45th legislature - STATE OF NEW MEXICO - first session, 2001
RELATING TO LOANS; ENACTING THE CAR TITLE LOAN ACT; REGULATING THE TERMS OF CAR TITLE LOANS; PROVIDING FOR LICENSING PERSONS MAKING CAR TITLE LOANS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. SHORT TITLE.--This act may be cited as the "Car Title Loan Act".
Section 2. PURPOSE OF ACT.--The purpose of the Car Title Loan Act is to protect consumers who enter into short-term, high-rate loans from abuses that occur in the credit marketplace. The Car Title Loan Act is to be liberally construed as a consumer protection statute to effectuate its purpose.
Section 3. DEFINITIONS.--As used in the Car Title Loan Act:
A. "car title loan" means money secured by bailment of a certificate of title to a car or motor vehicle, except a loan made in connection with the sale of a motor vehicle to an individual;
B. "commercially reasonable" has the same meaning as used in Section 55-9-504 NMSA 1978;
C. "consumer" means any natural person who singly or jointly with another person enters into a car title loan;
D. "department" means the regulation and licensing
department;
E. "director" means the director of the financial
institutions division of the regulation and licensing department;
F. "executive officer" means the president, chief
executive officer, chief financial officer, chief operating officer, executive vice president, senior vice president, secretary or treasurer of an organization;
G. "identification" means a government-issued
photographic identification card;
H. "interest" means the cost of obtaining a car title loan and includes any profit or advantage of any kind whatsoever that a car title loan lender may charge, contract for, collect, receive or in any way obtain as a result of a car title loan;
I. "license" means a permit issued under the Car
Title Loan Act to make or service car title loans;
J. "licensee" means a person who is licensed as a car title loan lender by the department to engage in car title loans or any facilitator;
K. "facilitator" means any person who facilitates,
enables or acts as a conduit for another person, or
who is or may be exempt from licensing, who makes deferred deposit loans;
L. "loan property" means a motor vehicle certificate of title that is deposited with a car title loan lender as a security for a car title loan;
M. "car" or "motor vehicle" means an automobile,
motorcycle, mobile home, truck, trailer, semitrailer, truck tractor and semitrailer combination or any other vehicle operated on the public highways and streets of this state that is used to transport persons or property and propelled by power other than muscular power, but excludes a vehicle that runs only upon a track and a mobile home that is the primary residence of the owner;
N. "car title loan agreement" or "agreement" means a written agreement in which a car title loan lender agrees to make a car title loan to a borrower;
O. "car title loan lender" or "lender" means a person who engages in the business of making or servicing car title loans;
P. "car title loan office" means the location at which, or premises from which, a car title loan lender regularly conducts business or any other location that is held out to the public as a location at which a lender makes or services car title loans; and
Q. "titled personal property" means a car or motor vehicle that has as evidence of ownership a state-issued certificate of title except for a mobile home that is the primary residence of the borrower.
Section 4. APPLICABILITY.--
A. Except as otherwise provided in this section, the Car Title Loan Act applies to any person who acts as a car title loan lender or a facilitator of car title loans.
B. To the extent that state or federally regulated financial institutions are exempt by virtue of other state or federal laws from certain provisions of the Car Title Loan Act, they remain subject to all other provisions of that act.
Section 5. LICENSING.--
A. No person shall engage in or offer to engage in the business of making car title loans unless and until a license has been issued by the director. The director shall not issue or renew any such license until the prospective licensee meets the requirements for licensing and licensee conduct of the New Mexico Small Loan Act of 1955.
B. The director may promulgate rules to carry out the provisions of the Car Title Loan Act.
Section 6. REMEDIES FOR CAR TITLE LOANS MADE WITHOUT LICENSING.--Any car title loan made that is not authorized by a valid license is void. The person making the car title loan forfeits the right to collect any money, including principal and interest charged on the car title loan, from the borrower in connection with an agreement. Any car title loan for which personal property other than a car or motor vehicle is pledged is void. The person making the car title loan shall return to the borrower the loan property, the titled personal property pledged or the fair market value of such titled personal property and all principal and interest paid by the borrower.
