Committee Substitute for HB0406AFS

HOUSE APPROPRIATIONS AND FINANCE COMMITTEE SUBSTITUTE FOR

HOUSE BUSINESS AND INDUSTRY COMMITTEE SUBSTITUTE FOR

HOUSE BILL 406

49th legislature - STATE OF NEW MEXICO - first session, 2009

AN ACT

RELATING TO FINANCIAL TRANSACTIONS; PROVIDING FOR THE LIMITATION OF FEES AND REGULATION OF TITLE LOANS; PROHIBITING LENDERS FROM MAKING TITLE LOANS UNDER A LICENSE ISSUED PURSUANT TO THE NEW MEXICO SMALL LOAN ACT OF 1955; ENACTING THE TITLE LOAN ACT; CREATING A FUND; MAKING AN APPROPRIATION.

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

Section 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 15 of this act may be cited as the "Title Loan Act".

Section 2. [NEW MATERIAL] DEFINITIONS.--As used in the Title Loan Act:

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

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

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

D. "fair market value" means the value of the motor vehicle as determined by a nationally recognized general index of motor vehicle values approved by the division;

E. "installment loan" means a loan that is to be repaid in a minimum of twelve successive substantially equal payment amounts to pay off a loan in its entirety with a period of at least one year to maturity;

F. "license" means a permit issued under the authority of the Title Loan Act to make title loan products and collect charges 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 Title Loan Act and rules promulgated by the director;

G. "licensee" means a person to whom one or more licenses have been issued pursuant to the Title Loan Act 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 Title Loan Act and the rules promulgated by the director under that act and whose name appears on the face of the license;

H. "motor vehicle" means a vehicle that is self- propelled or is propelled by electric power obtained from batteries;

I. "payment plan" means a loan to pay the outstanding balance of a title loan, with a repayment schedule of ten successive substantially equal amounts to pay off a loan in its entirety with a period of ten months to maturity;

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

K. "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;

L. "title lender" means a person engaged in the business of entering into title loan product agreements with consumers;

M. "title loan" means a loan transaction secured by a motor vehicle, but does not include credit extended to finance the purchase of a motor vehicle or an installment loan;

N. "title loan product" means a title loan or payment plan; and

O. "title loan product agreement" means a written agreement between a consumer and a title lender evidencing a title loan product.

Section 3. [NEW MATERIAL] LICENSURE OF TITLE LENDERS.--

A. It is unlawful for any person to act as a title lender unless the person has been licensed by the division pursuant to the Title Loan Act to make title loan products.

B. All title loan product agreements entered into by a title lender that are in violation of the title lender's license requirements are void, and the title lender has no right to collect, receive or retain any interest, fees or charges.

C. A consumer who enters into a title loan product agreement with a title lender who is in material violation of the title lender's obligations under Sections 6 through 11 of the Title Loan Act shall not be bound by the terms of the agreement, except that the consumer's only liability is for the return of the principal sum borrowed, which shall be repaid within a reasonable time after a finding is made that the title loan product is void and after the title lender releases any lien on the motor vehicle and returns the certificate of title.

D. Each license shall specify the location in New Mexico of the specific title lender's office to which it applies and must be conspicuously displayed in that office.

E. Before a title lender's office location may be changed or moved by a title lender, the division shall approve the change of location by mailing the title lender an updated license for that office.

F. Each title lender shall post a surety bond in the amount of fifty thousand dollars ($50,000) for each office location, not to exceed a maximum of two hundred fifty thousand dollars ($250,000) per title lender. A title lender shall notify the division in writing of any claim made on the title lender's bond. When an action is commenced on a title lender's bond, the director may require the title lender to file a new bond. A surety bond shall continue in effect for two years after the title lender ceases operation in New Mexico. A surety bond shall be available to pay damages and penalties to consumers harmed by a violation of the Title Loan Act.

G. More than one place of business shall not be maintained under the same license, but the division may issue more than one license to the same title lender if the title lender is otherwise qualified.

