HB0425RPS

HOUSE REGULATORY AND PUBLIC AFFAIRS COMMITTEE SUBSTITUTE FOR

HOUSE BILL 425

52nd legislature - STATE OF NEW MEXICO - first session, 2015

AN ACT

RELATING TO FINANCIAL INSTITUTIONS; LIMITING FEES AND CHARGES FOR CERTAIN INSTALLMENT AND SHORT-TERM INSTALLMENT LOANS; AMENDING CHAPTER 56, ARTICLE 8 NMSA 1978, THE NEW MEXICO SMALL LOAN ACT OF 1955 AND THE NEW MEXICO BANK INSTALLMENT LOAN ACT OF 1959.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 56-8-9 NMSA 1978 (being Laws 1957, Chapter 209, Section 1, as amended) is amended to read:

"56-8-9. EXCESSIVE CHARGES PROHIBITED--APPLICABILITY OF MAXIMUM RATES--DEFINITION.--

A. Unless otherwise provided by law, no person, corporation or association, directly or indirectly, shall take, reserve, receive or charge any interest, discount or other advantage for the loan of money or credit or the forbearance or postponement of the right to receive money or credit except at the rates permitted in Sections 56-8-1 through 56-8-21 NMSA 1978.

B. No provision of law prescribing maximum rates of interest that may be charged in any transaction shall apply to a transaction in which a corporation is a debtor, regardless of the purpose for which the corporation was formed and regardless of the fact that an individual is codebtor, endorser, guarantor, surety or accommodation party. No corporation or its codebtor, endorser, guarantor, surety or accommodation party shall have a cause of action or affirmatively plead, counterclaim, set off or set up the defense of usury in any action to recover damages or enforce a remedy on any obligation executed by the corporation, and no civil or criminal penalty [which] that would otherwise be applicable except as provided in Sections 30-43-1 through 30-43-5 NMSA 1978 shall apply on any obligation executed by the corporation.

C. A lender may, in the case of business or commercial loans for business or commercial purposes in the amount of five hundred thousand dollars ($500,000) or more, take, receive, reserve or charge on any loan or discount made, or upon any note, bill of exchange or other evidence of debt, interest at a rate agreed to by the parties [even if the rate exceeds the rate set forth in Section 56-8-11 NMSA 1978].

D. In addition to the maximum interest or discount [which] that a lender is permitted to charge by law, the lender may charge, take, reserve or receive a premium or points in an amount up to but not exceeding three percent of the face amount of the loan on interim construction loans. The lender may charge and require the borrower to pay the premium upon execution of the loan agreement, whether the proceeds are delivered to the borrower immediately or whether there are to be obligatory or permissive future advances. The lender shall not be required to refund this charge in the event of prepayment of the obligation. For the purposes of this section, [an] "interim construction loan" means a loan secured by a first mortgage and used by the borrower primarily for financing the construction of buildings, structures or improvements on or to the real property on which the first mortgage has been taken.

E. A lender may charge, take, reserve or receive points or a premium on any loan secured by real property, provided the points or premium together with the interest or discount charged, taken, reserved or received do not exceed the maximum interest or discount permitted by law. The lender shall not be required to refund this charge in the event of prepayment even if the prepayment would result in a higher charge to the borrower than permitted by law.

F. A loan in an amount less than or equal to two thousand five hundred dollars ($2,500) shall be made only pursuant to the New Mexico Bank Installment Loan Act of 1959 or the New Mexico Small Loan Act of 1955."

SECTION 2. Section 58-7-1 NMSA 1978 (being Laws 1959, Chapter 327, Section 1) is amended to read:

"58-7-1. SHORT TITLE.--[This act shall be known] Chapter 58, Article 7 NMSA 1978 may be cited as the "New Mexico Bank Installment Loan Act of 1959"."

SECTION 3. Section 58-7-3 NMSA 1978 (being Laws 1995, Chapter 190, Section 15) is amended to read:

"58-7-3. LOANS COVERED BY ACT.--

A. The New Mexico Bank Installment Loan Act of 1959 applies to a loan that is a precomputed loan repayable in installments [or] and that is clearly identified on the loan documents as being made under that act.

