HB1320: making changes in the laws relative to retail installment sales, first mortgage bankers and brokers, mortgage loan servicers, second mortgage home loans, and the regulation of small loans.

CHAPTER 139

HB 1320 – FINAL VERSION

11Mar2004… 0609h

13May2004… 1488eba

2004 SESSION

03-2271

06/10

HOUSE BILL 1320

AN ACT making changes in the laws relative to retail installment sales, first mortgage bankers and brokers, mortgage loan servicers, second mortgage home loans, and the regulation of small loans.

SPONSORS: Rep. Kopka, Hills 63

COMMITTEE: Commerce

ANALYSIS

This bill makes certain changes to the laws relative to retail installment sales of motor vehicles, licensing of nondepository first mortgage bankers and brokers, regulation of mortgage loan services, second mortgage home loans, and regulation of small loans.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

11Mar2004… 0609h

13May2004… 1488eba

03-2271

06/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Four

AN ACT making changes in the laws relative to retail installment sales, first mortgage bankers and brokers, mortgage loan servicers, second mortgage home loans, and the regulation of small loans.

Be it Enacted by the Senate and House of Representatives in General Court convened:

139:1 Definitions; Retail Seller; Location. Amend RSA 361-A:1, XII to read as follows:

XII. “Retail seller’’ or “seller’’ means a person who sells a motor vehicle in this state or to a retail buyer under or subject to a retail installment contract.

139:2 Definitions; Sales Finance Company. Amend the introductory paragraph of RSA 361-A:1, XIII to read as follows:

XIII. “Sales finance company’’ means a person engaged, in whole or in part, directly or indirectly, in the business of providing motor vehicle financing in this state to one or more retail buyers, or in the business of purchasing retail installment contracts from one or more retail sellers. The term includes but is not limited to any federally chartered bank, savings bank, trust company, credit union, cooperative bank, finance company, lending agency, industrial bank, or investment company, if so engaged. The term does not include the pledgee of an aggregate number of such contracts to secure a bona fide loan thereon, nor does it include a retail seller who:

139:3 Licensing of Sales Finance Companies and Retail Sellers Required; Responsibility for Supervision Added. Amend RSA 361-A:2, I to read as follows:

I. No person shall engage in the business of a sales finance company or retail seller in this state without a license therefor as provided in this chapter. Persons subject to this chapter shall be responsible for the supervision of their employees, agents, and branch offices. No federally chartered bank, savings bank, trust company, credit union, cooperative bank, or industrial bank shall be required to obtain such a license but shall comply with the provisions of RSA 361-A:7-12, unless otherwise exempted in this chapter.

139:4 New Paragraphs; Licensing of Sales Finance Companies and Retail Sellers Required; No Implied Approval by the Commissioner. Amend RSA 361-A:2 by inserting after paragraph XII the following new paragraphs:

XIII. The fact that a person is licensed or registered in the state of New Hampshire under this chapter does not constitute a finding that the commissioner has passed in any way upon the merits or qualifications of such person or that the commissioner has recommended or given approval to any person. It is unlawful to make, or cause to be made, to any prospective purchaser, customer, or client any representation inconsistent with the provisions of this paragraph.

XIV. Any license fee required by this chapter shall be paid before a license may become effective.

139:5 License Surrender; Effective Date. Amend RSA 361-A:2-a to read as follows:

361-A:2-a License Surrender.

I.(a) A licensee who ceases to engage in the business of a sales finance company or retail seller at any time during a license year for any cause, including but not limited to bankruptcy, license revocation or voluntary dissolution, shall surrender such license in person or by registered or certified mail to the commissioner within 15 calendar days of such cessation.

(b) Withdrawal of the surrendered license becomes effective 30 days after receipt of the license by the commissioner or within such shorter period of time as the commissioner may determine, unless a revocation or suspension proceeding is pending when the withdrawal is filed or a proceeding to revoke or suspend or to impose conditions upon the withdrawal is instituted within 30 days after the license is surrendered. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the commissioner by order determines. If no proceeding is pending or instituted and withdrawal automatically becomes effective, the commissioner may nevertheless institute a revocation or suspension proceeding under RSA 361-A:3 within one year after the withdrawal became effective and may enter a revocation or suspension order as of the last date on which the license was effective.

II. Failure to comply with the provisions of this section and rules adopted under this section shall be cause for denial of future license applications and the imposition of penalties under RSA 361-A:11.

139:6 Annual Report. RSA 361-A:2-b, I is repealed and reenacted to read as follows:

I.(a) Each sales finance company licensee shall file, under oath, an annual report with the commissioner on or before February 1 each year concerning operations for the preceding year or license period ending December 31 upon a form prescribed by the commissioner

(b) A person who surrenders, withdraws, or does not renew a license shall file the annual report as required in subparagraph (a), notwithstanding the fact that he or she is not licensed on the date that the report is due.

(c) Each sales finance company shall also file, under oath, its financial statement with the commissioner within 90 days from the date of its fiscal year end. The financial statement shall be prepared in accordance with generally accepted accounting principles and shall include a balance sheet, income statement, statement of changes in owners’ equity, a cash flow statement, and note disclosures. If the financial statement is not audited, a certification statement shall be attached and signed by a duly authorized officer of the sales finance company. The certification statement shall state that the financial statement is true and accurate to the best of the officer’s belief and knowledge.