H. Each title lender shall keep books, accounts and records that will enable the division to determine if the title lender is complying with the provisions of the Title Loan Act and shall maintain any other records required by the division. The division may examine the records at any reasonable time. The records shall be kept for seven years following the last entry on a title loan product and shall be kept according to generally accepted accounting procedures that include an examiner being able to review the record keeping and reconcile each title loan product with documentation maintained in the consumer's title loan product file records.

Section 4. [NEW MATERIAL] EXEMPTIONS.--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 requirements of the Title Loan Act.

Section 5. [NEW MATERIAL] APPLICATION--BOND-- INVESTIGATION AND FEE--AGENT FOR SERVICE OF PROCESS--ISSUANCE OR DENIAL OF LICENSE--RENEWAL.--

A. Application for a license and any annual license renewal shall be in writing under oath and in the form prescribed by the director, shall give the exact location where the business is to be conducted and shall contain such other relevant information as the director may require, including identification of all parties in interest and the names and addresses of all the partners, officers, directors, trustees and beneficiaries of any trust and of such principal owners and members as will provide the basis for an investigation and findings necessary under the Title Loan Act. The application shall also include a statement accepting the license, if granted, as a privilege to be enjoyed and exercised only under all the terms and conditions of the Title Loan Act and under all rules of the director promulgated pursuant to that act. The applicant shall pay an application fee of one thousand dollars ($1,000) to the director at the time of making application for an original license.

B. The application shall be accompanied by, and every licensee shall at all times maintain on file with the director, a written power of attorney appointing a person who is a resident of this state as the licensee's agent for service of all judicial or other process or legal notice and notices provided for by the Title Loan Act, unless the licensee has appointed an agent for service of process under another statute of this state. In case of noncompliance with this subsection, service of process, including service of all notices provided for in the Title Loan Act, may be made on the manager or person in charge of the registered office or place of business of the licensee, and the director may by order suspend the license pending compliance with this section.

C. Upon the filing of an application, whether it is an original or a renewal, the director shall investigate the facts concerning the application and the requirements provided in this section.

D. An applicant for a license, upon written notice to do so by the director, shall, within twenty days after service of the notice, furnish in writing, under oath, to the director all additional information required by the director that may be relevant or, in the opinion of the director, helpful in conducting the investigation.

E. Failure to comply with the director's requirement for supplemental information or the willful furnishing of false information is sufficient grounds for denial of license.

F. False or misleading information willfully and intentionally furnished to the director prior to the issuance of any license is grounds for suspension or revocation of any license in accordance with the procedures for suspension or revocation of license in the Title Loan Act.

G. The director shall grant or deny each complete application for an original license within sixty days of receipt of the application, fees and all the required information, unless the period is extended by written agreement between the applicant and the director.

H. The director shall enter an order granting the application, file the director's findings and, upon payment of the license fee pursuant to the fee schedule set by the director, issue and deliver a license to the applicant if the director finds that:

(1) the financial responsibility, character and general fitness of the applicant for an original license and of the individual members and beneficiaries of the applicant, if the applicant is a copartnership, association or trust, and of the officers and directors of the applicant, if the applicant is a corporation, are such as to command the confidence of the public and to warrant belief that the business will be operated lawfully, honestly, fairly and efficiently within the declared purposes and spirit of the Title Loan Act; and

(2) the applicant has the surety bond required in Section 3 of the Title Loan Act.

I. If the director does not make the findings enumerated in Subsection H of this section, the director shall enter an order denying the application, notify the applicant of the denial and retain the application fee. Within thirty days after the entry of such an order, the director shall prepare written findings and shall deliver a copy to the applicant.

