New Hampshire has revised its bonding requirements for small loan, title loan, payday loan and closed-end loan lenders to now require $25,000 surety bonds to attain licensure as a lender. Former legislation required either proof that the licensee had $25,000 per location or a $25,000 bond. This bill, HB-644, will become effective January 1, 2016.

Whom does this concern?

This requirement pertains to lenders, meaning entities that lend money or give credit on the condition that it be returned, usually with an interest fee. Lenders do not include financial institutions. Lenders include people who participate in the following:

• serve as an intermediary, finder or agent of a lender or borrower to negotiate or arrange loans
• offer to act as agent for anyone trying to obtain or lend a loan
• perform any of the functions related to the production, distribution or maintenance of loans
• act as a credit services organization
• advertise services for small loans, payday loans or title loans
• perform administrative functions necessary to carry out debt holders’ obligations under loan agreement

The provisions of this bill do not apply to anyone engaged in business banks, trust companies, insurance companies, savings or building and loan associations, and credit unions. Additionally, anyone who makes loans solely for educational purposes are not obligated to adhere to these provisions.

What are the bonding requirements?

To obtain approval for a license, small loan lender applicants will have to file a surety bond with the New Hampshire Banking Department. The specific requirements include the following:

• $25,000 bond amount
• continuous in nature
• 30-day written notice of cancellation required
• suits must be brought within 6 years of the principal’s violation
• if action is commenced against a bond, the principal must file a new bond

What are other important details?

Small loan lenders must obtain a license before commencing business operations. A few important details to note from this legislation include the following:

• initial and renewal applications must be accompanied with nonrefundable $450 fees (plus an additional $450 for each additional branch)
• background checks and fingerprint scans for all principals named in bond
• each lender must provide detailed financial information to banking department to assure financial credibility
• licensees must maintain a positive net worth at all times
• licenses expire December 31 of each year
• anyone who knowingly violates a provision of Chapter 399-A is guilty of a misdemeanor

A copy of the bond form for small loan lenders is available here. Small loan lenders will be required to file this bond by January 1, 2016.

Photo by Omar Bárcena (CC BY 2.0)