On August 2, New Hampshire passed House Bill 1243 (the “Bill”), which substantially amends its Motor Vehicle Retail Installment Sales Act (the “Act”). The Bill is effective as of August 2.
The Bill’s revisions include:
- Expanded Definition of “Sales Finance Company”. The definition now includes any person acting as a lender, holder, assignee, or servicer under retail installment contracts, not just motor vehicle retail installment sellers and sales finance companies. However, the Department clarified in its August 16 announcement that securitization trusts are not “holders” for purposes of the Bill’s servicing requirements. See N.H. Rev. Stat. 361-A:20.
- New Licensing Requirements. The licensing obligation now encompass lenders, assignees, servicers, and legal successors to lenders’ rights, while also expanding the definition of “person” to include trusts and any two individuals or entities with a joint or common interest. State or federally chartered banks, credit unions, and bankruptcy trustees servicing existing contracts are exempt from the requirement.
- Expanded Geographical Scope for Licensing Requirements. Prior to the amendments, the Act required licensing only for persons engaging in the applicable business within the state. Now, the obligation extends to any nonexempt person who, either in their own name or on behalf of others, engages in the applicable business within the state or “with persons located in this state.” The Act and the amendments do not clearly define what it means to engage in business in the state for these purposes.
- Harsher Consequences for Non-Compliance. Failure to obtain the required license can now lead to contracts being rendered null and void, along with the inability to collect, receive, or retain any principal, interest, or charges on such contracts. Criminal penalties will still apply for knowingly operating without a license. The Bill further prohibits aiding and abetting unlicensed business activities.
In an earlier August 6 announcement, the Banking Department clarified that, given the time crunch the Bill’s effective date creates, achieving full compliance immediately may be challenging for many businesses. For this reason, the Department plans to “engage in outreach and education” on the Bill’s revisions through January 1, 2025. The Department further provided that businesses facing compliance difficulties due to the effective date should reach out for guidance.
Putting It Into Practice: With the enactment of House Bill 1243, New Hampshire has joined the ranks of a growing number of states that are passing and enforcing “true lender” laws aimed at shielding consumers from allegedly harmful lending practices (we previously discussed this trend here, here, here, and here). The Bill contributes to an increasingly complex true lender state licensure landscape. Companies engaged in the auto finance space, whether in the form of auto installment loans or otherwise, should continue to monitor jurisdictions where they operate for related regulatory developments.