Section 7. INFORMATION AND ANNUAL REPORTS.--
A. Each licensee shall keep and use books, accounts and records that will enable the director to determine if the licensee is complying with the provisions of the Car Title Loan Act and maintain any other records as required by the director. The director, or his designee, is authorized to examine all such records at any reasonable time. All such records must be kept for four years following the last entry on a loan and according to generally accepted accounting procedures, which means that an examiner must be able to review the record keeping and reconcile each loan with documentation maintained in the consumer's loan file records.
B. Each licensee shall file an annual report with the director on or before the last day of March for the twelve-month period in the preceding year on forms prescribed by the director. The reports shall disclose in detail and under appropriate headings:
(1) the resources, assets and liabilities of the licensee at the beginning and the end of the period;
(2) the income, expense, gain, loss and a reconciliation of surplus or net worth with the balance sheets and the ratios of the profits to the assets reported;
(3) the total number of car title loans made in the calendar year ending as of December 31 of the previous year, as well as the total number of car title loans that were renewed or "rolled-over" rather than repaid and the number of times loans were renewed;
(4) the total number of car title loans outstanding as of December 31 of the previous year;
(5) the average annual percentage rate and the average number of times repayment of a car title loan is deferred during the calendar year ending as of December 31 of the previous year;
(6) verification that the licensee has not used the criminal process or caused the criminal process to be used in the collection of any car title loans during the calendar year ending as of December 31 of the previous year; and
(7) the total number of car title loans renewed to each consumer and the number of times the car title loan was renewed to that consumer.
C. The reports required in this section shall be verified by the oath or affirmation of an executive officer of the licensee.
D. No licensee may engage in the business of selling used motor vehicles. If a licensee conducts another business or is affiliated with other licensees under the Car Title Loan Act, or if any other situation exists under which allocations of expense are necessary, the licensee shall make the allocation according to appropriate and reasonable accounting principles as approved by the director. Information about other business conducted on the same premises as that of car title loans shall be provided as required by the director.
E. Each licensee shall file a copy of the contract described in Section 8 of the Car Title Loan Act with the director prior to the date of commencement of business at each location, at the time any changes are made to the documents or schedule and annually thereafter upon renewal of the license. These documents shall be public records.
Section 8. CAR TITLE LOAN AGREEMENT.--
A. At the time a car title loan lender makes a car title loan, the lender and the borrower shall execute a car
title loan agreement, which shall be legibly typed or written
in indelible ink and completed as to all essential provisions prior to execution by the borrower and lender. The car
title loan agreement shall include the following information:
(1) the make, model and year of the titled car to which the loan relates;
(2) the vehicle identification number, or other comparable identification number, along with the license plate number, if applicable, of the car to which the loan relates;
(3) the name, residential address, date of birth, physical description and social security number of the borrower;
(4) the date the car title loan agreement is
executed by the car title loan lender and the borrower;
(5) the identification number and the type of identification, including the issuing agency, accepted from the borrower;
(6) the amount of money advanced, designated as the "amount financed";
(7) the maturity date of the car title loan agreement, which shall be at least thirty days after the date the car title loan agreement is executed by the car title loan lender and the borrower;
(8) the total car title loan interest payable on the maturity date, designated as the "finance charge";
(9) the amount financed plus finance charge, which must be paid to reclaim the loan property on the maturity date, designated as the "total amount of all payments"; and
(10) the interest rate, computed in accordance with the regulations adopted by the federal reserve board pursuant to the federal Truth in Lending Act, designated as the "annual percentage rate."
B. The following information shall be printed on all car title loan agreements:
(1) the name and physical address of the car title loan office;
(2) the name and address of the director as well as a telephone number to which consumers may address complaints and a statement that complaints about the loan may be sent to the director;
(3) a statement in not less than twelve-point type that describes, states or provides that:
(a) if the borrower fails to repay the full amount of the car title loan on or before the end of the maturity date or any extension of the maturity date and fails to make a payment on the car title loan within thirty days after the end of the maturity date or any extension of the maturity date, whichever is later, the car title loan lender may take possession of the borrower's motor vehicle and sell the vehicle in the manner provided by law. If the vehicle is sold, the borrower is entitled to any proceeds of the sale in excess of the amount owed on the car title loan and the reasonable expenses of repossession and sale;
(b) if the car title loan agreement is lost, destroyed or stolen, the borrower should immediately so advise the issuing car title loan lender in writing; and
(c) disclosures required under any other state law.