B. A loan in an amount less than or equal to two thousand five hundred dollars ($2,500) shall be made only pursuant to the New Mexico Bank Installment Loan Act of 1959 or the New Mexico Small Loan Act of 1955."

SECTION 4. Section 58-7-3.1 NMSA 1978 (being Laws 1983, Chapter 96, Section 1) is amended to read:

"58-7-3.1. PRECOMPUTED LOAN.--[If the loan is] In a precomputed loan transaction, the interest charge [may] shall be calculated on the assumption that all scheduled payments will be made when due, and the effect of prepayment is governed by the provisions of rebate upon prepayment in Section 58-7-5 NMSA 1978."

SECTION 5. Section 58-7-6 NMSA 1978 (being Laws 1959, Chapter 327, Section 6, as amended) is amended to read:

"58-7-6. ADDITIONAL CHARGES.--

A. No additional amount shall be charged or contracted for, directly or indirectly, on or in connection with any such installment loan except as follows:

[A.] (1) delinquency charges not to exceed [five cents ($.05)] ten cents ($.10) for each one dollar ($1.00) of each installment more than ten days in arrears, provided that the total of delinquency charges on any such installment shall not exceed [ten dollars ($10.00)] twenty-five dollars ($25.00) and that only one delinquency charge shall be made on any one installment regardless of the period during which the installment remains unpaid;

[B.] (2) the lender may charge for only the actual cost of any insurance; provided, however, all insurance shall be written by [a company or] companies licensed to operate within the state and at rates no higher than those approved by the superintendent of insurance; and provided further that the lender [must] shall not require any insurance to be written or provided by or through any particular agent, broker or insurer as a condition to making the loan but [must] shall, at the borrower's option, permit the [same] insurance to be procured from any reputable insurer or through any reputable agent authorized by law to provide it;

[C.] (3) in the event that a borrower fails to maintain in effect any insurance required in connection with a loan transaction, the lender may purchase the required insurance or lender's single interest insurance covering the lender's interest in the property, and the cost of [such] that insurance shall be added to the loan and may accrue interest as provided for [herein] in the New Mexico Bank Installment Loan Act of 1959;

[D.] (4) such amounts as are necessary to reimburse the lender for fees paid to a public officer for filing, recording or releasing any instrument or lien;

[E.] (5) if a loan under the New Mexico Bank Installment Loan Act of 1959 is secured and if the borrower fails to pay any governmental or other levy arising after the date of the loan [which] that would create a lien superior to the lien of the lender on the property standing as security, the lender, at the lender's option, may pay [such] the levy and add the amount so paid to the balance due from the borrower;

[F.] (6) the actual expenditures, including reasonable [attorneys'] attorney fees, for legal process or proceedings to collect any such installment loan; provided, however, that no [attorneys'] attorney fees are permitted where the loan is referred for collection to an attorney who is a salaried employee of the holder of the contract;

[G.] (7) the actual cost of charges incurred in making a real estate loan secured by a mortgage on real estate, including but not limited to the charges for an abstract of title, title examination, title insurance premiums, property survey, appraisal fees, notary fees, preparation of deeds, mortgages or other documents, escrow charges, credit reports and filing and recording fees; [and

H. a one-time charge of an amount not to exceed twenty-five dollars ($25.00) in an installment loan repayable in two or more installments when the loan is made to a natural person primarily for personal, family or household purposes to help defray the actual costs of preparing truth-in-lending disclosure statements, equal credit opportunity disclosure statements and other disclosures required by federal law]

(8) a processing fee of not more than ten percent of the principal amount of the loan, which fee is fully earned and nonrefundable at the time a loan agreement is executed;

(9) upon the execution of an installment loan, the lender may impose a handling fee of not more than seven and three-fourths percent of the initial principal amount of the loan, calculated per each month for the scheduled term of the loan; and

(10) if there are insufficient funds to pay a check or other type of debit on the date of presentment by the lender, a lender may charge a consumer a fee not to exceed thirty-five dollars ($35.00). Only one fee may be collected by a lender on a check or debit authorization. A check or debit authorization request shall not be presented to a financial institution by a lender for payment more than one time unless the consumer agrees in writing, after a check or other type of debit has been dishonored, to one additional presentment or deposit.

