2005 Senate Bill text for SB0876

SENATE BILL 876

47th legislature - STATE OF NEW MEXICO - first session, 2005

INTRODUCED BY

Ben D. Altamirano

AN ACT

RELATING TO FINANCE; PROVIDING CONDITIONS FOR REFUND ANTICIPATION LOANS; PROVIDING PENALTIES.

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

Section 1. A new section of Chapter 58 NMSA 1978 is enacted to read:

"[NEW MATERIAL] REFUND ANTICIPATION LOANS--PROHIBITED ACTS.--

A. A refund anticipation loan shall not exceed two thousand five hundred dollars ($2,500).

B. A refund anticipation loan agreement shall include a provision granting the consumer the right to rescind the transaction by returning in cash, or through certified funds, one hundred percent of the amount advanced by a creditor for a refund anticipation loan no later than 5:00 p.m. on the first day of business conducted by the creditor following the execution of the refund anticipation loan agreement. Unless the provisions of this subsection are followed, a refund anticipation loan shall not be subject to the consumer's right of rescission unless both the consumer and the creditor agree to the rescission. If a consumer exercises the right of rescission pursuant to this subsection, no fee for the rescinded transaction shall be charged to the consumer, and the creditor shall not charge or impose on the consumer a fee for exercising the right of rescission pursuant to this subsection.

C. The creditor shall provide the consumer with a copy of the refund anticipation loan agreement in Spanish or English prior to the consummation of the loan.

D. A creditor may not charge or receive from a consumer interest, fees or charges other than:

(1) delinquency fees that do not exceed five cents ($.05) 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) and that only one delinquency charge shall be made on any one installment regardless of the period during which the installment remains unpaid; and

(2) simple interest on the amount of loan proceeds delivered to the consumer in a refund anticipation loan, the aggregate amount of which includes all interest and all administrative fees received on the loan, including interest received after any renewals, refinance or extensions, and the total aggregate amount may not exceed one and one-half times the amount of the original loan agreement principal balance.

E. Once the creditor has received the interest and principal balance, the refund anticipation loan shall be terminated and considered paid in full by the consumer. The interest rate charged on the outstanding balance after initial maturity shall not be greater than the interest rate charged during the initial loan term. Interest on loans shall be computed and paid only as a percentage of the unpaid principal balance.

F. A creditor shall not:

(1) use or threaten to use a criminal process in this or another state to collect on a refund anticipation loan;

(2) alter the date or other information on a check drawn by a consumer in a refund anticipation loan transaction;

(3) use a device or agreement that would have the effect of charging or collecting more fees, charges or interest than allowed by law by entering into a different type of transaction with the consumer that has that effect except as specifically permitted by the New Mexico Small Loan Act of 1955;

(4) engage in unfair, deceptive or fraudulent practices in the making or collecting of a refund anticipation loan;

(5) charge a fee to cash a check issued by the originating lender representing the proceeds of the refund anticipation loan;

(6) make a refund anticipation loan in excess of the refund amount;

(7) accept collateral for a refund anticipation loan other than the consumer's check;

(8) charge interest, fees or charges other than those specifically authorized, including:

(a) charges for insurance; or

(b) collection costs;

(9) threaten to take any action against a consumer that is prohibited by the New Mexico Small Loan Act of 1955;

(10) include any of the following provisions in a refund anticipation loan agreement:

(a) a hold harmless clause;

(b) a confession of judgment clause or power of attorney;

(d) a provision in which the consumer agrees not to assert a claim or defense arising out of the contract; or

(e) a waiver of a provision of the New Mexico Small Loan Act of 1955;

(11) make a refund anticipation loan contingent on the purchase of insurance or other goods or services;

(12) advertise, display, distribute or broadcast or cause or permit to be advertised, displayed, distributed or broadcast, in any manner, a false, misleading or deceptive statement or representation with regard to the charges, terms or conditions for refund anticipation loans;

(13) sign a loan consent form or instrument in which blanks are left to be filled in after execution of the refund anticipation loan, instrument or form;

(14) offer, arrange, act as an agent for or assist a third party in any way in the making of a refund anticipation loan unless the third party complies with all applicable federal and state laws and regulations;

(15) enter into a refund anticipation loan with a consumer who lacks the capacity to consent; or

(16) use provisions in documents associated with a refund anticipation loan that are deceptive or misleading.

G. A creditor that makes a refund anticipation loan and an income tax return preparer shall not be related through common ownership or be family members, such as:

(1) members of a family, including brothers and sisters, spouses, ancestors or lineal descendants, who shall be treated as individuals that own the stock or beneficial ownership interest;

(2) an individual and a corporation in which that individual owns any of the outstanding stock;

(3) an individual and a partner, limited liability company or limited liability partnership in which that individual owns any of the capital interests or profit interest;

(4) any two corporations or any two partnerships, limited liability companies or limited partnerships in which any one individual has an ownership interest through capital stock, capital interests or profit interest;

(5) a corporation and a partnership in which any one individual has an ownership interest through capital stock, capital interests or profit interest; or

(6) a trust or fiduciary relationship or corporations, partnerships, limited liability companies or limited partnerships in which any one individual has an ownership interest through capital stock, capital interests or profit interest.

H. As used in this section:

(1) "creditor" means a person who individually or in conjunction or cooperation with another person makes a refund anticipation loan or processes, receives or accepts for delivery an application for a refund anticipation loan or a check in payment of refund anticipation loan proceeds or in any other manner acts to allow the making of a refund anticipation loan, but "creditor" does not include a banking corporation, savings and loan association or credit union operating under the laws of the United States or New Mexico; and

(2) "refund anticipation loan" means an advance of money that a creditor arranges to be repaid directly from the proceeds of a debtor's income tax refunds.

I. A person who violates any provision of this section is guilty of a misdemeanor and upon conviction shall be punished by a fine of not less than one hundred dollars ($100) and not more than three hundred dollars ($300) or by imprisonment of not more than ninety days or both. Each refund anticipation loan constitutes a separate action and a loan that violates the provisions of this section is a separate and distinct violation punishable pursuant to this subsection."

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