)
• Debt management and settlement providers

If you make consumer loans at interest rates greater than 10%, you are almost certainly required to hold an OCCC license. Operating without one exposes your business to serious enforcement action.

The Finance Commission of Texas

The Finance Commission of Texas is the rulemaking body that sits above the OCCC and the Texas Department of Banking. It adopts rules published in Title 7 of the Texas Administrative Code and provides the regulatory framework that both agencies operate within. When Texas passes new lending legislation — like HB 700 — the Finance Commission typically takes the lead on writing the implementing rules.

The NMLS Migration: What Regulated Lenders Need to Do in 2026

One of the biggest operational changes for small lenders over the past year has been the OCCC’s mandatory transition from its legacy licensing platform, ALECS, to the Nationwide Multistate Licensing System (NMLS). This is not optional. Transitioning your license to NMLS is mandatory for all covered license types.

The OCCC has implemented this in phases:

• Property Tax Lenders completed their NMLS transition in May 2025
• Regulated Lenders (those operating under Chapter 342 of the Texas Finance Code) completed their transition by September 30, 2025
• Motor vehicle sales finance companies and other Chapter 348 and Chapter 353 licensees are expected to complete their transition to NMLS during calendar year 2026
• Credit access businesses are also undergoing an NMLS transition with details to be published by the OCCC

Why NMLS Matters for Your Compliance Operations

NMLS is more than just a new filing system. It represents a fundamental change in how you manage your compliance obligations. Here are the key operational differences regulated lenders need to understand:

1. Advance Change Notices Are Now Required Under the old ALECS system, notifications were generally reactive — you reported changes after they happened. Under NMLS, an advance change notice must be submitted before certain material changes occur. These include:

• Changes to the legal name or legal status of your entity
• Changes to key individuals (executives and controlling persons)
• Changes to branch location addresses

2. Post-Discovery Notifications Within 30 Days Some events must be reported to the OCCC within 30 days of discovery, including:

• Bankruptcy filings by your company or its direct owners
• Data breaches affecting 250 or more Texas residents — this is a significant new threshold that reflects the Finance Commission’s commitment to promoting cybersecurity awareness among licensees
• New civil or regulatory actions against the company or key individuals
• Material changes to criminal history disclosure questions for key individuals

3. Licensing Structure Has Changed In ALECS, each Chapter 342 license was referred to as a “Licensed Location.” In NMLS, the structure is hierarchical: your first license is the Company License, and any additional locations requiring a Chapter 342 license are treated as branches. An entity cannot hold a branch license without first obtaining a company license. This restructuring requires careful attention when managing multi-location operations.

4. Filing Fees NMLS charges a $120 initial processing fee per company license during transition, plus an additional $25 for each branch license. Budget these costs accordingly if you operate at multiple locations.

5. Reinstatement Penalties Failing to keep licenses current carries $1,000 reinstatement penalties and risks a “Cancel-Non Renewable” status, which can effectively shut down your lending operations. Automate your renewal calendar — do not let license expiration dates sneak up on you.

HB 700 and Texas’s New Commercial Sales-Based Financing Rules

Texas House Bill 700, which took effect on September 1, 2025, created a whole new regulatory framework for commercial sales-based financing — the category of products that includes merchant cash advances (MCAs) and similar revenue-based financing products. For small lenders operating in this space, HB 700 is arguably the most significant piece of state legislation in years, and its implementation rules must be finalized by the Finance Commission by September 1, 2026.

Here is what the law requires:

Registration Requirements

Persons engaging in business as a commercial sales-based financing provider or broker in Texas must register with the OCCC by December 31, 2026. This applies to businesses already operating as of the September 1, 2025 effective date. Unregistered operation after that deadline is a compliance violation with enforcement consequences.

Disclosure Requirements

For MCA contracts involving financing amounts under $1 million, HB 700 mandates specific disclosures that must appear in the financing contract:

• Total finance charge
• Total repayment amount
• Any additional fees charged by the provider
• Other material terms required by the Finance Commission’s implementing rules

These disclosure requirements are designed to give Texas small business borrowers a clearer picture of what they are actually paying, which has historically been obscured by the structure of MCA products.

Prohibited Contract Provisions

HB 700 bans certain contract terms that were previously used to take advantage of borrowers:

• Confessions of judgment — provisions that previously allowed MCA providers to obtain a court judgment against a borrower without notice or a hearing — are now void and unenforceable under Texas law
• Unauthorized ACH debits — an MCA provider is now prohibited from automatically debiting a Texas business’s bank deposit account unless the MCA maintains a validly perfected, first-priority security interest in that account

This second prohibition is particularly significant. It effectively disrupts the standard MCA business model, which commonly relies on blanket liens across “all assets” combined with ACH payment agreements. Many MCA providers are still working through what compliant product structures look like under this new rule.

