Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports
if they are used for other purposes.
Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).
Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and
attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.
F I S C A L I M P A C T R E P O R T
SPONSOR
Park
ORIGINAL DATE
LAST UPDATED
2/09/07
HB 887
SHORT TITLE
Title Loan Fees and Regulation
SB
ANALYST
C. Sanchez
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08
FY09 3 Year
Total Cost
Recurring
or Non-
Rec
Fund
Affected
Total NFI See section
on fiscal
implication
s.
See section
on fiscal
implications.
See section
on fiscal
implications.
General
Fund
Relates to SB 393
SOURCES OF INFORMATION
LFC Files
Responses Received From
Regulation and Licensing Department (RLD)
Administrative Office Of The Courts (AOC)
Attorney General’s Office (AGO)
SUMMARY
Synopsis of Bill
House Bill 887 amends the Small Loan Act of 1955, 58-15-1 NMSA 1978. The amendment
includes definitions for new terms and new sections that address the charges and fees that may be
imposed when making title loans. The legislation also addresses licensure of title lenders,
requirements for title loans, permitted charges, default and repossession and sale of property,
prohibited acts, renewed title loans, payment plans, disclosures, and verification system.
Summary of Key Issues:
New definitions for:
•
Consumer
•
Debit authorization
•
Fair market value
•
Installment loan
pg_0002
House Bill 887 – Page
2
•
Loan property
•
Payment plan
•
Person
•
Simple interest
•
Title lender
•
Title loan
•
Title loan agreement
Summary of proposed new statutory provisions:
1)
Any loan made on an unencumbered state-issued certificate of title or certificate of
ownership to personal property, not including a mobile home, that is deposited with a title
lender as a security for a title loan in the course of the title lender's business is subject to a
title loan agreement unless the loan is an installment loan with interest not exceeding
36% annual percentage rate.
2)
Requires any person acting as a title lender to be licensed.
3)
Requires a title lender to post a consumer protection bond of $25,000 per location.
4)
The division may require criminal background checks for new licensees.
5)
Requires a title loan to have a stated minimum term of at least thirty days, with the option
of one renewal, with any remaining principal converted/lapsing into a fully amortized
payment plan.
6)
A title loan shall not exceed the lesser of fifty percent of the fair market value of the loan
property or two thousand five hundred dollars.
7)
A consumer may rescind a title loan transaction.
8)
A title loan licensee may charge an administrative fee of not more than $15.50 per $100
dollars on new and renewed title loans.
9)
Only one $15.00 fee maybe charged for a returned check or debit authorization.
10)
A title loan will be in default if within 7 days a consumer does not renew the title loan,
the consumer does not elect to enter a payment plan or upon the consumer’s third missed
payment of a payment plan.
11)
Upon default a consumer shall deliver the loan property to the lender. If the consumer
fails to deliver the loan property with 3 days the lender may take possession of the
property. Prior to the lender engaging a repossession agent, the lender shall afford the
consumer an opportunity to make the loan property available to the lender. Upon taking
possession of the loan property, the lender may dispose of the loan property through a
sale by a licensed dealer. Within 30 days after the sale, the lender must return any excess
to the consumer.
12)
Adds a section regarding prohibited acts when licensees make title loans.
13)
Consumers that have renewed their title loans are eligible to enter into a payment plan.
The lender may not charge any fees or interest for a payment plan. The payment plan
shall provide for: (1) a minimum of one hundred eighty days for the repayment of the
unpaid principal balance of a renewed title loan; and (2) substantially equal monthly
payments to pay off the title loan in its entirety.
14)
The division must certify by no later than October 1, 2007 one or more consumer
reporting services databases that a licensees must use in order to verify that a proposed
loan agreement is permissible.
pg_0003
House Bill 887 – Page
3
FISCAL IMPLICATIONS
None noted for FY07. In the future the Financial Institutions Division may need to hire more
examiners to monitor for compliance with the bill. It is difficult to determine what effect the
new provisions of the bill will have regarding the number of small loan licensees.
There will be a minimal administrative cost for statewide update, distribution and documentation
of statutory changes. Any additional fiscal impact on the judiciary would be proportional to the
enforcement of this law and actions commenced as a result of violations of this law. New laws,
amendments to existing laws and new hearings have the potential to increase caseloads in the
courts, thus requiring additional resources to handle the increase.
SIGNIFICANT ISSUES
New definitions and statutory provisions as outlined above and some technical issues as outlined
below.
PERFORMANCE IMPLICATIONS
This could affect the Financial Institutions Division’s performance measure of examination
turnaround in 30 days.
The courts are participating in performance-based budgeting. This bill may have an impact on
the measures of the district courts in the following areas
•
Cases disposed of as a percent of cases filed
•
Percent change in case filings by case type
ADMINISTRATIVE IMPLICATIONS
Starting in FY08 the Financial Institutions Division may need to hire more examiners to monitor
for compliance with the bill.
CONFLICT
HB 887 is in conflict with H.B. 92. Specifically, the conflict lies on the allowable interest rates
for both a new payday loan and a renewed payday loan. Moreover, H.B. 92 is limited to payday
loans whereas HB 887 applies to all small loans currently allowed under the Small Loan Act.
RELATES
SB 393
TECHNICAL ISSUES
1)
Page 7, line 17-18, clarification is needed when an applicant is a corporation or a limited
liability company, etc. as an entity does not have fingerprints.
2)
Page 9, line 10, “converted lapsing" is redundant.
3)
Page 15, lines 6-20 and page 16 lines 8-16, clarification is needed as it is not clear
pg_0004
House Bill 887 – Page
4
whether 3 independent bids are required when a licensed dealer sells the vehicle. It is
also not clear whether a title lender may sell the loan property without the use of a
licensed dealer.
OTHER SUBSTANTIVE ISSUES
In New Mexico payday lenders typically charge customers annual interest rates of 390% to
780%.
The United States Congress (federal) has adopted legislation, the Talent-Nelson Amendment,
which imposes a 36% rate cap on all loans to members of the military and their dependents. This
legislation goes into effect on October 1, 2007. Proposed regulations pursuant to Talent-Nelson
from the Department of Defense are expected shortly.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
The payday and car title loan business remain available to consumers with no additional
disclosures, no caps on fees and charges, no maximum loan amount, or other restrictions
imposed by this bill.
CS/csd