J. A written application for license renewal shall be filed on or before March 31 of each year, and thereupon the director shall investigate the facts and review the files of examinations of the applicant made by the director's office and of complaints filed by borrowers, if any. The director shall deliver a renewal license to the applicant if the director finds that:

(1) no valid complaints of violations or abuses of the Title Loan Act or of the rules of the director promulgated under that act have been filed;

(2) examinations of the affairs of the applicant indicate that the business has been conducted and operated lawfully and efficiently within the declared purposes and spirit of the Title Loan Act; and

(3) the financial responsibility, experience and general fitness and character of the applicant remain such as to command the confidence of the public and to warrant the belief that the business will continue to be operated lawfully and efficiently within the purposes and spirit of the Title Loan Act.

K. If the director does not make the findings enumerated in Subsection J of this section, the director may grant a temporary extension of the license not exceeding sixty days pending a hearing. The director shall enter an order fixing a date for a hearing on the application; shall notify the licensee of the hearing, specifying the particular complaints, violations or abuses or other reasons for the director's contemplated refusal to renew the license; and shall afford to the applicant an opportunity to be heard. At the hearing, the director shall produce evidence to establish the truth of the charges of violation or other grounds specified in the notice, and the applicant shall be accorded the right to produce evidence or other matters of defense. If after the hearing the director finds that the complaints of violations or other grounds specified in the notice are not well-founded, the director shall issue the renewal license. If the director finds that the complaints of violations or other grounds are well-founded, the director shall enter an order denying the renewal application and notify the applicant of the denial, returning the renewal license fee tendered with the application. Within thirty days after the entry of such an order, the director shall prepare written findings and shall deliver a copy of the findings to the applicant. The order shall be subject to review in the district court pursuant to the provisions of Section 39-3-1.1 NMSA 1978. The court in its discretion and upon proper showing may order a temporary extension of the license pending disposition of the review proceedings.

L. In connection with the determination of fitness and character of an applicant pursuant to the provisions of this section, the fact that the applicant or licensee is a member of or interested financially in, connected or affiliated with, controls or is controlled by or owns or is owned by other corporations, partnerships, trusts, associations or other legal entities engaged in the lending of money whose policies and practices as to rates of interest, charges and fees and general dealing with borrowers are questionable or would constitute violation of the general usury statutes of this state or of the Title Loan Act shall be given consideration and weight as the director determines.

M. At the time of issuance of an original license and each annual license renewal, the licensee for each licensed office shall pay to the director a license fee for the period covered by the license.

N. The director shall determine fees for licensure that shall be at least five hundred dollars ($500), but not more than one thousand dollars ($1,000), plus an additional seventy-five cents ($.75) for each one thousand dollars ($1,000) or fraction thereof of loans outstanding as of December 31 next preceding, as shown on the applicant's annual report. In the event that the application for annual renewal of the license is delinquent, the licensee shall also pay a delinquency fee as determined by the director of at least ten dollars ($10.00) per day for each day the licensee is delinquent in filing the application for renewal.

O. The director shall establish fees for examination of a title lender, which shall not exceed one hundred fifty dollars ($150) per day, or fraction of a day of examination.

P. A licensee, by accepting a license that is issued or renewed or by continuing to operate a licensed office under the Title Loan Act, shall by such action be deemed to have consented to be bound by the lawful provisions of that act and all lawful requirements, regulations and orders of the director promulgated or issued pursuant to any authorization granted in that act.

Section 6. [NEW MATERIAL] REQUIREMENTS FOR TITLE LOAN PRODUCTS.--

A. A title lender may make title loan products subject to the provisions of this section.

B. A title loan product shall be reduced to writing, which shall include the following requirements:

(1) the title lender agrees to make a loan of money to the consumer, and the consumer agrees to give the title lender a security interest in a motor vehicle owned by the consumer;

(2) the consumer consents to the title lender keeping possession of the certificate of title and perfecting the title lender's lien on the motor vehicle;

(3) the stated contract rate of interest for a title loan shall be:

(a) for a loan with a principal amount of two thousand five hundred dollars ($2,500) or less, no greater than forty-five percent per annum simple interest; and