What HB 700 Does NOT Do

It is important for small business lenders and borrowers to understand the limits of HB 700:

• No rate caps. The law does not impose APR limits or caps on finance charges or fees
• No total cost ceilings. Providers can still charge high costs if the market supports it
• No exemption from federal law. HB 700 complements, but does not replace, applicable federal consumer protection requirements

Conventional lenders — commercial banks, credit unions, traditional invoice factoring companies — are largely exempt from HB 700, as are their subsidiaries and affiliates. The law is specifically targeted at the MCA and commercial sales-based financing industry.

CFPB Section 1071: What Texas Small Lenders Must Know

On April 30, 2026, the Consumer Financial Protection Bureau finalized a revised version of its Section 1071 small business lending data rule, bringing to a close a regulatory saga that stretched nearly two decades. The Texas Bankers Association and the American Bankers Association had jointly challenged the original 2023 rule and successfully pushed for a scaled-back version under the current administration.

Here is what the final 2026 rule looks like and what it means for small lenders in Texas:

The Revised Rule’s Key Changes

The CFPB significantly narrowed the scope of the rule from its 2023 predecessor:

• Origination threshold raised: Financial institutions now must originate at least 1,000 covered credit transactions in each of two consecutive years before the rule applies — up from just 100 in the original rule. This exempts a large share of community banks and smaller lenders from the reporting mandate entirely
• Small business definition tightened: The gross annual revenue threshold defining a “small business” for purposes of the rule was cut from $5 million or less to $1 million or less
• Merchant cash advances excluded: MCAs are now excluded from covered credit transactions under the rule
• Agricultural lending excluded: Small-dollar loans and agricultural credit transactions are similarly excluded
• Farm Credit System lenders excluded: FCS lenders are no longer covered
• Compliance deadline extended: All covered financial institutions must begin collecting data starting January 1, 2028, with reporting to the CFPB following in 2029

What the Rule Requires When It Does Apply

For lenders that meet the origination threshold, the Section 1071 rule requires collecting and reporting data about small business credit applications, including demographic information about business ownership, intended purpose of the credit, and key application outcomes. The stated goal is to identify potential discrimination in small business lending markets, particularly for women- and minority-owned businesses.

The Texas Bankers Association has continued to push for Congressional repeal of the rule, arguing that even the revised version creates burdensome reporting requirements. For now, though, lenders at or above the 1,000-transaction threshold should start building compliance frameworks in 2026 to be ready for the 2028 collection start date.

For authoritative and up-to-date information on the Section 1071 rule, the CFPB’s official guidance is available at consumerfinance.gov, and the American Bankers Association’s compliance resources provide lender-specific guidance at aba.com.

Texas Finance Code Essentials for Small Lenders

The Texas Finance Code is the foundation of every lending operation in the state. If you have not read the relevant chapters recently, here is a quick refresher on the provisions most likely to affect small lender compliance in 2026.

Chapter 342: Consumer Loans

This is the core statute for most OCCC-regulated lenders. Chapter 342 governs:

• Interest rate structures: Regulated consumer loans are those made at rates greater than 10%. The chapter establishes two primary rate structures for most consumer lending
• Recordkeeping: Sections 342.552 and 342.558 require lenders to maintain transaction records and allow OCCC access to those records. The Finance Commission updated the relevant rules in early 2026 to align with NMLS requirements
• Fees and charges: Origination fees, late payment penalties, and refinancing charges are all regulated to prevent excessive costs. Delinquency charges on consumer loans are limited to a small percentage of the unpaid balance
• Prepayment penalties: These are generally prohibited under Chapter 342, allowing borrowers to pay off debts early without additional charges

Chapter 303: Usury Laws

Texas usury law under Chapter 303 generally caps interest rates on consumer credit at 18% APR unless otherwise authorized by statute. Small lenders operating near that ceiling need to ensure their all-in cost of credit, including fees, does not breach the usury limit in a way that triggers penalty exposure.

Chapter 341: Disclosure Requirements

Chapter 341 requires all lenders to provide written contracts specifying:

• Interest rates (expressed clearly)
• Repayment schedules
• Total credit costs

These disclosure requirements align with the federal Truth in Lending Act (TILA), but Texas adds its own layer. Non-compliance can expose lenders to borrower claims and regulatory enforcement.

The Texas SAFE Act (Chapter 180)

Any individual originating residential mortgage loans in Texas must be licensed under the Texas SAFE Act. The OCCC has adopted the NMLS Uniform State Test as a requirement for all mortgage loan originators (RMLOs) applying through the OCCC. Loan originators employed by federally regulated depositories register through their federal regulator rather than the OCCC — but the licensing obligation still exists.