(d) In lieu of the requirements of subparagraph (c), licensees may submit copies of their most recent Securities and Exchange Commission Form 10-K and Form 10-Q statements.

139:7 Annual Report; Maximum Penalty for Noncompliance. Amend RSA 361-A:2-b, III to read as follows:

III. Any sales finance company failing to file either the annual report or the financial statement required by this section within the time prescribed shall pay to the commissioner a penalty of $25 for each calendar day the annual report or financial statement is overdue to a maximum penalty of $2,500 per report or statement and shall be subject to suspension or revocation of its license.

139:8 Suspension or Revocation of Licenses; Procedure. Amend the introductory paragraph of RSA 361-A:3, I to read as follows:

I. The commissioner may issue an order requiring the person to whom any license has been granted to show cause why the license should not be revoked. The order shall give reasonable notice of the opportunity for a hearing and shall state the reasons for the issuance of the order. The commissioner may by order summarily postpone or suspend any license pending final determination of any order to show cause, or of any other proceeding under this section, provided the commissioner finds that the public interest would be irreparably harmed by delay in issuing such order. Upon the entry of the order, the commissioner shall promptly notify the applicant or licensee that the order has been entered and of the reasons for the order and that within 10 days after receipt of a written request the matter will be scheduled for a hearing. Delivery of such order shall be by hand or registered mail at the principal office of the licensee. Delivery of such order to an officer, director, 5 percent or more owner, member, partner, or legal representative of the licensee shall be deemed a valid delivery of the order. If the person to whom an order to show cause is issued fails to request a hearing within 30 days of receipt of the order or within 10 days of valid delivery of the order, and no hearing is ordered by the commissioner, then such person shall be deemed in default, and the order shall, on the thirty-first day, become permanent, and shall remain in full force and effect until and unless later modified or vacated by the commissioner, for good cause shown. A hearing shall be held not later than 10 days after the request for such hearing is received by the commissioner after which and within 20 days of the date of the hearing the commissioner shall enter an order making such disposition of the matter as the facts require. If the person to whom the license was granted fails to request a hearing within 30 calendar days of receipt of such order or fails to appear at a hearing after being duly notified, the person shall be deemed in default and the proceeding may be decided against him or her upon consideration of the order to show cause, the allegations of which may be deemed to be true.

I-a. The commissioner may, by order, deny, suspend, or revoke any license or application if the commissioner finds that the order is in the public interest and the applicant, or licensee, any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the applicant or licensee:

139:9 Cease and Desist Orders. RSA 361-A:3-a is repealed and reenacted to read as follows:

361-A:3-a Cease and Desist Orders.

I. Whenever the commissioner has reasonable cause to believe that any person is engaging in the business of a sales finance company or retail seller without obtaining a license as provided in this chapter, or has engaged or is about to engage in any act or practice constituting a violation of this chapter, or any rule or order under this chapter, the commissioner may, in addition to all actions provided for in this chapter, enter an order requiring such person to cease and desist from such violation. Delivery of such order shall be by hand or registered mail at the principal office of the licensee or other person. The order shall be calculated to give reasonable notice of the rights of the person to request a hearing on the order and shall state the reasons for the entry of the order. A hearing shall be held not later than 10 days after the request for such hearing is received by the commissioner after which and within 20 days of the date of the hearing the commissioner shall issue a further order vacating the cease and desist order or making it permanent as the facts require. All hearings shall comply with RSA 541-A. If the person to whom a cease and desist order is issued fails to appear at the hearing after being duly notified, the person shall be deemed in default, and the proceeding may be decided against him or her upon consideration of the cease and desist order, the allegations of which may be deemed to be true. If the person to whom a cease and desist order is issued fails to request a hearing within 30 calendar days of receipt of such order, then such person shall likewise be deemed in default, and the order shall, on the thirty-first day, become permanent, and shall remain in full force and effect until and unless later modified or vacated by the commissioner, for good cause shown.

II. If any person refuses to obey such order, an action may be brought by the commissioner or by the attorney general on the commissioner’s behalf in any superior court in this state to enjoin such person from engaging in or continuing such violation or from doing any act or acts in furtherance of such violation. In any such action, an order or judgment may be entered awarding a temporary or permanent injunction, and awarding the commissioner or the attorney general or both costs in bringing such action. The court shall have the power to enforce obedience to such injunction, in addition to all the court’s customary powers, by a fine not exceeding $10,000 or by imprisonment, or both.

139:10 New Section; Books and Records. Amend RSA 361-A by inserting after section 9 the following new section:

361-A:9-a Books and Records. A licensee shall keep and use business records in such form and at such location as the commissioner shall by rule determine. The records shall enable the commissioner to determine whether the licensee is complying with the provisions of this chapter, any rules adopted under it, and any other law, rule, or regulation applicable to the conduct of the business for which it is licensed under this chapter. The rules may contain provisions for records to be recorded, copied, or reproduced by any process which accurately reproduces or forms a durable medium for reproducing the original record or document, or in any other form or manner authorized by the commissioner. Nothing in this section shall be construed to permit any licensee to destroy original records or documents. Each licensee shall preserve all such business records for as long a period as the commissioner shall prescribe by rule.