(b) for a loan with a principal amount greater than two thousand five hundred dollars ($2,500), no greater than thirty-six percent per annum simple interest;

(4) the title lender shall not charge any interest or fees not provided for in the Title Loan Act;

(5) the title loan shall be payable in substantially equal monthly payments, provided that a title loan shall have a maximum loan period of less than twelve months and have the following minimum loan periods:

(a) sixty days for a loan with a principal amount of two thousand five hundred dollars ($2,500) or less; and

(b) one hundred twenty days for a loan with a principal amount greater than two thousand five hundred dollars ($2,500);

(6) if there is an unpaid balance remaining at the maturity of a title loan, the title lender shall offer and the consumer may enter into a payment plan with a term of ten months. The payment plan shall be fully amortized, shall consist of ten substantially equal monthly payments and shall not include any fees or charges other than interest charges that shall not exceed an annual percentage rate of:

(a) for a payment plan with a principal amount of two thousand five hundred dollars ($2,500) or less, no greater than forty-five percent per annum simple interest; and

(b) for a payment plan with a principal amount greater than two thousand five hundred dollars ($2,500), no greater than thirty-six percent per annum simple interest;

(7) the consumer has the exclusive right to redeem the certificate of title by repaying all obligations under the title loan product in full;

(8) upon completion by the consumer of all obligations under a title loan product, the title lender shall promptly release its security interest in the motor vehicle and return the certificate of title to the consumer;

(9) the consumer has the right to rescind a title loan product transaction by returning in cash, or through certified funds, one hundred percent of the amount advanced by a title lender no later than 5:00 p.m. on the second day of business conducted by the title lender following the execution of the title loan product agreement. If a consumer exercises the right of rescission pursuant to this paragraph, no interest charge or fee for the rescinded transaction shall be charged to the consumer and the title lender shall not charge or impose on the consumer a fee for exercising the right of rescission. If this paragraph is applicable, any interest or fee collected by a title lender shall be returned in full to the consumer; and

(10) any assignee shall be obligated to the terms of the title loan product agreement and all of its rights and obligations.

C. The amount of a title loan shall not exceed fifty percent of the fair market value of the motor vehicle. A title lender shall not make a title loan to a consumer if the monthly payment for the initial term of the title loan, when combined with the principal amount and fees of any of the consumer's outstanding payday or title loan products, exceeds twenty-five percent of the consumer's gross monthly income.

D. Each title loan transaction shall be entered into a database pursuant to Section 13 of the Title Loan Act. Before entering into a title loan transaction, the lender shall check the database pursuant to Section 13 of the Title Loan Act to ensure the proposed title loan is in compliance with the Title Loan Act.

E. A title lender shall not enter into a new title loan with a consumer who has been a party to three previous title loan product transactions within the previous twelve-month period.

F. A consumer may make payments in any amount on a title loan product at any time before maturity without additional fees.

G. After each payment is made, in full or in part, on a title loan product, the title lender shall give to the person making the payment a signed, dated receipt showing the amount paid, the amount credited toward fees and the principal and the balance due.

H. The director shall determine which languages in addition to English and Spanish, if any, that title loan product agreements and title loan disclosures shall be translated into and made available to consumers. Prior to the consummation of a title loan, the title lender shall provide to the consumer a copy of the title loan agreement and the title loan disclosure in the available language selected by the consumer.

I. The disclosure of the credit terms of a title loan product agreement shall be according to and governed by the requirements of 12 C.F.R. 226, known as "Regulation Z" of the federal Truth in Lending Act. The definitions and requirements of that regulation and commentary shall apply to title loan products as if those provisions are fully set out in this section.

