SENATE BILL 393
48th legislature - STATE OF NEW MEXICO - first session, 2007
INTRODUCED BY
Bernadette M. Sanchez
AN ACT
RELATING TO FINANCIAL TRANSACTIONS; PROVIDING FOR LIMITATION ON INTEREST CHARGES FOR CERTAIN CONSUMER LOANS; AMENDING AND ENACTING CERTAIN PROVISIONS OF THE NEW MEXICO SMALL LOAN ACT OF 1955.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. 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 [shall] have the following meanings unless the context clearly requires a different meaning. The meaning ascribed to the singular form [shall apply] applies also to the plural:
[A. "person" shall include individuals, copartners, associations, trusts, corporations and any other legal entity;]
A. "annual percentage rate" means an actuarial annual percentage rate as defined in the federal Truth in Lending Act, 15 U.S.C. 1601 et seq.;
B. "consumer" means a person who enters into a loan agreement in New Mexico;
C. "consumer loan" means an extension in the amount of two thousand five hundred dollars ($2,500) or less, excluding loans for which real property is pledged as collateral and loans offered for the express purpose of financing the purchase of real property and that are secured by that real property;
D. "department" or "division" means the financial institutions division of the regulation and licensing department;
E. "director" means the director of the division;
F. "interest" means all cost elements associated with the extension of credit, including fees, service charges, renewal charges, credit insurance premiums, any ancillary products sold with the extension of credit and any other charge or premium with respect to the extension of consumer credit;
[B.] G. "license" [shall mean] 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 [the New Mexico Small Loan Act of 1955] that act at a single place of business. It shall constitute and shall be construed as a grant of a [revokable] 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 [of the financial institutions division] and not otherwise;
[C.] H. "licensee" [shall mean] means a person to whom one or more licenses have been issued [hereunder] pursuant to the New Mexico Small Loan Act of 1955 upon [their] 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 [of the financial institutions division hereunder] under that act and whose name [or names appear] appears on the face of the license;
[D. "director" means the director of the financial institutions division of the commerce and industry and licensing department;
E. "department" means the financial institutions division of the commerce and industry department;] and
I. "person" includes an individual, copartner, association, trust, corporation and any other legal entity."
Section 2. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:
"[NEW MATERIAL] PERMITTED CHARGES AND FEES WHEN MAKING CONSUMER LOANS--PARTIAL PAYMENTS.--
A. A licensee shall not charge or receive, directly or indirectly in connection with making any consumer loan, any interest, fees or charges, except those specifically authorized by this section.
B. A licensee shall not charge interest on the amount of cash delivered to the consumer in a consumer loan in an amount greater than an effective annual percentage rate of thirty-six percent. The interest rate charged on the outstanding balance of a consumer loan after maturity shall not be greater than an effective annual percentage rate of ten percent. Interest charges on consumer loans shall be computed and paid only as a percentage of an unpaid principal balance.
C. A licensee may charge and collect from the consumer a late or delinquent charge of not more than ten dollars ($10.00) or an amount equal to five cents ($0.05) for each one dollar ($1.00) of any installment that is not paid within five days from the date such payment is due, whichever is greater, provided that this late or delinquent charge shall not be collected more than once for an installment in default.
D. A consumer may make partial payments on, as well as prepayment of, the principal balance of a consumer loan at any time without a prepayment charge or fee. When a loan is repaid before its maturity date, unearned interest charges shall be rebated to the consumer based on a method at least as favorable to the consumer as the actuarial method."
Section 3. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:
"[NEW MATERIAL] PROHIBITED ACTS WHEN MAKING CONSUMER LOANS.--When making a consumer loan, a licensee shall not:
A. require a consumer to pay interest except as:
(1) agreed pursuant to the terms of the promissory note or other contract evidencing the consumer loan; or
(2) authorized by the New Mexico Small Loan Act of 1955.
B. roll over, renew, repay, refinance or consolidate any consumer loan extended to a consumer by the same licensee with the proceeds of other credit extended to the consumer;
C. require a consumer to waive the consumer's right to legal recourse under any otherwise applicable provision of state or federal law;
D. require the consumer to submit to arbitration or impose onerous legal notice provisions in the case of a dispute;
E. demand unreasonable notice from the consumer as a condition for legal action;
F. use a check or other method of access to a deposit, savings or other financial account maintained by the consumer or the title of a vehicle as security for an obligation pursuant to a consumer loan;
G. require as a condition for the extension of credit that the consumer establish an allotment to repay an obligation pursuant to a consumer loan; or
H. prohibit a consumer from prepaying a consumer loan or charge a penalty or fee for prepaying all or part of a consumer loan."
Section 4. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:
"[NEW MATERIAL] REMEDIES--PENALTIES.--
A. A violation of a provision of Section 2 or 3 of this 2007 act, except as the result of accidental or bona fide error of computation, renders the consumer loan agreement void, and the licensee shall have no right to collect, receive or retain any principal, interest or other charges whatsoever with respect to that consumer loan.
B. A violation of a provision of Section 2 or 3 of this 2007 act, except as the result of accidental or bona fide error of computation, is unconscionable conduct and is an unfair and deceptive practice under the Unfair Practices Act.
C. A person found to have violated a provision of Section 2 or 3 of this 2007 act, except as the result of accidental or bona fide error of computation, 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 may sue for injunctive and other appropriate equitable relief to stop a person from violating a provision of Section 2 or 3 of this 2007 act.
E. A consumer may bring a class action suit to enforce the provisions of Sections 2 and 3 of this 2007 act.
F. A provision of a promissory note or other contract evidencing a consumer loan requiring arbitration of any dispute arising under that consumer loan shall not be enforceable against any consumer.
G. A licensee that knowingly violates the provisions of this section is guilty of a misdemeanor and shall be sentenced pursuant to the provisions of Section 31-19-1 NMSA 1978.
H. A consumer shall not be required to waive any administrative remedies available pursuant to the New Mexico Small Loan Act of 1955 or any other applicable law prior to pursuing any of the remedies set forth in this section.
I. The remedies and penalties provided in this section are in addition to and do not preclude any remedy otherwise available under state law, including any award for consequential and punitive damages."
Section 5. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:
"[NEW MATERIAL] REQUIRED DISCLOSURES WHEN MAKING CONSUMER
LOANS.--Prior to making a consumer loan, a licensee shall provide to the consumer the following information orally and in writing:
A. a statement of the annual percentage rate of interest applicable to the consumer loan;
B. all disclosures required pursuant to the federal Truth in Lending Act, 15 U.S.C. 1601 et seq.; and
C. a clear description of the consumer's payment obligations under the term of the consumer loan."
Section 6. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:
"[NEW MATERIAL] EXEMPTIONS.--
A. The provisions of Sections 2 through 5 of this 2007 act do not apply to a thrift, bank or credit union regulated by the office of comptroller of the currency, the office of thrift supervision, federal deposit insurance corporation or national credit union administration using accounts or funds on deposit in the thrift, bank or credit union as security or collateral for a loan made by the same institution holding the account or funds.
B. A banking corporation, savings and loan association or credit union operating under the laws of the United States or of New Mexico is exempt from the licensing requirements of the New Mexico Small Loan Act of 1955, and that act shall not apply to business transacted by any such person under the authority of and as permitted by any such law or 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."
Section 7. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2007.
- 9 -