139:11 New Section; Applicability. Amend RSA 361-A by inserting after section 11 the following new section:

361-A:11-a Applicability. Persons subject to or licensed under this chapter shall abide by applicable federal laws and regulations, the laws and rules of this state, and the orders of the commissioner. Any violation of such law, regulation, or rule is a violation of this chapter.

139:12 New Paragraphs; Application of Other Laws. Amend RSA 397-A:2 by inserting after paragraph II the following new paragraphs:

III. Persons subject to or licensed under this chapter shall abide by applicable federal laws and regulations, the laws and rules of this state, and the orders of the commissioner. Any violation of such law, regulation, or rule is a violation of this chapter.

IV. The fact that a person is licensed or registered in the state of New Hampshire under this chapter does not constitute a finding that the commissioner has passed in any way upon the merits or qualifications of such person or that the commissioner has recommended or given approval to any person. It is unlawful to make, or cause to be made, to any prospective purchaser, customer, or client any representation inconsistent with the provisions of this paragraph.

V. Any license fee required by this chapter shall be paid before a license may become effective.

139:13 License Grant. RSA 397-A:6, I and II are repealed and reenacted to read as follows:

I. If the commissioner determines that the applicant meets the requirements of this chapter, then the commissioner shall forthwith issue a license or licenses permitting the applicant to engage in the business of making or brokering first mortgage loans in accordance with the laws of this state. Licensees shall be responsible for the supervision of their employees, agents, loan originators, and branch offices.

II. No license shall be issued to any person whose principal place of business is located outside of this state unless that person designates an agent residing within this state for service of process.

139:14 License Surrender. Amend RSA 397-A:10-a to read as follows:

397-A:10-a License Surrender.

I.(a) A licensee who ceases to engage in the business of a first mortgage banker or first mortgage broker at any time during a license year for any cause, including but not limited to bankruptcy, license revocation, or voluntary dissolution, shall surrender such license in person or by registered or certified mail to the commissioner within 15 calendar days of such cessation, and shall cause to be published in a newspaper of general circulation in the licensee’s market area a notice to such effect. The commissioner shall adopt rules, in accordance with RSA 541-A, relative to such notice.

(b) Withdrawal of the surrendered license becomes effective 30 days after receipt by the commissioner of the license or within such shorter period of time as the commissioner may determine, unless a revocation or suspension proceeding is pending when the withdrawal is filed or a proceeding to revoke or suspend or to impose conditions upon the withdrawal is instituted within 30 days after the license is surrendered. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the commissioner by order determines. If no proceeding is pending or instituted and withdrawal automatically becomes effective, the commissioner may nevertheless institute a revocation or suspension proceeding under RSA 397-A:17 within one year after withdrawal became effective and may enter a revocation or suspension order as of the last date on which the license was effective.

II. Failure to comply with the provisions of this section and rules adopted under this section shall be cause for denial of future license applications and the imposition of penalties under RSA 397-A:21.

139:15 New Paragraph; Record Keeping; Rules. Amend RSA 397-A:11 by inserting after paragraph III the following new paragraph:

IV. A licensee shall keep and use business records in such form and at such location as the commissioner shall by rule determine. The records shall enable the commissioner to determine whether the licensee is complying with the provisions of this chapter, any rules adopted under it, and any other law, rule, or regulation applicable to the conduct of the business for which it is licensed under this chapter. The rules may contain provisions for records to be recorded, copied, or reproduced by any process which accurately reproduces or forms a durable medium for reproducing the original record or document, or in any other form or manner authorized by the commissioner. Nothing in this section shall be construed to permit any licensee to destroy original records or documents. Each licensee shall preserve all such business records for as long a period as the commissioner shall prescribe by rule.

139:16 New Paragraph; Annual Report; Non-Licensees. Amend RSA 397-A:13 by inserting after paragraph I the following new paragraph:

I-a. A person who surrenders, withdraws, or does not renew a license shall file the annual report as required in paragraph I, notwithstanding the fact that he or she is not licensed on the date that the report is due

139:17 Annual Report; Maximum Penalty for Noncompliance. Amend RSA 397-A:13, IV to read as follows:

IV. Any [licensee] first mortgage banker, first mortgage broker, or first mortgage banker and broker failing to file either the annual report or the financial statement required by this section within the time prescribed may be required to pay to the banking department a penalty of $25 for each calendar day the annual report or financial statement is overdue The penalties for failure to file an annual report that are prescribed by this paragraph shall not apply to mortgage brokers licensed under this chapter who earned no money from purchasing, placing or selling first mortgage loans during the preceding year and who indicate such in writing to the banking department on or before February 1 to a maximum penalty of $2,500 per report or statement and shall be subject to suspension or revocation of its license.

139:18 Borrower’s Rights. RSA 397-A:15, V is repealed and reenacted to read as follows:

V. Persons subject to or licensed under this chapter that service first mortgage home loans on real property located in the state of New Hampshire shall, within 5 days of receipt of a written request, provide a net payoff amount as of a specific date with a daily interest rate charge.

V-a. Licensees that service first mortgage home loans originated in the state of New Hampshire shall, within 5 days of receipt of a written request, provide a net payoff amount as of a specific date with a daily interest rate charge.