C. At the time of the transaction, the car title loan lender shall deliver to the borrower an exact copy of the executed car title loan agreement.
D. Upon execution of a car title loan agreement, the car title lender may take possession of the loan property and retain possession of the property until it is redeemed. The borrower shall have the exclusive right to redeem the loan property by repaying all amounts legally due under the agreement. When the loan property is redeemed, the lender shall immediately return the loan property and commence action to release any security interest in the titled personal property. During the term of the agreement or any extension of the agreement, a car title loan lender may retain physical possession of the loan property only. A car title loan lender shall not require a borrower to provide any additional security or guaranty as a condition to entering into a car title loan transaction.
Section 9. CAR TITLE LOAN RENEWALS.--A car title loan agreement may be extended for no more than two consecutive thirty-day periods by mutual consent of the car title loan lender and the borrower, provided that after the second and final such renewal or extension all payments thereafter shall be first applied to reduce the principal balance. Each extension of a car title loan agreement shall be executed in a separate extension agreement, each of which shall comply with the requirements for executing a car title loan agreement as provided in the Car Title Loan Act. The interest rate charged in any car title loan extension agreement shall not exceed the interest rate charged in the related car title loan agreement. A car title loan lender may not capitalize in any car title loan extension agreement any unpaid interest due on the related car title loan agreement or any subsequent extensions to that car title loan agreement.
Section 10. REPOSSESSION, DISPOSAL OF PLEDGED PROPERTY--
EXCESS PROCEEDS.--
A. If a borrower fails to repay all amounts legally due under the car title loan agreement on or before the end of the car title loan's maturity date or authorized extension of such date and fails to make a payment on the loan within thirty days after the end of the loan's maturity date or authorized extension of such date, whichever is later, the car title loan lender may take possession of the titled personal property. A lender may take possession of the titled personal property only through an agent who is licensed by the state to repossess motor vehicles.
B. Prior to engaging a repossession agent, the lender shall afford the debtor an opportunity to make the titled personal property available to the lender at a place, date and time reasonably convenient to the lender and the borrower. Prior to taking possession of titled personal property, the lender shall afford the borrower a reasonable opportunity to remove from the titled personal property any personal belongings without charge or additional cost to the borrower. After the lender takes possession of the titled personal property, the lender, at the lender's sole expense and risk, may authorize a third party to retain physical possession of the titled personal property.
C. Upon taking possession of titled personal property, the lender may dispose of the titled personal property by sale but may do so only through a commercially reasonable sale. In addition, nonpublic sales or disposal of personal property between a car title loan lender and any business affiliates of a car title loan lender or a member of a car title loan lender's family are presumed not to be made in a commercially reasonable manner. At least ten days prior to sale, the lender shall notify the borrower of the date, time and place of the sale and provide the borrower with a written accounting of the principal amount due on the car title loan, interest accrued through the date the lender takes possession of the titled personal property and any reasonable expenses incurred to date by the lender in taking possession of, preparing for sale and selling the titled personal property. At any time prior to sale, the lender shall permit the borrower to redeem the titled personal property by tendering a money order or certified check for the principal amount of the car title loan, interest accrued through the date the lender takes possession and any reasonable expenses incurred to date by the lender in taking possession of, preparing for sale and selling the titled personal property. Nothing in the Car Title Loan Act in any car title loan agreement shall preclude a borrower from purchasing the titled personal property at any sale.
D. Any sale or disposal of the titled personal property shall vest in the purchaser the right, title and interest of the owner and the car title loan lender.
E. Within thirty days after the sale of the titled personal property, the borrower shall receive all proceeds from the sale of the motor vehicle in excess of the sum of the principal amount due on the loan, the interest on the loan up to the date the lender took possession and the reasonable expenses incurred by the lender in taking possession of, preparing for sale and selling the titled personal property. The lender shall pay to the borrower reasonable attorney fees and costs incurred in any action brought to recover proceeds that results in the car title loan lender being ordered to return all or part of the amount.
Section 11. REQUIRED DISCLOSURES.--
A. Before entering into a car title loan, the licensee shall deliver to the consumer a pamphlet prepared or approved by the director that explains, in simple English and Spanish, all of the consumer's rights and responsibilities in a car title loan transaction, includes a toll free number to the director's office to handle concerns or complaints by the consumer and informs the consumer that the director's office can provide information about whether a lender is licensed, whether complaints have been filed with the director and the resolution of such complaints.