Section 7. [NEW MATERIAL] TITLE LOAN PRODUCTS--PERMITTED CHARGES.--A title lender shall not charge or receive from a consumer, directly or indirectly, interest, fees or charges for a title loan product except as follows:

A. the stated contract rate of interest for a title loan shall be:

(1) for a loan with a principal amount of two thousand five hundred dollars ($2,500) or less, no greater than forty-five percent per annum simple interest; and

(2) for a loan with a principal amount greater than two thousand five hundred dollars ($2,500), no greater than thirty-six percent per annum simple interest;

B. the title loan shall be payable in substantially equal monthly payments, provided that a title loan shall have a maximum loan period of less than twelve months and have the following minimum loan periods:

(1) sixty days for a loan with a principal amount of two thousand five hundred dollars ($2,500) or less; and

(2) one hundred twenty days for a loan with a principal amount greater than two thousand five hundred dollars ($2,500);

C. upon the execution of a new title loan agreement, the licensee may impose an additional administrative fee of not more than one dollar ($1.00) per executed new title loan agreement as necessary to cover the cost to the licensee of verification pursuant to Section 13 of the Title Loan Act, which fee is fully earned and nonrefundable at the time a title loan agreement is executed and payable in full at the end of the term of the title loan or upon prepayment of the title loan unless a title loan is rescinded pursuant to Section 6 of the Title Loan Act;

D. if there are insufficient funds to pay a check or other type of debit on the date of presentment by the title lender, a title lender may charge a consumer a fee not to exceed fifteen dollars ($15.00). Only one fee may be collected by a title lender on a check or debit authorization. A lender shall not present a check or debit authorization more than one time; and

E. after default and repossession of the motor vehicle securing a title loan product, the title lender may charge a consumer actual and reasonable expenses incurred in taking possession of the motor vehicle, preparing the motor vehicle for sale and selling the motor vehicle. These reasonable expenses shall not exceed the lesser of ten percent of the sales price of the motor vehicle or one hundred dollars ($100).

Section 8. [NEW MATERIAL] PAYMENT PLANS--NOTICE--TERMS.--

A. The title lender shall provide written notice by mail to the consumer of the option to enter into a payment plan at least seven days before the title loan's maturity date. The written notice shall:

(1) state the date by which the consumer must act to enter into a payment plan;

(2) state the remaining principal balance owed;

(3) inform the consumer that the consumer may pay the balance owed over a period of ten months, provide the contract interest rate for the payment plan and provide an estimated monthly payment amount; and

(4) be in English; provided that if the consumer elected to receive documents in another language pursuant to Section 6 of the Title Loan Act at the time the consumer entered into the title loan agreement, a copy of the notice shall also be provided to the consumer in that language.

B. A payment plan shall provide for a term of ten months, shall be fully amortized, shall consist of ten substantially equal monthly payments and shall not include any fees or charges other than interest charges that shall not exceed an annual percentage rate of:

(1) for a payment plan with a principal amount of two thousand five hundred dollars ($2,500) or less, no greater than forty-five percent per annum simple interest; or

(2) for a payment plan with a principal amount greater than two thousand five hundred dollars ($2,500), no greater than thirty-six percent per annum simple interest.

Section 9. [NEW MATERIAL] DEFAULT--REPOSSESSION AND SALE OF MOTOR VEHICLE.--

A. A title lender shall collect on a title loan in default in a professional, fair and lawful manner and shall comply with the requirements and prohibitions set forth in 15 U.S.C. 1692c-1692f of the federal Fair Debt Collection Practices Act.

B. Upon default of a title loan product, a consumer shall deliver the motor vehicle to the title lender at the location specified by the title loan product agreement.

C. If a consumer fails to deliver the motor vehicle to the title lender upon default, the title lender shall serve the consumer a notice of default by certified mail at the consumer's last known address of record.

D. A title lender may take possession of the motor vehicle ten business days after service of a notice of default through an agent that is licensed by the state to repossess.

E. Prior to authorizing repossession of the motor vehicle, the title lender shall afford the consumer an opportunity by mail and telephone to make the motor vehicle available to the title lender at a place, date and time reasonably convenient to the title lender and the consumer.