139:19 License Revocation; Procedure. The introductory paragraph of RSA 397-A:17, I is repealed and reenacted to read as follows:

I. The commissioner may issue an order requiring the person to whom any license has been granted to show cause why the license should not be revoked. The order shall give reasonable notice of the opportunity for a hearing and shall state the reasons for the issuance of the order. The commissioner may by order summarily postpone or suspend any license pending final determination of any order to show cause, or of any other proceeding under this section, provided the commissioner finds that the public interest would be irreparably harmed by delay in issuing such order. Upon the entry of the order, the commissioner shall promptly notify the applicant or licensee that the order has been entered and of the reasons for the order and that within 10 days after receipt of a written request the matter will be scheduled for hearing. Delivery of such order shall be by hand or registered mail at the principal office of the licensee. Delivery of such order to an officer, director, 5 percent or more owner, member, partner, or legal representative of the licensee shall be deemed a valid delivery of the order. If the person to whom an order to show cause is issued fails to request a hearing within 30 days of receipt of the order or within 10 days of valid delivery of the order, and no hearing is ordered by the commissioner, then such person shall be deemed in default, and the order shall, on the thirty-first day, become permanent, and shall remain in full force and effect until and unless later modified or vacated by the commissioner, for good cause shown. A hearing shall be held not later than 10 days after the request for such hearing is received by the commissioner after which and within 20 days of the date of the hearing the commissioner shall enter an order making such disposition of the matter as the facts require. If the person to whom the license was granted fails to request a hearing within 30 calendar days of receipt of such order or fails to appear at a hearing after being duly notified, such person shall be deemed in default and the proceeding may be decided against him or her upon consideration of the order to show cause, the allegations of which may be deemed to be true. The commissioner may by order, upon due notice and opportunity for hearing, assess penalties or deny, suspend, or revoke a license if it is in the public interest and the applicant or licensee, any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the applicant or licensee:

139:20 Application of Chapter; Supervision Requirement. Amend RSA 397-B:2 is repealed and reenacted to read as follows:

397-B:2 Application of Chapter.

I. This chapter shall provide for the banking department’s regulation of mortgage servicing companies that engage in the business of servicing first mortgage loans secured by real property located in the state of New Hampshire, which is or shall be occupied in whole or in part as a primary domicile or place of residence by the mortgagor and which consists of not more than 4 living units. Persons registered under this chapter shall be responsible for the supervision of their employees, agents, and branch offices.

II. Persons subject to or licensed under this chapter shall abide by applicable federal laws and regulations, the laws and rules of this state, and the orders of the commissioner. Any violation of such law, regulation, or rule is a violation of this chapter.

III. Persons subject to or registered under this chapter that service first mortgage home loans on real property located in the state of New Hampshire shall, within 5 days of receipt of a written request, provide a net payoff amount as of a specific date with a daily interest rate charge. Persons who fail to provide a net payoff amount within 5 days of receipt of a written request shall be assessed a fine of $100 per day up to a maximum penalty of $2500 per violation.

IV. Any registration fee required by this chapter must be paid before a registration may become effective.

139:21 Administration by Commissioner; Rulemaking; Licensee Changed to Registrant. Amend RSA 397-B:3, IV to read as follows:

IV. The commissioner may require such regular or special reports as the commissioner deems necessary to the proper supervision of [licensees] registrants under this chapter.

139:22 Administration by Commissioner; Rulemaking; Licensee Changed to Registrant. Amend RSA 397-B:3, VIII to read as follows:

VIII. The commissioner may issue an order requiring the person to whom any registration has been granted to show cause why the registration should not be revoked. The registration may be revoked for violations of this chapter or any rule or order thereunder. The commissioner may issue a cease and desist order against any registrant or person whom he or she has reasonable cause to believe is in violation of the provisions of this chapter or any rule or order under this chapter. Delivery of such orders shall be by hand or registered mail at the principal office of the [licensee] registrant or other person. The orders shall be calculated to give reasonable notice of the right of the person to request a hearing on the order and shall state the reasons for the entry of the order. A hearing shall be held not later than 10 days after the request for such hearing is received by the commissioner after which and within 20 days of the date of the hearing the commissioner shall issue a further order vacating the revocation or cease and desist order or making it permanent as the facts require. All hearings shall comply with 541-A. If the person to whom a revocation or cease and desist order is issued fails to appear at the hearing after being duly notified, such person shall be deemed in default, and the proceeding may be determined against him or her upon consideration of the revocation or cease and desist order, the allegations of which may be deemed to be true. If the person to whom a revocation or cease and desist order is issued fails to request a hearing within 30 calendar days of receipt of such order, then such person shall likewise be deemed in default, and the order shall, on the thirty-first day, become permanent, and shall remain in full force and effect until and unless later modified or vacated by the commissioner, for good cause shown.

139:23 New Section; Record Keeping. Amend RSA 397-B by inserting after section 4 the following new section:

397-B:4-a Record Keeping. A registrant shall keep and use business records in such form and at such location as the commissioner shall by rule determine. The records shall enable the commissioner to determine whether the registrant is complying with the provisions of this chapter, any rules adopted under it, and any other law, rule, or regulation applicable to the conduct of the business for which it is registered under this chapter. The rules may contain provisions for records to be recorded, copied, or reproduced by any process which accurately reproduces or forms a durable medium for reproducing the original record or document, or in any other form or manner authorized by the commissioner. Nothing in this section shall be construed to permit any registrant to destroy original records or documents. Each registrant shall preserve all such business records for as long a period as the commissioner shall prescribe by rule.