B. The charges permitted under this section may be added to the balance due from the borrower."

SECTION 6. Section 58-7-7 NMSA 1978 (being Laws 1959, Chapter 327, Section 8, as amended) is amended to read:

"58-7-7. RESTRICTIONS.--

A. No lender shall make a loan [under] pursuant to the New Mexico Bank Installment Loan Act of 1959 to a borrower who is also indebted to [such] that lender under the New Mexico Small Loan Act of 1955 unless the loan made under the New Mexico Small Loan Act of 1955 is paid and released at the time the loan is made.

B. No lender shall make a loan pursuant to the New Mexico Bank Installment Loan Act of 1959 if a loan has an initial stated maturity of less than one hundred twenty days."

SECTION 7. Section 58-7-9 NMSA 1978 (being Laws 1959, Chapter 327, Section 10, as amended) is amended to read:

"58-7-9. CONSTRUCTION.--

A. None of the provisions of the New Mexico Small Loan Act of 1955 are amended or repealed by the New Mexico Bank Installment Loan Act of 1959.

[B. With the exception of precomputed loan transactions, a lender is not bound by the provisions of the New Mexico Bank Installment Loan Act of 1959 in making loans where the loan is made in accordance with the provisions of Sections 56-8-9 through 56-8-14 NMSA 1978.

C.] B. None of the provisions of the New Mexico Bank Installment Loan Act of 1959 apply to the assignment or purchase of retail installment contracts originated under the provisions of Sections 58-19-1 through 58-19-14 NMSA 1978 or originated under the provisions of Sections 56-1-1 through 56-1-15 NMSA 1978.

[D.] C. In the event of a conflict between a requirement of the New Mexico Bank Installment Loan Act of 1959 and a requirement of the Home Loan Protection Act, the requirement of the Home Loan Protection Act shall control.

[E.] D. As used in the New Mexico Bank Installment Loan Act of 1959:

(1) "year" means three hundred sixty-five days; and

(2) "month" means one-twelfth of a year.

[F.] E. The director of the financial institutions division of the regulation and licensing department shall issue and file as required by law interpretive regulations to effectuate the purposes of the New Mexico Bank Installment Loan Act of 1959. In issuing, amending or repealing interpretive regulations, the director shall issue the regulation amendment or repeal of the regulation as a proposed regulation amendment or repeal of a regulation and file it for public inspection in the office of the director of the financial institutions division. Distribution thereof shall be made to interested persons, and their comments shall be invited. After the proposed regulation has been on file for not less than two months, the director may issue it as a final regulation by filing as required by law. Any person who is or may be adversely affected by the adoption, amendment or repeal of a regulation under this section may file an appeal of that action in the district court in Santa Fe county within thirty days after the filing of the adopted regulation, amendment or repeal as required by law.

[G.] F. Any person, corporation or association complying with the regulations adopted by the director of the financial institutions division of the regulation and licensing department is deemed to have complied with the provisions of the New Mexico Bank Installment Loan Act of 1959.

[H. All loans other than precomputed loan transactions made under the New Mexico Bank Installment Loan Act of 1959 shall be clearly identified on the loan documents as being made under that act.]"

SECTION 8. A new section of the New Mexico Bank Installment Loan Act of 1959 is enacted to read:

"[NEW MATERIAL] PREEMPTION.--The state has exclusive jurisdiction and authority regarding the terms and conditions of loans to which the New Mexico Bank Installment Loan Act of 1959 is applicable, and counties, municipalities and other political subdivisions of the state are preempted from any regulation of terms and conditions of such loans by ordinance, resolution or otherwise."

SECTION 9. Section 58-15-2 NMSA 1978 (being Laws 1955, Chapter 128, Section 2, as amended) is amended to read:

"58-15-2. DEFINITIONS.--The following words and terms when used in the New Mexico Small Loan Act of 1955 have the following meanings unless the context clearly requires a different meaning. The meaning ascribed to the singular form applies also to the plural:

A. "consumer" means a person who enters into a loan agreement and receives the loan proceeds in New Mexico;

B. "debit authorization" means an authorization signed by a consumer to electronically transfer or withdraw funds from the consumer's account for the specific purpose of repaying a loan;