F. Upon taking possession of the motor vehicle, the title lender shall provide notice to the consumer of the lender's intent to dispose of the motor vehicle and shall dispose of the motor vehicle in a commercially reasonable manner. The notice and sale shall be in conformance with Chapter 55, Article 9 NMSA 1978. At any time prior to the sale, the title lender shall permit the consumer to redeem the motor vehicle by tendering cash, a money order or certified check for the amount outstanding. Nothing in the Title Loan Act precludes a consumer from purchasing the motor vehicle at a sale.

G. Within thirty days after the sale of the motor vehicle, the title lender shall deliver to the consumer all proceeds from the sale of the motor vehicle less unpaid principal, interest and fees owed under a title loan product and the actual and reasonable expenses incurred by the title lender in taking possession of, preparing for sale and selling the motor vehicle, as provided in Section 7 of the Title Loan Act; provided that the lender shall not use more than one month's post default interest in this calculation.

H. After repossession, a title lender shall make all personal contents from the motor vehicle available to the consumer for a period of at least ninety days.

I. A title lender shall comply with Chapter 55, Article 9 NMSA 1978.

J. In taking possession of and selling the motor vehicle, the title lender shall at all times proceed in a commercially reasonable manner.

K. Except as provided in Subsection L of this section, a consumer who does not redeem a certificate of title is not personally liable to the title lender for any amount owed under the title loan product, and the title lender shall look solely to the motor vehicle for satisfaction of any amount owed under the title loan product agreement.

L. A consumer who obtains a title loan product from a title lender under false pretenses by hiding or not disclosing the existence of a known valid prior lien or security interest affecting the motor vehicle, who acts in any other fraudulent manner with regard to the motor vehicle or who intentionally diminishes its value is personally liable to the title lender for the full amount owed pursuant to the title loan product agreement, including expenses incurred by the title lender in connection with the loan.

M. A prevailing consumer is entitled to reasonable attorney fees and costs incurred in an action against a title lender.

Section 10. [NEW MATERIAL] TITLE LOAN PRODUCTS--PROHIBITED ACTS.--A title lender shall not:

A. enter into a title loan product agreement with a person under the age of eighteen years;

B. enter into a new title loan with a consumer who has completed three title loan transactions with any title lender in New Mexico in the preceding twelve-month period;

C. threaten or intimidate a consumer or threaten to use or request the use of criminal process in this or another state to collect on a title loan product;

D. use a device or agreement that would have the effect of charging or collecting more fees, charges or interest than that allowed by law by entering into a different type of transaction with the consumer such as a sale-leaseback or other subterfuge that has that effect;

E. sell or otherwise charge for any type of insurance in connection with a title loan product agreement;

F. charge a prepayment penalty;

G. charge a fee to cash a check representing the proceeds of a title loan;

H. charge a late fee or delinquency charge if a consumer fails to repay a title loan product on time;

I. fail to exercise reasonable care in the safekeeping of a certificate of title;

J. refuse to accept partial payments toward satisfying an obligation owed under a title loan product agreement;

K. assign or attempt to assign a consumer's personal check to a third party unless for collection purposes;

L. accept collateral for a title loan product other than the motor vehicle that is the subject of the title provided as the initial collateral for that title loan or require a consumer to provide a guaranty from another person for a title loan product;

M. accept a certificate of title to a mobile home, motor home or recreational vehicle as collateral for a title loan product;

N. include any of the following provisions in a title loan product agreement:

(1) a hold harmless clause;

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

(3) an assignment of or order for payment of wages or other compensation for services;

(4) a waiver of claims for punitive damages;

(5) a provision in which the consumer agrees not to assert a claim or defense arising out of the title loan product agreement;

(6) a waiver of a provision of the Title Loan Act;

(7) a waiver of the right to enter into a payment plan;

(8) a waiver of any right secured by New Mexico law;

(9) a mandatory arbitration clause;