139:24 Penalties; Licensee Changed to Registrant. Amend RSA 397-B:6, V to read as follows:

V. Every person who directly or indirectly controls a person liable under this section, every partner, principal executive officer, or director of such person, every person occupying a similar status or performing a similar function, every employee of such person who materially aids in the act constituting the violation, and every [licensee] registrant or person acting as a common law agent who materially aids in the acts constituting the violation, either knowingly or negligently, may, upon notice and opportunity for hearing, and in addition to any other penalty provided for by law, be subject to suspension, revocation, or denial of any registration or license, including the forfeiture of any application fee, or imposition of an administrative fine not to exceed $2,500, or both. Each of the acts specified shall constitute a separate violation, and such administrative action or fine may be imposed in addition to any criminal or civil penalties imposed. No person shall be liable under this paragraph who shall sustain the burden of proof that such person did not know, and in the exercise of reasonable care could not have known, of the existence of facts by reason of which the liability is alleged to exist.

139:25 Surrender. Amend RSA 397-B:8 to read as follows:

397-B:8 Surrender.

I.(a) Registrants under this chapter who cease to engage in the business of servicing mortgage loans in this state at any time during a registration year for any cause, including but not limited to bankruptcy, registration revocation, or voluntary dissolution, shall surrender such registration in person or by registered or certified mail to the commissioner within 15 calendar days of such cessation, and shall cause to be published in a newspaper of general circulation in the state a notice to such effect. The commissioner shall adopt rules in accordance with RSA 541-A relative to such notice.

(b) Withdrawal of the surrendered license becomes effective 30 days after receipt by the commissioner of the license or within such shorter period of time as the commissioner may determine, unless a revocation or suspension proceeding is pending when the withdrawal is filed or a proceeding to revoke or suspend or to impose conditions upon the withdrawal is instituted within 30 days after the license is surrendered. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the commissioner by order determines. If no proceeding is pending or instituted and withdrawal automatically becomes effective, the commissioner may nevertheless institute a revocation or suspension proceeding under RSA 397-B:3, VIII within one year after withdrawal became effective and may enter a revocation or suspension order as of the last date on which the license was effective.

II. Failure to comply with the provisions of this section and rules adopted under this section shall be cause for denial of future license applications and the imposition of penalties under RSA 397-B:6.

139:26 Records and Filings; Licensee Changed to Registrant. Amend the introductory paragraph of RSA 397-B:11, III to read as follows:

III. A [licensee] registrant may maintain its records in electronic format if, upon request, the [licensee] registrant provides the commissioner with:

139:27 Definitions; Second Mortgage Banker; Second Mortgage Broker. Amend RSA 398-A:1, VII and VIII to read as follows:

VII. “Second mortgage banker” means a person not exempt under RSA 398-A:10 who [for compensation or gain, or in the expectation of compensation or gain,] either directly or indirectly:

(a) Makes or originates second mortgage loans as payee on the note evidencing the loan; or

(b) Advances, or offers to advance, or makes a commitment to advance the banker’s own funds for second mortgage loans, or closes second mortgage loans with the banker’s own funds; or

(c) Otherwise engages in the business of funding second mortgage loans.

VIII. “Second mortgage broker” means a person not exempt under RSA 398-A:10 who [for compensation or gain, or in the expectation of compensation or gain,] either directly or indirectly:

(a) Acts as an intermediary, finder, or agent of a lender or borrower for the purpose of negotiating, arranging, finding, or procuring second mortgage loans, or commitments for second mortgage loans; or

(b) Offers to serve as agent for any person in an attempt to obtain a second mortgage loan; or

(c) Offers to serve as agent for any person who has money to lend for a second mortgage loan.

139:28 License Required. RSA 398-A:1-a, I is repealed and reenacted to read as follows:

I. No person shall engage in the business of making or brokering second mortgage loans secured by real property located in the state of New Hampshire, which is or shall be occupied in whole or in part as a primary domicile or place of residence by the borrower and which consist of not more than 4 living units, unless the person first obtains a license as provided herein, except when the person lending money is the seller of the real estate upon which the second mortgage is to be taken as security. Persons subject to this chapter shall be responsible for the supervision of their employees, agents, loan originators, and branch offices. A person who is licensed under RSA 397-A to broker first mortgage loans may obtain a license under this chapter to broker second mortgage loans by filing a notice and paying the fee required by RSA 398-A:1-a, III. A person who is licensed under RSA 397-A as a first mortgage banker or as a first mortgage banker/broker may obtain a second mortgage home loan license under this chapter to make second mortgage loans by filing a notice and paying the fee required by RSA 398-A:1-a, III. A person who is licensed under 397-A may apply for a second mortgage home loan lender license to make and broker second mortgage loans.

139:29 License Required. RSA 398-A:1-a, IV(b) is repealed and reenacted to read as follows:

(b) The applicant for a second mortgage home loan lender license, who is not also licensed as a first mortgage banker, has available for use in such business at each location specified in the application at least $25,000, or has such amount available, or actually invested in loans made under this chapter, or has posted a continuous surety bond in the amount of $25,000 in the form and under the terms determined by the commissioner; and

139:30 New Paragraphs; License Required; No Implied Approval by the Commissioner. Amend RSA 398-A:1-a by inserting after paragraph VIII the following new paragraphs:

IX. The fact that a person is licensed or registered in the state of New Hampshire under this chapter does not constitute a finding that the commissioner has passed in any way upon the merits or qualifications of such person or that the commissioner has recommended or given approval to any person. It is unlawful to make, or cause to be made, to any prospective purchaser, customer, or client any representation inconsistent with the provisions of this paragraph.