C. "department" or "division" means the financial institutions division of the regulation and licensing department;

D. "director" means the director of the division;

E. "installment loan" means a loan in an amount less than or equal to two thousand five hundred dollars ($2,500) that is to be repaid in a minimum of [four] six successive substantially equal payment amounts to pay off a loan in its entirety with [a period of no] an initial stated maturity of not less than [one hundred twenty] one hundred eighty days to maturity. "Installment loan" does not mean a loan in which a licensee requires, as a condition of making the loan, the use of postdated checks or debit authorizations for repayment of that loan or a refund anticipation loan;

F. "license" means a permit issued under the authority of the New Mexico Small Loan Act of 1955 to make loans and collect charges therefor strictly in accordance with the provisions of that act at a single place of business. It shall constitute and shall be construed as a grant of a revocable privilege only to be held and enjoyed subject to all the conditions, restrictions and limitations contained in the New Mexico Small Loan Act of 1955 and lawful regulations promulgated by the director and not otherwise;

G. "licensee" means a person to whom one or more licenses have been issued pursuant to the New Mexico Small Loan Act of 1955 upon the person's written application electing to become a licensee and consenting to exercise the privilege of a licensee solely in conformity with the New Mexico Small Loan Act of 1955 and the lawful regulations promulgated by the director under that act and whose name appears on the face of the license;

H. "payday loan" means a loan in which the licensee accepts a personal check or debit authorization tendered by the consumer and agrees in writing to defer presentment of that check or use of the debit authorization until the consumer's next payday or another date agreed to by the licensee and the consumer and:

(1) includes any advance of money or arrangement or extension of credit whereby the licensee, for a fee, finance charge or other consideration:

(a) accepts a dated personal check or debit authorization from a consumer for the specific purpose of repaying a payday loan;

(b) agrees to hold a dated personal check or debit authorization from a consumer for a period of time prior to negotiating or depositing the personal check or debit authorization; or

(c) pays to the consumer, credits to the consumer's account or pays another person on behalf of the consumer the amount of an instrument actually paid or to be paid pursuant to the New Mexico Small Loan Act of 1955; but

(2) does not include:

(a) an overdraft product or service offered by a banking corporation, savings and loan association or credit union; and

(b) installment loans;

I. "payday loan product" means a payday loan or a payment plan pursuant to Section 58-15-35 NMSA 1978;

J. "person" includes an individual, copartner, association, trust, corporation and any other legal entity;

K. "refund anticipation loan" means a loan that is

secured by or that the creditor arranges or expects to be

repaid, directly or indirectly, from the proceeds of the

consumer's federal or state personal income tax refunds or tax

credits, including any sale, assignment or purchase of a tax

refund or tax credit at a discount or for a fee;

[K.] L. "renewed payday loan" means a loan in which a consumer pays in cash the administrative fee payable under a payday loan agreement and refinances all or part of the unpaid principal balance of an existing payday loan with a new payday loan from the same licensee. A "renewed payday loan" includes a transaction in which a consumer pays off all or part of an existing payday loan with the proceeds of a payday loan from the same licensee; [and]

M. "short-term installment loan" means a loan in an amount less than or equal to two thousand five hundred dollars ($2,500) that is to be repaid in a minimum of three successive substantially equal payment amounts to pay off a loan in its entirety with an initial stated maturity of not less than ninety days to maturity and less than one hundred eighty days to maturity. "Short-term installment loan" does not mean a loan in which a licensee requires, as a condition of making the loan, the use of postdated checks or debit authorizations for repayment of that loan or a refund anticipation loan; and

[L.] N. "simple interest" means a method of calculating interest in which the amount of interest is calculated based on the annual interest rate disclosed in the loan agreement and is computed only on the outstanding principal balance of the loan."

SECTION 10. Section 58-15-3 NMSA 1978 (being Laws 1955, Chapter 128, Section 3, as amended) is amended to read:

"58-15-3. APPLICABILITY OF ACT--EXEMPTIONS--EVASIONS--PENALTY.--

A. A person shall not engage in the business of lending in amounts of two thousand five hundred dollars ($2,500) or less for a loan without first having obtained a license from the director. Nothing contained in this subsection shall restrict or prohibit a licensee under the New Mexico Small Loan Act of 1955 from making loans in any amount under the New Mexico Bank Installment Loan Act of 1959 in accordance with the provisions of Section 58-7-2 NMSA 1978.

