New Hampshire latest to ramp up fintech licensing requirements

State regulators are looking to ensure that servicers, fintechs and other third-party entities involved in auto lending are properly licensed by passing a range of legislation in recent months. New Hampshire Gov. Chris Sununu on Aug. 2 signed into law a bill amending the state’s Motor Vehicle Retail Installment Sales Act, which requires entities acting as “retail sellers or sales finance companies” to obtain a license. . It excludes certain financial institutions and bankruptcy trustees, according to the bill’s summary. [caption id="attachment_58344203" align="aligncenter" width="1024"] (Photo/Canva)[/caption] There is a desire across many states to require licenses from entities that are tangentially involved in transactions, Moorari Shah , partner at law firm Sheppard Mullin , told Auto Finance News . . Shah specializes in representing fintechs and leads the firm’s consumer finance team. Regulators “want to make sure they have oversight of the servicers [and] the downstream investors,” he said. “A bunch of states have focused mainly on fintech arrangements where it's common to have servicing done by a party other than the actual originator.” New Hampshire’s law was made effective retroactively to July 1, according to an Aug. 6 announcement from the New Hampshire Banking Department . . The department is offering “outreach and education” on the updated requirements through Jan. 1, 2025. The effective date created challenges for companies looking to comply with the updates, prompting the American Financial Services Association on Aug. 5 to publish a letter to New Hampshire Bank Commissioner Emelia Galdieri seeking to delay enforcement of the new provisions until Jan. 1, 2025. Making the regulation retroactive made it so that anyone who needed a license under the new stipulations but didn’t already have one was automatically out of compliance, Shah said, adding that the rollout was “flubbed.” Expanded scope Under the revisions to New Hampshire’s law, the definition of “sales finance company” was expanded beyond motor vehicle retail installment sellers and sales finance companies to include any person acting as a lender, holder, assignee or servicer for retail installment contracts, according to an Aug. 23 release from Sheppard Mullin. Licensing requirements are now applicable to lenders, holders, assignees and servicers, with the law making clear that contracts involving unlicensed, nonexempt people or businesses could be rendered null and void, which would remove the ability to collect funds from the contract, according to the bill. The New Hampshire Banking Department on Aug. 16 clarified that securitization trusts are not considered “holders” under the bill’s servicing requirements, according to an announcement. Eyes on fintechs Auto lenders that work with fintechs or other third-party providers must ensure that their partners comply with applicable state laws and updated licensing requirements, Shah said. “If you are a licensed entity, you are subject to examination and supervision by that regulator, and their expectation of you is that you will follow the laws, and you will ensure that the people you do business with also follow the law,” he said. “If you're buying or selling paper to people that need to be licensed and are not licensed, that could become your problem.” New Hampshire joins several states, including Florida, Connecticut, Maryland and Washington, that have considered or passed “true lender” laws, which aim to define when a nonbank entity is considered the lender in a transaction, according to Sheppard Mullin. . The laws, which started cropping up last year, have made entities such as fintechs subject to new licensing and compliance obligations. “The [New Hampshire] statute itself isn't all that novel; it’s an effort by the banking regulators to harmonize the statute with best practices around the country,” Shah said. Auto Finance Summit, the premier industry event for auto lending and leasing, returns Oct. 7-9 at Wynn Las Vegas. . To learn more about the 2024 event and register, visit www. .AutoFinanceSummit.com.

New Hampshire latest to ramp up fintech licensing requirements

State regulators are passing ‘true lender’ laws

Under the Hood: Collectors mindful of financial stressors could mitigate DQs

Auto delinquency rates up for 34th month in row

Related Posts

Trump nominates a new CFPB head, but Vought isn’t going anywhere

CFPB funding in jeopardy following DOJ decision

CFPB change to nonbank oversight could affect securitizations

Auto delinquency rates up for 34th month in row

Stay Informed with Our Newsletters

The Roadmap Podcast

SPONSORED

Driving Innovation in Automotive Refunds: How Onbe and Allied Solutions Are Modernizing the Payment Experience

Navigating the Margin Squeeze: EVs, Tariffs & Pricing — A Q&A with Earnix

Enhancing credit approaches to boost conversion and dealer loyalty

Welcome Back!

Retrieve your password