X. Any license or notice filing fee required by this chapter shall be paid before a license may become effective.

139:31 Revocation; Procedure. RSA 398-A:1-b, II is repealed and reenacted to read as follows:

II. The commissioner may issue an order requiring the person to whom any license has been granted to show cause why the license should not be revoked. The order shall be calculated to give reasonable notice of the opportunity for hearing, and shall state the reasons for the issuance of the order. A license may be suspended or revoked by the commissioner for violation of this chapter or any rule or order thereunder, for violation of applicable federal laws, or for other good cause shown. The commissioner may by order postpone or suspend any license pending final determination of any order to show cause, or of any other proceeding under this section, provided the commissioner finds that the public interest would be irreparably harmed by delay in issuing such order. Upon the entry of the order, the commissioner shall promptly notify the applicant or licensee that the order has been entered and of the reasons for the order and that within 10 days after receipt of a written request the matter will be scheduled for hearing. Delivery of such order shall be by hand or registered mail at the principal office of the licensee. Delivery of such order to an officer, director, 5 percent or more owner, member, partner, or legal representative of the licensee shall be deemed a valid delivery of the order. If the person to whom an order to show cause is issued fails to request a hearing within 30 days of receipt of the order or within 10 days of valid delivery of the order, and no hearing is ordered by the commissioner, then such person shall be deemed in default, and the order shall, on the thirty-first day, become permanent, and shall remain in full force and effect until and unless later modified or vacated by the commissioner, for good cause shown. A hearing shall be held not later than 10 days after the request for such hearing is received by the commissioner after which and within 20 days of the date of the hearing the commissioner shall enter an order making such disposition of the matter as the facts require. If the person to whom the license was granted fails to request a hearing within 30 calendar days of receipt of such order or fails to appear at a hearing after being duly notified, the person shall be deemed in default and the proceeding may be decided against him or her upon consideration of the order to show cause, the allegations of which may be deemed to be true.

139:32 Revocation; Licensee no Longer in Business. RSA 398-A:1-b, V is repealed and reenacted to read as follows:

V. If the commissioner finds that any licensee or applicant for license is no longer in existence or has ceased to do business as a second mortgage banker or broker or cannot be located after reasonable search, the commissioner may by order revoke the license or deny the application. The commissioner may deem abandoned and withdraw any application for a license made under this chapter, if any applicant fails to respond in writing within 180 days to a written request from the commissioner requesting a response. The commissioner shall send such request via certified mail to the last known address of the applicant that is on file with the commissioner.

139:33 Report. RSA 398-A:1-e is repealed and reenacted to read as follows:

398-A:1-e Report.

I. Each licensee shall file with the commissioner on or before February 1 of each year a report under oath concerning the business and operations for the preceding calendar year ending December 31 in the form prescribed by the commissioner. The annual report shall include a list of all individuals, and the address of the work location of each such individual, who act as originators for the licensee. The commissioner shall publish an analysis of the information required under this section as a part of his or her annual report. Any second mortgage broker or second mortgage home loan lender failing to file the report required by this section within the time prescribed shall pay to the commissioner the sum of $25 for each calendar day the report is overdue to a maximum penalty of $2,500 per report and shall be subject to suspension or revocation of its license.

II. A person who surrenders, withdraws, or does not renew a license shall file the annual report as required in paragraph I, notwithstanding the fact that it is not licensed on the date that the report is due.

III. Each licensee shall also file, under oath, its financial statement with the commissioner within 90 days from the date of its fiscal year end. The financial statement shall be prepared in accordance with generally accepted accounting principles and shall include a balance sheet, income statement, statement of changes in owners’ equity, a cash flow statement, and note disclosures. If the financial statement is not audited, a certification statement shall be attached and signed by a duly authorized officer of the second mortgage home loan lender. The certification statement shall state that the financial statement is true and accurate to the best of the officer’s belief and knowledge. Any licensee failing to file the financial statement required by this section within the time prescribed shall pay to the commissioner the sum of $25 for each calendar day the statement is overdue to a maximum penalty of $2,500 per statement.

139:34 License Surrender. Amend RSA 398-A:1-f to read as follows:

398-A:1-f License Surrender.

I.(a) A licensee who ceases to engage in the business of making second mortgage home loans at any time during a license year for any cause, including but not limited to bankruptcy, license revocation, or voluntary dissolution, shall surrender such license in person or by registered or certified mail to the commissioner within 15 calendar days of such cessation, and shall cause to be published in a newspaper of general circulation in the licensee’s market area a notice to such effect. The commissioner shall adopt rules, in accordance with RSA 541-A, relative to such notice.

(b) Withdrawal of the surrendered license becomes effective 30 days after receipt by the commissioner of the license or within such shorter period of time as the commissioner may determine, unless a revocation or suspension proceeding is pending when the withdrawal is filed or a proceeding to revoke or suspend or to impose conditions upon the withdrawal is instituted within 30 days after the license is surrendered. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the commissioner by order determines. If no proceeding is pending or instituted and withdrawal automatically becomes effective, the commissioner may nevertheless institute a revocation or suspension proceeding under RSA 398-A:1-b within one year after withdrawal became effective and may enter a revocation or suspension order as of the last date on which the license was effective.