B. Nothing in the New Mexico Small Loan Act of 1955 shall apply to a person making individual advances of two thousand five hundred dollars ($2,500) or less under a written agreement providing for a total loan or line of credit in excess of two thousand five hundred dollars ($2,500).

C. A banking corporation, savings and loan association or credit union operating under the laws of the United States or of a state shall be exempt from the licensing requirements of the New Mexico Small Loan Act of 1955, nor shall that act apply to business transacted by any person under the authority of and as permitted by any such law nor to any bona fide pawnbroking business transacted under a pawnbroker's license nor to bona fide commercial loans made to dealers upon personal property held for resale. Nothing contained in the New Mexico Small Loan Act of 1955 shall be construed as abridging the rights of any of those exempted from the operations of that act from contracting for or receiving interest or charges not in violation of an existing applicable statute of this state.

D. The provisions of Subsection A of this section apply to:

(1) a person who owns an interest, legal or equitable, in the business or profits of a licensee and whose name does not specifically appear on the face of the license, except a stockholder in a corporate licensee; and

(2) a person who seeks to evade its application by any device, subterfuge or pretense whatsoever, including but not thereby limiting the generality of the foregoing:

(a) the loan, forbearance, use or sale of credit (as guarantor, surety, endorser, comaker or otherwise), money, goods or things in action;

(b) the use of collateral or related sales or purchases of goods or services or agreements to sell or purchase, whether real or pretended;

(d) the real or pretended negotiation, arrangement or procurement of a loan through any use or activity of a third person, whether real or fictitious.

E. A person, copartnership, trust or a trustee or beneficiary thereof or an association or corporation or a member, officer, director, agent or employee thereof who violates or participates in the violation of a provision of Subsection A of this section is guilty of a petty misdemeanor and upon conviction shall be sentenced pursuant to the provisions of Subsection B of Section 31-19-1 NMSA 1978. A contract or loan in the making or collection of which an act is done that violates Subsection A or D of this section is void and the lender has no right to collect, receive or retain any principal, interest or charges whatsoever.

SECTION 11. Section 58-15-17 NMSA 1978 (being Laws 1955, Chapter 128, Section 15, as amended) is amended to read:

"58-15-17. REQUIREMENTS FOR MAKING AND PAYING OF LOANS--INCOMPLETE INSTRUMENTS--LIMITATIONS ON CHARGES AFTER JUDGMENT AND INTEREST.--

A. Every licensee shall:

(1) at the time a loan is made within the provisions of the New Mexico Small Loan Act of 1955, deliver to the borrower or, if there are two or more borrowers on the same obligation, to one of them, a statement in English or Spanish as requested by the borrower, on which shall be printed a copy of Section 58-15-14.1 NMSA 1978 and that discloses in clear and distinct terms:

(a) the amount of the loan;

(b) the date the loan was made;

(d) the type of the security, if any, for the loan;

(e) the name and address of the licensed office;

(f) the name of the person primarily obligated for the loan;

(g) the amount of principal;

(h) the agreed rate of charge stated on a percent per year basis and the amount in dollars and cents;

(i) all other disclosures required pursuant to state and federal law; and

(j) other items allowable pursuant to that act, so stated as to clearly show the allocation of each item included;

(2) for each payment made on account of any such loan, give to the person making it a plain and complete receipt specifying the date and amount of the payment, the amount applied to interest and principal and the balance unpaid. When payment is made in any other manner than by the borrower in person, by an agent of the borrower or by check or money order, the licensee shall mail the receipt to the borrower's last known address or hold the receipt for delivery upon request of the borrower. A copy of all receipts shall be kept on file in the office of the licensee as a part of the licensee's records; and

(3) upon payment of the loan in full, mark plainly every note and promise to pay signed by any obligor with the word "paid" or "canceled" and promptly file or record a release of any mortgage if the mortgage has been recorded, restore any pledge and cancel and return any note and any assignment given to the licensee. A licensee may mark and return a copy of the note, promise to pay or any assignment if the copy accurately reproduces the complete original.

