Any business involved in motor vehicle installment financing in New Hampshire needs to assess the multiple and significant changes to a key law that have been enacted with immediate effect.

On August 2, New Hampshire Governor Christopher Sununu signed HB 1243 into law, significantly revising RSA chapter 361-A, the Motor Vehicle Retail Installment Sales Act (the Act). The new law introduces comprehensive changes to the licensing and regulation of sales finance companies and retail sellers in the state. Importantly, the law is immediately effective, although a process to seek case-by-case deferral is available, as discussed below.

Key provisions of the law include:

• Expanded definition of “sales finance company”: HB 1243 expands the definition of “sales finance company” to include 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. Notably, banks and other depository institutions are not exempt from the Act’s revised and existing substantive non-licensing provisions. However, securitization trusts are not considered “holders” for the purposes of the Act’s servicing requirements.
• Expanded licensing obligations: The licensing obligations now encompass “lenders” — a defined term that includes retail installment sellers and finance companies — as well as assignees, servicers, and legal successors to lenders’ rights. The definition of “person” has been expanded 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. There is also an exemption for pledgees of retail installment sales contracts to secure a bona fide loan, but there is no express exemption for special purpose entities used in securitization.
• Licensing for persons who engage in business within New Hampshire: The geographical scope for licensing requirements has also been amended. Previously, the Act required licensing only for persons engaging in the applicable business within the state. Now, the obligation extends to any nonexempt person who engages in the applicable business within the state or with persons located in the state. Neither the Act nor the amendments clearly define what it means to engage in business in the state for these purposes.
• Voidable contracts for failure to obtain licensure: 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, and the Act prohibits aiding and abetting unlicensed business activities.
• Required notice in RICs detailing complaint procedure: A new disclosure requirement mandates that retail installment contracts include a notice stating that the consumer may file a complaint with the commissioner, along with the department’s contact information.
• Expanded definition of “cash sale price”: The definition of “cash sale price” has been updated to mean the price at which the retail seller offers to sell the motor vehicle for cash in the ordinary course of business, raising questions about the inclusion of dealer administration fees and other charges. Further, the Act imposes new itemization requirements, including the description and amounts of prepaid finance charges and the principal balance of the loan. HB 1243 also introduces new documentary fee regulations, clarifying that only lawful fees paid to public officers for filing or recording instruments securing loans are permissible.
• Balloon payment loans: HB 1243 also addresses balloon payment loans, setting a maximum disposition fee of $250, adjusted annually based on the consumer price index.
• Required notice of assignment within 15 days: There is now a requirement that borrowers receive a notice of assignment from both the current and future holders of the retail installment contract within 15 days of the assignment unless the servicer remains the same.
• Right-to-cure and other post-default notice requirements: HB 1243 introduces a new right-to-cure letter requirement, obligating licensees to send a written notice of default to the buyer at least 10 days after the default and providing a 21-day period for the buyer to cure the default. The law also specifies the content and timing of notices of disposition and explanations of calculation after the disposition of repossessed vehicles. Additionally, licensees must release liens and provide titles within 21 calendar days of payoff, and the continuation of interest after repossession of the vehicle is prohibited.

Although the New Hampshire Banking Department initially requested that the legislature delay the effective date of the new law until January 1, 2025, the final version of HB 1243 bears an effective date of July 1, 2024. Recognizing the challenges businesses may face in achieving full compliance immediately, the Banking Department plans to engage in outreach and education on HB 1243 until January 1, 2025. The Banking Department has created a process whereby affected entities can submit “no action” letters to “resolve implementation concerns” with the new law.

The Banking Department also has issued successive versions of answers to frequently asked questions to provide further clarity on the new provisions; the more recent, superseding version of the answers may be found here. For example, the Department has clarified that securitization trusts are not considered “holders” for the purposes of servicing requirements, and that notices required by the Act can be included as an addendum to the retail installment contract until company forms are fully updated. Additionally, the Department provided guidance on the definition of terms such as “principal” and “total interest charged for the period of such loan,” and outlined responsibilities for ancillary product refunds. However, questions still remain regarding the scope of the licensing requirements for special purpose entities as well as other concerns.

Troutman Pepper will continue to monitor this legislation and update our blog as further guidance is provided.