II. Failure to comply with the provisions of this section and rules adopted under this section shall be cause for denial of future license applications and the imposition of penalties under RSA 398-A:7-a.

139:35 New Sections; Applicability; Record Keeping. Amend RSA 398-A by inserting after section 1-f the following new sections:

398-A:1-g Applicability. Persons subject to or licensed under this chapter shall abide by applicable federal laws and regulations, the laws and rules of this state, and the orders of the commissioner. Any violation of such law, regulation, or rule is a violation of this chapter.

398-A:1-h Record Keeping. A licensee shall keep and use business records in such form and at such location as the commissioner shall by rule determine. The records shall enable the commissioner to determine whether the licensee is complying with the provisions of this chapter, any rules adopted under it, and any other law, rule, or regulation applicable to the conduct of the business for which it is licensed under this chapter. The rules may contain provisions for records to be recorded, copied, or reproduced by any process which accurately reproduces or forms a durable medium for reproducing the original record or document, or in any other form or manner authorized by the commissioner. Nothing in this section shall be construed to permit any licensee to destroy original records or documents. Each licensee shall preserve all such business records for as long a period as the commissioner shall prescribe by rule.

139:36 Definitions; Branch Office Added. Amend RSA 399-A:1, I to read as follows:

I. “Branch office” means a business location within this state of a person required to be licensed under this chapter. Branch office does not include a person’s principal office location.

I-a. “Check” means a draft drawn on the account of an individual or individuals at a depository institution.

139:37 New Paragraph; Definitions; Principal Office Added. Amend RSA 399-A:1 by inserting after paragraph XIII the following new paragraph:

XIII-a. “Principal office” means the main office location of a person required to be licensed under this chapter.

139:38 Application and Fees. Amend RSA 399-A:3, I and II to read as follows:

I. Every applicant for licensing under this chapter shall file with the commissioner a written application, under oath and penalty of perjury, and in the form prescribed by the commissioner. The application shall contain the name of the applicant; the address where the business is or is to be conducted and similar information as to any branch office of the applicant; the name and resident address of the owner or partners or, if a corporation or association, of the directors, trustees, and principal officers; names of any branch managers; the trade name, if any, under which the applicant proposes to conduct such business; the articles of incorporation or organization or partnership agreement; the name and address of the New Hampshire resident agent if the applicant is a foreign entity; and such other pertinent information as the commissioner may require. Each applicant and licensee who conducts payday or title loan lending shall maintain an office in this state that is accessible to consumers. Persons subject to this chapter shall be responsible for the supervision of their employees, agents, and branch offices. Each initial and renewal license application shall be accompanied by a nonrefundable application fee of $450 for the principal place of business of the licensee [within this state] and the sum of $450 for each branch of such licensee maintained in this state.

II. Every applicant for licensing shall be required to submit to the banking department detailed financial information sufficient for the commissioner to determine the applicant’s ability to conduct the business of a small loan lender, payday lender, or title loan lender with financial integrity. The application shall include a balance sheet or a statement of net worth prepared in accordance with generally accepted accounting principles. Net worth statements provided in connection with a license application under this section shall be subject to review and verification during the course of any examination or investigation conducted under this chapter. Each applicant shall demonstrate that it has available for use in such business at each location specified in the application, at least $25,000, or in the case of a licensee, has such amount available or actually invested in loans made under this chapter at each location or has posted a continuous surety bond in the amount of $25,000 in the form and under the terms determined by the commissioner.

139:39 Investigation of Application; License Requirements; Small Loan Lender License. Amend RSA 399-A:4, I to read as follows:

I. Upon the filing of the complete application for a small loan lender license[, a] for lending activities including payday [loan] loans [lender license,] or [a] title [loan lender license] loans and payment of the required application fee, if the commissioner determines that the applicant’s financial resources and responsibility, experience, character and general fitness, personnel, and record of past or proposed conduct warrant the public’s confidence and that the business will be operated lawfully, honestly, and fairly within the purposes of this chapter, the commissioner shall enter an order approving such application and shall issue a license to the applicant and shall issue licenses to the applicant’s branches to engage in the business of a small loan lender[,] including payday loan lender[,] or title loan lender under and in accordance with the provisions of this chapter.

139:40 Investigation of Application; License Requirements; Surrendered License. RSA 399-A:4, VIII is repealed and reenacted to read as follows:

VIII.(a) A licensee who ceases to engage in the business of a small loan lender, payday loan lender, or title loan lender at any time during a license year for any cause, including but not limited to bankruptcy, license revocation, or voluntary dissolution, shall surrender such license in person or by registered or certified mail to the commissioner within 15 calendar days of such cessation.

(b) Withdrawal of the surrendered license becomes effective 30 days after receipt of the license by the commissioner or within such shorter period of time as the commissioner may determine, unless a revocation or suspension proceeding is pending when the withdrawal is filed or a proceeding to revoke, suspend, or to impose conditions upon the withdrawal is instituted within 30 days after the license is surrendered. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the commissioner by order determines. If no proceeding is pending or instituted and withdrawal automatically becomes effective, the commissioner may nevertheless institute a revocation or suspension proceeding under RSA 399-A:7 within one year after withdrawal became effective and may enter a revocation or suspension order as of the last date on which the license was effective.