B. A licensee shall not take a note or promise to pay that does not disclose the amount of the loan, a schedule of payments, or a description thereof, and the agreed charge or rate of charge or any instrument in which blanks are left to be filled in after execution.

C. If judgment is obtained against a party on a loan made pursuant to the provisions of the New Mexico Small Loan Act of 1955, neither the judgment nor the loan shall carry, from the date of the judgment, charges against a party to the loan other than costs, attorney fees and post-judgment interest as provided by law.

D. Any loan made under the provisions of the New Mexico Small Loan Act of 1955 that is filed and approved as a claim in any bankruptcy proceeding shall, from a date ninety days subsequent to the date of adjudication, bear interest at the rate of ten percent a year only. This limitation shall not apply when the bankrupt is not discharged in bankruptcy or to any obligation not dischargeable under the provisions of the Bankruptcy Act presently in force or as hereafter amended.

E. No loan made under the provisions of the New Mexico Small Loan Act of 1955 shall bear interest after ninety days from the date of the death of the borrower in excess of a rate of ten percent a year on the unpaid principal balance of the loan.

F. No loan made under the provisions of the New Mexico Small Loan Act of 1955 shall bear interest after twelve months from the date of maturity of the loan in excess of ten percent a year upon the unpaid principal balance of the loan.

G. No lender shall make a loan pursuant to the New Mexico Small Loan Act of 1955 if a loan has an initial stated maturity of less than ninety days, unless it is a payday loan or a refund anticipation loan.

H. No lender shall make a loan pursuant to the New Mexico Small Loan Act of 1955 unless the loan is an installment loan, short-term installment loan, payday loan or refund anticipation loan."

SECTION 12. Section 58-15-20 NMSA 1978 (being Laws 1955, Chapter 128, Section 18, as amended) is amended to read:

"58-15-20. FEES AND COSTS.--

A. Notwithstanding any provision of the New Mexico Small Loan Act of 1955, lawful fees, if any, actually and necessarily paid out by the licensee to a public officer for the filing, recording or releasing in a public office of an instrument securing the loan may be charged to the borrower.

B. Notwithstanding any provision in a note or other loan contract taken or received pursuant to the provisions of the New Mexico Small Loan Act of 1955, attorney fees shall not be charged or collected except when the note or other contract has been submitted in good faith to an attorney for collection and after diligent and good faith effort to collect on the part of the licensee has failed.

C. Notary fees incident to the taking of a lien to secure a small loan or releasing such a lien shall not be charged or collected by a licensee, an officer, agent or employee of a licensee or anyone within an office, room or place of business in which a small loan office is conducted.

D. Delinquency fees shall not exceed [five cents ($.05)] ten cents ($.10) for each one dollar ($1.00) of each installment more than ten days in arrears; provided that the total of delinquency charges on any such installment shall not exceed [ten dollars ($10.00)] twenty-five dollars ($25.00) and that only one delinquency charge shall be made on any one installment regardless of the period during which the installment remains unpaid."

SECTION 13. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

"[NEW MATERIAL] INSTALLMENT LOANS--PERMITTED CHARGES.--

A. Upon the execution of an installment loan, the licensee may impose and collect a processing fee of not more than ten percent of the principal amount of the loan, which fee is fully earned and nonrefundable at the time a loan agreement is executed.

B. Upon the execution of an installment loan, the

licensee may impose a handling fee of not more than seven and

three-fourths percent of the initial principal amount of the loan, calculated per each month for the scheduled term of the loan.

C. If there are insufficient funds to pay a check or other type of debit on the date of presentment by the licensee, a licensee may charge a consumer a fee not to exceed thirty-five dollars ($35.00). Only one fee may be collected by a licensee on a check or debit authorization. A check or debit authorization request shall not be presented to a financial institution by a licensee for payment more than one time unless the consumer agrees in writing, after a check or other type of debit has been dishonored, to one additional presentment or deposit.

D. A licensee shall not charge a consumer for fees, interest or charges of any kind other than those permitted pursuant to Subsections A, B and C of this section and Sections 58-15-16 and 58-15-20 NMSA 1978."

