By the Division of Banks

Licensing Requirements For Out-Of-State Companies Accepting Unsecured Retail Installment Contracts

Mass. Gen. Laws chapters 255B, concerning motor vehicles, and 255D, concerning all other goods and services, govern the licensing of sales finance companies. Said chapter 255B § 1 defines a sales finance company as "any person engaged, in whole or in part, in the business of purchasing retail installment contracts from one or more retail sellers." A retail installment contract, under that same section, is "an agreement, signed by the borrower in this Commonwealth, pursuant to which the title to, the property in or a lien upon a motor vehicle, which is the subject matter of a retail installment sale, is retained or taken by a retail seller from a retail buyer as security, in whole or in part, for the buyer's obligation." This section does not apply to unsecured retail installment contracts.

Said chapter 255D § 1, on the other hand, does not require that the retail installment sales agreement be secured in order to be covered by applicable law. Accordingly, a purchaser of unsecured retail installment sales agreements, unless otherwise exempted, would be required to obtain a sales finance company license. It is the Division's opinion that an out-of-state corporation accepting unsecured retail installment contracts, with recourse, from retailers located in the Commonwealth, must be licensed even if it has no offices, employees or assets in the Commonwealth.