B. The following notices in English and Spanish, as well as other languages in which a significant amount of car title loan business is conducted, must be conspicuously posted by all licensees in each location of a business providing car title loans:
(1) that informs consumers that the licensee cannot use the criminal process against a consumer to collect any car title loans; and
(2) that includes the schedule of all interest and fees to be charged on such loans with an example of the amounts that would be charged on a five hundred dollar ($500) loan payable in thirty days and sixty days, giving the corresponding annual percentage rate.
C. No licensee shall charge or receive, directly or indirectly, any interest, fees or charges except those specifically authorized by this section.
D. A licensee shall be permitted to charge an administrative fee of no more than five dollars ($5.00) for each car title loan entered into with a consumer.
E. In addition to the administrative fee, the licensee shall be permitted to charge interest on the amount of cash delivered to the consumer in a car title loan. The rate charged on the outstanding balance after maturity shall not be greater than the rate charged during the loan term. Charges on loans shall be computed and paid only as a percentage of the unpaid principal balance. "Principal balance" means the balance due and owed exclusive of any interest, service charges or other loan-related charges.
F. When a loan is repaid before its due date, unearned interest charges must be rebated to the consumer based on a method at least as favorable to the consumer as the actuarial method.
Section 12. PROHIBITED ACTS.--No licensee making car title loans may or authorize anyone to:
A. engage in the business of title lending unless the director has first issued a valid license;
B. use or threaten to use the criminal process in this or any other state to collect on the loan;
C. use any device or agreement that would have the effect of charging or collecting more fees, charges or interest than allowed by the Car Title Loan Act, including but not limited to entering into a different type of transaction with the consumer;
D. engage in unfair, deceptive or fraudulent practices in the making or collecting of a car title loan;
E. enter into a car title loan with a consumer that is unconscionable. In determining whether a car title loan transaction is unconscionable, consideration shall be given to, but is not limited to, whether the amount of the loan exceeds twenty-five percent of the consumer's net income for the term of the loan;
F. charge to cash a check representing the proceeds of the car title loan;
G. accept payment of the car title loan through the proceeds of another car title loan provided by the same licensee or any affiliate;
H. make more than one car title loan to a consumer at a time;
I. renew, repay, refinance or consolidate a car title loan with the proceeds of another car title loan made by the same consumer. Upon termination of a car title loan through the redemption of the title by payment of the loan or any other method of termination, the licensee shall not enter into another car title loan with the same consumer for at least thirty days thereafter, provided that a licensee may extend the term of the loan beyond the due date without charge;
J. accept any other collateral for a car title loan than a motor vehicle;
K. charge any interest, fees or charges other than those specifically authorized by the Car Title Loan Act, including:
(1) charges for insurance; and
(2) attorney fees or other collection costs;
L. threaten to take any action against a consumer that is prohibited by the Car Title Loan Act, or make any misleading or deceptive statements regarding the car title loan or any consequence thereof;
M. make a misrepresentation of a material fact by an applicant in obtaining or attempting to obtain a license;
N. include any of the following provisions in loan documents required by Section 8 of the Car Title Loan Act:
(1) a hold harmless clause;
(2) a confession of judgment clause;
(3) a waiver of the right to a jury trial, if applicable, in any action brought by or against a consumer;
(4) a mandatory arbitration clause;
(5) an assignment of or order for payment of wages or other compensation for services;
(6) a provision in which the consumer agrees not to assert any claim or defense arising out of the contract; or
(7) a waiver of any provision of the Car Title Loan Act;
O. sell insurance of any kind whether or not sold in connection with the making or collecting of a loan;
P. falsify or fail to make an entry of any material matter in a car title loan agreement or any extension of such agreement;
Q. refuse to allow the director to inspect completed car title loan agreements, extensions of such agreements, or loan property during the ordinary operating hours of the car title loan lender's business or other times acceptable to both parties;
R. enter into a car title loan agreement with a person under the age of eighteen years;
S. knowingly enter into a car title loan agreement with any person who is under the influence of drugs or alcohol when such condition is visible or apparent, or with any person using a name other than such person's own name or the registered name of the person's business;
