This alert is part of Holland & Knight's Garden State Initiative, a firmwide effort to enhance coordination among attorneys, clients and professional networks with ties to New Jersey to foster greater collaboration across offices and strengthen client relationships.
New Jersey Gov. Phil Murphy signed three bills into law in 2024 and 2025 that should be of interest to financial institutions doing business in the state. Two of these three laws – P.L. 2024, c. 48, and P.L. 2025, c. 69 – became effective on July 22 and July 10, 2025, respectively, and the third, P.L. 2025, c. 56, does not become effective until Nov. 1, 2025. The new laws address 1) the collection and reporting of medical debts, 2) ability of consumers to repay their mortgage loans more frequently than monthly and 3) increases in realty transfer taxes for high-value properties. Brief summaries of these new laws are provided in this Holland & Knight alert.
P.L. 2024, c. 48
This law, codified at N.J.S.A. 56:11-56 et seq. (the Medical Debt Law), imposes a number of prohibitions, restrictions and obligations on "medical creditors," "medical debt collectors" and "consumer reporting agencies" (CRAs) in connection with the collection and reporting of "medical debt." Of most significance to financial institutions are the law's prohibitions against 1) medical creditors and medical debt collectors reporting of patients' medical debt for health services (performed on or after July 22, 2025) to a CRA and 2) CRAs from making "any consumer report containing a patient's paid medical debt or a medical debt of less than $500 regardless of the date it was incurred."
The Medical Debt Law defines 1) a "medical creditor" to mean any person who "provides health care services and to whom a patient owes money for health care services or … that provided health care services and to whom the patient previously owed money if the medical debt has been purchased by one or more debt buyers," 2) a "medical debt collector" to mean any person who "regularly collects or attempts to collect, directly or indirectly, medical debts originally owed, due, or asserted to be owed or due to another[, including a] medical debt buyer" and 3) "medical debt" to mean "a debt arising from the receipt of health care services," except debt charged to a general purpose credit card or home equity or general purpose line of credit, debt arising from veterinarian services or an insurance payment for a healthcare provider's services that is retained by the subscriber, and secured debt.
The two prohibitions in the Medical Debt Law that are mentioned above would seem to present a serious problem for lenders that rely on consumer reports to assess loan applicants' ability to repay. If medical creditors and medical debt collectors can no longer report to CRAs consumer medical debts for health-related services performed on or before July 22, 2025, and CRAs cannot include certain medical debts (whenever incurred) in a consumer report, those debts will not appear on loan applicants' consumer reports, potentially causing lenders to overestimate applicants' ability to repay. As the last financial crisis demonstrated, lending to borrowers who do not have the ability to repay can have negative repercussions for both lenders and borrowers – lenders will suffer losses when borrowers are unable to pay their loans, and borrowers who cannot make their loan payments can incur late fees or other default-related fees, see their credit scores reduced (making it more difficult for them to obtain credit in the future) and, if their loans default, lose by means of a forced sale any personal or real property they may have put up as collateral for their loans.
The Medical Debt Law can also potentially create problems for financial institutions that furnish credit information to CRAs. "Furnishers" are bound by a provision in the federal Fair Credit Reporting Act (FCRA), specifically 15 U.S.C. § 1681, not to report information relating to a consumer that the furnisher "knows or has reasonable cause to believe … is inaccurate." Query whether a furnisher that has actual knowledge of medical debts owed by a consumer but, nevertheless, in compliance with the Medical Debt Law, does not report such debts to a CRA while continuing to report other debts of the consumer could be found to have violated the FCRA provision cited above.
Note that although the Consumer Financial Protection Bureau (CFPB) adopted a final rule in January 2025 prohibiting medical debt from appearing on consumer reports, a U.S. district court in Texas on July 11, 2025, vacated that rule on the grounds that it exceeded the CFPB's statutory authority under the FCRA. In that decision, the court stated: "[J]ust as an agency cannot prohibit what a federal statute explicitly permits, neither can a state law. Accordingly, any state law purporting to prohibit a CRA from furnishing a credit report with coded medical information would be inconsistent with FCRA and therefore preempted." What impact this decision may have on New Jersey's Medical Debt Law remains to be seen.1
P.L. 2025, c. 56
This law adds a new section N.J.S.A. 17:11C-75.1 (Section 75.1) to the New Jersey Residential Mortgage Lending Act, N.J.S.A. 17:11C-51 et seq. (RMLA), which generally regulates nonbank residential mortgage lenders, brokers and servicers. Section 75.1 requires any "financial institution" that services a New Jersey "mortgage loan" to allow 1) mortgagors who are in good standing on their loans to make biweekly or bimonthly mortgage payments and 2) any mortgagor (presumably even if not in good standing) to pay additional amounts to principal without the imposition of any penalty. If a mortgagor chooses to make biweekly payments, the financial institution must apply to principal any amount paid by the mortgagor in excess of the total annual "contractual mortgage payments" due (for principal, interest and escrow). If a mortgagor chooses to make bimonthly payments, those payments must be in an amount equal to half of the total monthly contractual mortgage payment due.