SECTION 14. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

"[NEW MATERIAL] SHORT-TERM INSTALLMENT LOANS--PERMITTED CHARGES.--

A. Upon the execution of a short-term installment loan, the licensee may impose and collect a processing fee of not more than ten percent of the principal amount of the loan, which fee is fully earned and nonrefundable at the time a loan agreement is executed.

B. In addition to the processing fee set forth in Subsection A of this section, a licensee shall only charge simple interest on the amount of loan proceeds delivered to the consumer in a short-term installment loan, subject to the following conditions:

(1) the aggregate amount of interest and fees received by the licensee for a short-term installment loan includes all interest and fees, other than a processing fee, received on the loan, including interest and fees received after any renewals, refinance, extensions or default;

(2) unless a short-term installment loan is repaid in full with cash, certified funds or a check or debit having cleared the drawee institution, a short-term installment loan remains outstanding as a renewal, refinance or extension for the purpose of capping the total aggregate amount of interest and fees paid by the borrower;

(3) once the licensee has received an aggregate amount of interest and fees, other than a processing fee, equal to the original principal amount of the short-term installment loan, in addition to the original principal amount of the loan and processing fee, the short-term installment loan shall be deemed satisfied and considered paid in full by the consumer;

(4) the aggregate amount of interest and fees, other than a processing fee, received by a licensee shall not exceed the original principal amount of the short-term installment loan. The maximum aggregate amount of interest and fees, other than a processing fee, shall be prorated by multiplying the number of days in the stated term of the loan by fifty-five hundredths percent;

(5) the interest rate charged on the outstanding balance of a short-term installment loan shall be at a constant rate that is applicable throughout the initial term of the short-term installment loan; and

(6) the interest rate charged on the outstanding balance after initial maturity shall be capped at a rate not greater than the interest rate charged during the initial term of the short-term installment loan.

D. In addition to the fees permitted pursuant to Subsections A, B and C of this section, a licensee may charge the fees permitted pursuant to Sections 58-15-16 and 58-15-20 NMSA 1978."

SECTION 15. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

"[NEW MATERIAL] UNDERWRITING PRACTICES--EXEMPTION.--

A. No licensee shall make an installment loan or short-term installment loan without documenting and considering the consumer's reasonable ability to repay the principal and all fees associated with that loan pursuant to its terms.

B. In documenting and considering the consumer's reasonable ability to repay a loan, a licensee shall use a form approved by the director. The form shall include at a minimum entries for the consumer's share of rent or mortgage payments, telephone and cellular telephone service, motor vehicle payments, credit card payments, loan repayments and garnishments. The form shall include an entry for the consumer's disposable income. The form shall have a self-attestation statement regarding the completeness and accuracy of the information provided by the consumer.

C. A licensee shall not make a loan to a consumer in which monthly payments exceed thirty-five percent of the consumer's disposable income as stated on the form required pursuant to Subsection B of this section.

D. A licensee shall retain all documentation required by this section as part of the licensee's loan records, which records shall be retained as required by the division for examination pursuant to Section 58-15-9 NMSA 1978.

E. The requirements of this section shall apply to all loans pursuant to the New Mexico Small Loan Act of 1955 except payday loans and refund anticipation loans.

F. As used in this section:

(1) "consumer's average monthly financial obligations" includes the consumer's share of financial obligations that are joint with a spouse or domestic partner;

(2) "consumer's average monthly income" shall not include income of a spouse or domestic partner; and

(3) "disposable income" means the consumer's average monthly income over the term of the proposed loan less the consumer's average monthly financial obligations over the course of the proposed loan."

SECTION 16. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

"[NEW MATERIAL] PREEMPTION.--The state has exclusive jurisdiction and authority regarding the terms and conditions of permitted installment loans, short-term installment loans or payday loans, and counties, municipalities and other political subdivisions of the state are preempted from any regulation of terms and conditions of permitted installment loans, short-term installment loans or payday loans by ordinance, resolution or otherwise."

SECTION 17. REPEAL.--Section 58-15-18 NMSA 1978 (being Laws 1955, Chapter 128, Section 16, as amended) is repealed.

SECTION 18. APPLICABILITY.--The provisions of this act shall apply to loans subject to the New Mexico Small Loan Act of 1955 and the New Mexico Bank Installment Loan Act of 1959 executed on or after July 1, 2015.

SECTION 19. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2015.

- 28 -