T. fail to exercise reasonable care, as defined by regulations, in the safekeeping of loan property or of titled personal property repossessed pursuant to this act;
U. fail to return loan property or repossessed titled personal property to a borrower, with any and all of the car title loan lender's liens on the property properly released, upon payment of the full amount due the car title loan lender, unless the property has been seized or impounded by an authorized law enforcement agency, taken into custody by a court or otherwise disposed of by court order;
V. refuse to accept partial payments in amounts equal to not less than five-dollar ($5.00) increments toward satisfying any obligation owed under a car title loan agreement or extension of such agreement and provide a receipt without charge therefor;
W. engage in the business of selling new or used motor vehicles, or parts for motor vehicles;
X. act as a car title loan lender under the Car Title Loan Act within a place of business in which the licensee solicits or engages in business outside the scope of that act if the department determines that the licensee's operation of and conduct pertaining to such other business results in an evasion of that act. Upon making such a determination, the department shall order the licensee to cease and desist from such evasion; provided, no licensee shall engage in the pawnbroker business;
Y. use the words, in advertising or promoting a car title loan or loan company, "interest free loans" or "no finance charges" or words to that effect; or
Z. engage in any violation of the Car Title Loan Act.
Section 13. RIGHT TO RECLAIM--LOST CAR TITLE LOAN AGREEMENT.--
A. A person presenting identification as the borrower and presenting the borrower's copy of the car title loan agreement to the car title loan lender is presumed to be entitled to reclaim the loan property described in the car title loan agreement. However, if the car title loan lender determines that the person is not the borrower, the car title loan lender is not required to allow the redemption of the loan property by such person. The person reclaiming the loan property must sign the borrower's copy of the car title loan agreement, which the car title loan lender may retain to evidence such person's receipt of the loan property. A person reclaiming the loan property who is not the borrower must show identification to the car title loan lender, together with notarized written authorization from the borrower, and the car title loan lender shall record that person's name and address on the car title loan agreement retained by the car title loan lender. In such case, the person reclaiming the borrower's copy of the car title loan agreement shall be provided a copy of such signed form as evidence of the agreement.
B. If the borrower's copy of the car title loan agreement is lost, destroyed or stolen, the borrower must notify the car title loan lender, in writing by certified or registered mail, return receipt requested, or in person evidenced by a signed receipt, and receipt of such notice shall invalidate such car title loan agreement if the loan property has not previously been reclaimed. Before delivering the loan property or issuing a new car title loan agreement, the car title loan lender shall require the borrower to make a written statement of the loss, destruction or theft of the borrower's copy of the car title loan agreement. The car title loan lender shall record on the written statement the type of identification and the identification number accepted from the borrower, the date the statement is given and the number or date of the car title loan agreement lost, destroyed or stolen. The statement shall be signed by the car title loan lender or the car title loan office employee who accepts the statement from the borrower. The car title loan lender shall not impose any type of fee for providing the borrower with a copy of the car title loan agreement.
Section 14. ENFORCEMENT.--
A. The remedies provided herein are cumulative and apply to licensees and unlicensed persons to whom the Car Title Loan Act applies and who failed to obtain a license.
B. The violation of any provision of the Car Title Loan Act, or rule adopted pursuant to that act, except as the result of accidental or bona fide error of computation, renders the loan void, and the person shall have no right to collect, receive or retain any principal, interest or other charges whatsoever with respect to the loan.
C. Any person found to have violated the Car Title Loan Act shall be liable to the consumer for actual, consequential and punitive damages, plus statutory damages of one thousand dollars ($1,000) for each violation, plus costs and attorney fees.
D. A consumer or the attorney general may sue for injunctive and other appropriate equitable relief to stop any person from violating any provision of the Car Title Loan Act.
E. The consumer may bring a class action suit to enforce the Car Title Loan Act.
F. The remedies provided in this section are not intended to be the exclusive remedies available to a consumer nor must the consumer exhaust any administrative remedies provided under the Car Title Loan Act or any other applicable law.
Section 15. SEVERABILITY.--If any part or application of the Car Title Loan Act is held invalid, the remainder or its application to other situations or persons shall not be affected.
Section 16. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2001.