(c) Failure to comply with the provisions of this section and rules adopted under this section shall be cause for denial of future license applications and the imposition of penalties under RSA 399-A:18.

139:41 New Paragraphs; Investigation of Application; License Requirements; No Implied Approval by the Commissioner. Amend RSA 399-A:4 by inserting after paragraph IX the following new paragraphs:

X. The fact that a person is licensed or registered in the state of New Hampshire under this chapter does not constitute a finding that the commissioner has passed in any way upon the merits or qualifications of such person or that the commissioner has recommended or given approval to any person. It is unlawful to make, or cause to be made, to any prospective purchaser, customer, or client any representation inconsistent with the provisions of this paragraph.

XI. Any license fee required by this chapter shall be paid before a license may become effective.

139:42 Reporting and Record Keeping Requirements. RSA 399-A:6, I is repealed and reenacted to read as follows:

I.(a) Each licensee shall file, under oath, an annual report with the commissioner on or before February 1st each year concerning its business and operations for the preceding calendar year or license period ending December 31st in the form prescribed by the commissioner.

(b) A person who surrenders, withdraws, or does not renew a license shall file the annual report as required in subparagraph (a), notwithstanding the fact that it is not licensed on the date that the report is due.

(c) Each licensee shall also file, under oath, its financial statement with the commissioner within 90 days from the date of its fiscal year end. The financial statement shall be prepared in accordance with generally accepted accounting principles and shall include a balance sheet, income statement, statement of changes in owners’ equity, a cash flow statement, and note disclosures. If the financial statement is not audited, a certification statement shall be attached and signed by a duly authorized officer of the licensee. The certification statement shall state that the financial statement is true and accurate to the best of the officer’s belief and knowledge.

139:43 Reporting and Record Keeping Requirements. Amend RSA 399-A:6, III to read as follows:

III. Any licensee or person failing to file either the annual report or the financial statement required by this section within the time prescribed shall pay to the commissioner a penalty of $25 for each calendar day the annual report or financial statement is overdue to a maximum penalty of $2,500 per report or statement and shall be subject to suspension or revocation of its license.

139:44 Denial, Suspension, or Revocation of Licenses; Procedure. RSA 399-A:7, II and III are repealed and reenacted to read as follows:

II. The commissioner may issue an order requiring the person to whom any license has been granted to show cause why the license should not be suspended or revoked. The order shall be calculated to give reasonable notice of the opportunity for hearing, and shall state the reasons for the issuance of the order. The commissioner may by order summarily postpone or suspend any license pending final determination of any order to show cause, or of any other proceeding under this section, provided the commissioner finds that the public interest would be irreparably harmed by delay in issuing such order. Upon the entry of the order, the commissioner shall promptly notify the applicant or licensee that the order has been entered and of the reasons for the order and that within 10 days after receipt of a written request the matter will be scheduled for hearing. Delivery of such order shall be by hand or registered mail at the principal office of the licensee. Delivery of such order to an officer, director, 5 percent or more owner, member, partner, or legal representative of the licensee shall be deemed a valid delivery of the order. If the person to whom an order to show cause is issued fails to request a hearing within 30 days of receipt of the order or within 10 days of valid delivery of the order, and no hearing is ordered by the commissioner, then such person shall be deemed in default, and the order shall, on the thirty-first day, become permanent, and shall remain in full force and effect until and unless later modified or vacated by the commissioner, for good cause shown. A hearing shall be held not later than 10 days after the request for such hearing is received by the commissioner after which and within 20 days of the date of the hearing the commissioner shall enter an order making such disposition of the matter as the facts require. If the person to whom the license was granted fails to request a hearing within 30 calendar days of receipt of such order or fails to appear at a hearing after being duly notified, that person shall be deemed in default and the proceeding may be decided against him or her upon consideration of the order to show cause, the allegations of which may be deemed to be true.

III. If a licensee is a partnership, association, corporation, or entity however organized, it shall be sufficient cause for the suspension or revocation of a license that any officer, director, or trustee of a licensed association or corporation or any member of a licensed partnership has so acted or failed to act on behalf of said licensee as would be cause for suspending or revoking a license to such party as an individual. Each licensee shall be responsible for supervision of its branch offices and for the acts of any or all of its employees while acting as its agent if such licensee, after actual knowledge of such acts, retained the benefits, proceeds, profits, or advantages accruing from such acts or otherwise ratified such acts.

139:45 Books and Records. RSA 399-A:21, I is repealed and reenacted to read as follows:

I. Each licensee shall keep and use in its business such books and accounting records as are in accord with sound and accepted accounting practice and enable the commissioner to determine whether the licensee is complying with this chapter and any rule adopted under it. A licensee shall keep and use business records in such form and at such location as the commissioner shall by rule determine. The rules may contain provisions for records to be recorded, copied, or reproduced by any process which accurately reproduces or forms a durable medium for reproducing the original record or document, or in any other form or manner authorized by the commissioner. Nothing in this section shall be construed to permit any licensee to destroy original records or documents. Each licensee shall preserve all such business records for as long a period as the commissioner shall prescribe by rule.

139:46 Effective Date. This act shall take effect 60 days after is passage.

(Approved: May 24, 2004)

(Effective Date: July 23, 2004)