Section 75.1 defines 1) a "financial institution" to mean a New Jersey-chartered depository institution, New Jersey-licensed lender or mortgage servicer subject to the laws of New Jersey and 2) a "mortgage loan" essentially to mean a consumer-purpose loan made by a financial institution to a natural person that is secured by a 1-6 family dwelling, the value of which the financial institution "relies primarily upon" to make the loan.
In situations where mortgagors are making biweekly or bimonthly payments and an escrow analysis projects an escrow shortage or otherwise results in an increase to the amount the mortgagors must pay into escrow, Section 75.1 also requires financial institutions to notify the mortgagors of their new escrow payment amount, adjust their recurring payment amount accordingly and apply any excess amounts paid by the mortgagors first to any unsatisfied escrow payments and then to principal. Section 75.1 also allows mortgagors receiving such notifications to inform the financial institution that they wish to make a separate payment to reduce or eliminate the projected escrow shortage, in which case the financial institution must treat any such payment as separate and independent of any payments applied to principal pursuant to Section 75.1.
Financial institutions that make or service New Jersey mortgage loans should take heed that they will likely have to adjust their servicing platforms to comply with the requirements in Section 75.1, and the Nov. 1, 2025, deadline is not that far away. (Note that although the RMLA generally exempts depository institutions from its provisions, New Jersey-chartered depositories nevertheless appear to be subject to Section 75.1.)
P.L. 2025, c. 69
Since 2006, New Jersey has imposed on buyers of certain types of properties – Class 2 "residential" property, Class 3A "farm property (regular)" that contains a residential dwelling, cooperative units and Class 4A "commercial properties" – an additional or supplemental realty transfer fee equal to 1 percent of the purchase price, but only if the purchase price exceeds $1 million (dubbed the "Mansion Tax").2 Apparently not content with the amount of revenue obtained by the state government as a result of the Mansion Tax, the New Jersey Legislature enacted P.L. 2024, c.48 (the "Mansion Tax Amendment"), thereby cementing the state's status as having one of the highest property taxes in the nation.
The Mansion Tax Amendment makes two important changes to the prior law. First, it transfers the obligation to pay the Mansion Tax from the buyer to the seller. Second, it changes the Mansion Tax from 1) a flat percentage (1 percent) of the property's purchase price to 2) a graduated percentage of the purchase price depending on its amount – i.e., the higher the purchase price, the great percentage Mansion Tax the seller must pay. The new graduated percentages are as follows:
- 1 percent for properties sold for more than $1 million and not more than $2 million
- 2 percent for properties sold for more than $2 million and not more than $2.5 million
- 5 percent for properties sold for more than $2.5 million and not more than $3 million
- 3 percent for properties sold for more than $3 million and not more than $3.5 million
- 5 percent for properties sold for more than 3.5 million
For example, under the new law, a deed transfer for $2.75 million will be subject to a Mansion Tax of 2.5 percent x $2.75 million, or $68,750, due at recording in addition to the other seller fees.
The Mansion Tax Amendment is effective for all deeds submitted for recording on or after July 10, 2025.
The Mansion Tax Amendment will likely have a significant impact on both buyers and sellers of such properties. Sellers who choose not to increase the purchase price of their properties to cover all or part of the Mansion Tax will receive less (often significantly less) than they otherwise would have, and buyers purchasing properties from sellers who choose to increase their asking price to cover all or part of the Mansion Tax will end up paying more (often significantly more) than they otherwise would have.
In addition, the Mansion Tax Amendment may also indirectly impact mortgage lenders when underwriting loan applications to finance the purchase of such properties, particularly in cases where the properties are sold at a price that is inflated to cover the Mansion Tax. In such a scenario, because appraisals of such properties may be based on comparable properties sold before the effective date of the Mansion Tax Amendment, they are likely to come in at a lower valuation than the agreed purchase price, possibly causing the lender to require higher down payments, higher interest rates or a combination of both, or perhaps even to deny the loan application.
The Mansion Tax Amendment exempts only three types of real property transfers from the obligation to pay the Mansion Tax:
- transfers of properties that are owned by 501(c)(3) nonprofit organizations
- transfers of real property that are "incidental to a corporate merger or acquisition" (i.e., where the equalized assessed value of the property is less than 20 percent of the total value of the assets transferred in the merger or acquisition
- transfers of real property entered into on or after Jan. 1, 2021, and is an intercompany transfer between combined group members as part of the unitary business3
Notes
1 On July 30, 2025, a bill was introduced in the U.S. House of Representative by Sens. Jeff Merkley (D-Ore.), Rick Williams (D-Ga.) and Lou Correa (D-Calif.) to amend the FCRA to exclude all medical debt from appearing on a consumer report and prohibit creditors from obtaining or using consumer medical debt in credit decisions.
2 The Mansion Tax first came into being in 2004 but applied only to improved or unimproved properties zoned for residential use.
3 A "unitary business" is defined, by reference to the definition in N.J.S.A. 54:10A-4(gg), to mean "a single economic enterprise that is made up either of separate parts of a single business entity or of a group of business entities under common ownership that are sufficiently interdependent, integrated, and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value among the separate parts."