Compliance Priorities for Texas Small Lenders in 2026: An Action Checklist

To help bring all of this together, here are the most critical compliance priorities for small lenders operating in Texas right now:

Immediate (Q2–Q3 2026)

1. Confirm your NMLS transition is complete — If you are a regulated lender under Chapter 342 and have not yet completed the ALECS-to-NMLS migration, you are already non-compliant. Contact the OCCC immediately
2. Set up advance change notice protocols — Update your internal compliance procedures to ensure that any material changes to your organization trigger timely NMLS notifications before or within 30 days of the event
3. Review your data breach response plan — The 250-resident reporting threshold means cybersecurity is now a direct regulatory compliance issue, not just an IT matter
4. Determine your Section 1071 threshold status — Pull your origination data and find out whether you currently meet or are approaching the 1,000 covered transaction threshold for CFPB reporting purposes

By September 1, 2026

5. Monitor the Finance Commission’s HB 700 implementing rules — The rules governing commercial sales-based financing providers and brokers must be adopted by September 1, 2026. If you operate in that space, these rules will define your disclosure obligations and prohibited practices in detail
6. Prepare MCA disclosure templates — If you offer revenue-based financing under $1 million, your contract templates must include HB 700-mandated disclosures

By December 31, 2026

7. Register with the OCCC if you are an MCA provider or broker — The December 31, 2026 registration deadline applies to all commercial sales-based financing businesses already operating in Texas
8. Transition motor vehicle sales finance licenses to NMLS — Lenders holding Chapter 348 or Chapter 353 licenses should be actively preparing for their 2026 NMLS transition

Ongoing

9. Subscribe to OCCC rule updates — The OCCC maintains an email list for rule announcements. Send a request to rule.comments@occc.texas.gov to stay informed
10. Review annual report filing requirements — The OCCC launched a new annual report filing system in early 2026. Both property tax lenders and regulated lenders are required to file. Motor vehicle dealers will face a new annual report requirement beginning June 2026

Common Compliance Mistakes Texas Small Lenders Make

Even experienced lenders trip up in predictable ways. Here are the most common compliance failures that OCCC examiners find during routine and periodic examinations:

Operating without a current, valid license. License renewal deadlines are not suggestions. The NMLS system now requires active management of renewal timelines, and a lapse in license status creates immediate legal exposure.

Failure to provide required disclosures. Written contracts must meet Chapter 341 requirements and, where applicable, TILA requirements. Template agreements should be reviewed annually by a qualified regulatory attorney to ensure they reflect current law.

Inadequate recordkeeping. Chapter 342 requires transaction records to be maintained in a format accessible for OCCC examination. Disorganized or incomplete files are a red flag for examiners.

Confusing state and federal requirements. Texas lenders must comply with both the Texas Finance Code and applicable federal law — including TILA, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, and, for those above the threshold, Section 1071. State compliance does not equal federal compliance.

Ignoring changes in key personnel reporting. Under NMLS, changes to key individuals must be reported through advance change notices. Many lenders forget to update NMLS when officers or controlling persons change.

Looking Ahead: Texas Banking Regulation Beyond 2026

The regulatory environment is not getting simpler. A few trends worth watching:

Increased federal-state coordination. The OCCC’s transition to NMLS is part of a broader national effort to harmonize state financial regulation and reduce siloing. Expect continued pressure toward standardized licensing requirements and data reporting.

Digital lending scrutiny. As fintech and online lending grow in Texas, regulators are paying closer attention to digital underwriting practices, fair lending compliance in algorithmic decision-making, and data security. The OCCC’s 2025-2029 strategic plan explicitly identifies cybersecurity and technological efficiency as core priorities.

Possible MCA legislative evolution. HB 700 set a national precedent for MCA regulation, and other states are already watching Texas closely. Future Texas legislative sessions may revisit rate caps or other structural requirements that the current law left in place.

Conclusion

Texas banking regulations in 2026 demand real attention from small lenders. The mandatory NMLS licensing migration, HB 700’s new registration and disclosure requirements for commercial sales-based financing providers, and the CFPB’s revised Section 1071 small business data rule are all active compliance obligations — not future concerns. Lenders operating under the Texas Finance Code need to audit their current license status, update their internal change notification procedures, build compliant contract templates for any MCA or revenue-based financing they offer, and start tracking origination volumes in anticipation of the 2028 Section 1071 data collection date.

The regulatory agencies — the OCCC, the Texas Department of Banking, and the Finance Commission of Texas — are all actively enforcing these requirements, and the consequences of non-compliance range from steep reinstatement fees to license revocation. The smartest move any small Texas lender can make right now is to treat compliance not as a back-office burden but as a core part of building a durable, trustworthy lending business in one of the largest and most dynamic credit markets in the country.