(10) a provision allowing the title lender to charge the consumer attorney fees for collection efforts; or

(11) a provision allowing the title lender to charge the consumer post-default interest, except as allowed by the Title Loan Act;

O. refuse to return:

(1) the certificate of title as required by the Title Loan Act;

(2) surplus proceeds from the sale of the motor vehicle securing a title loan product; or

(3) personal property left in the motor vehicle at the time of repossession within ninety days after repossession;

P. make a title loan product contingent on the purchase of insurance or other goods or services from the title lender, but nothing in this section shall require a title lender to enter into a title loan product secured by an uninsured motor vehicle;

Q. offer, arrange, act as an agent for or assist a third party in any way in the making of a title loan product unless the third party complies with all applicable federal and state laws and regulations;

R. knowingly enter into a title loan product agreement with a consumer who lacks the capacity to consent;

S. own or operate a vehicle sales facility or pawnshop;

T. use an agency agreement or partnership agreement as a scheme or contrivance to circumvent the application of the provisions of the Title Loan Act to a title loan. For the purposes of this subsection:

(1) "agency agreement" means an agreement between in-state entities and a banking corporation, savings and loan association or credit union operating under the laws of the United States or of any state whereby the in-state agent holds a predominant economic interest in the revenues generated by a title loan product made to New Mexico residents; and

(2) "partnership agreement" means an agreement between in-state entities and a banking corporation, savings and loan association or credit union operating under the laws of the United States or of any state whereby the in-state partner holds a predominant economic interest in the revenues generated by a title loan product made to New Mexico residents;

U. advertise using the words "interest-free loans" or "no finance charge"; or

V. make any type of loan other than a title loan product from the premises of a title lender's office.

Section 11. [NEW MATERIAL] REQUIRED DISCLOSURES.--A title lender shall provide a notice immediately above the consumer's signature on each title loan agreement or renewed title loan agreement in at least twelve-point bold type using the following language:

"(1) A title loan is not intended to meet long-term financial needs.

(2) You should use a title loan only to meet short-term cash needs.

(3) If you default on this title loan, you may lose your vehicle.

(4) A title loan is a high-cost loan. You should consider what other lower-cost loans are available to you.

(5) If you cannot fully repay your loan when due, you have a right to enter into a payment plan requiring full payment within ten months, in relatively equal monthly payments. If you enter into a payment plan, you will be responsible for interest on the outstanding principal balance.".

Section 12. [NEW MATERIAL] DUTIES OF DIVISION.--

A. The division shall:

(1) maintain a list of title lenders that is available to the general public; and

(2) establish a complaint process whereby an aggrieved consumer or other person may file a complaint against a title lender or an unlicensed person that violates a provision of the Title Loan Act.

B. The division may:

(1) hold hearings, make findings of fact or conclusions of law;

(2) issue cease and desist orders;

(3) refer the matter to the appropriate law enforcement agency for prosecuting a violation; or

(4) seek injunctive or other relief in district court or revoke or suspend a license granted under the Title Loan Act.

C. The division shall compile a report for the legislature on October 1 each year beginning in 2011 detailing title loan product statistics, including data adequate to obtain an accurate understanding of the practices and legal compliance of all title lenders in the state. Annual reports shall be made available to interested parties and the general public. Consistent with state law, the report shall include, at a minimum, nonidentifying consumer data from the calendar year ending December 31 of the previous year, including:

(1) the total number and dollar amount of title loans and payment plans entered into by consumers;

(2) the total number and dollar amount of title loans and payment plans outstanding;

(3) the average number of days of a title loan, including statistics detailing the percentage of consumers who elect to enter into a payment plan;

(4) the number of title loans and payment plans in default, the number of repossessions by title lenders for default and the average amount of the loans in default or loans satisfied by repossession;

(5) the total dollar amount of the net write-offs and the net recoveries of a title lender;

(6) the minimum, maximum and average dollar amounts of title loans and payment plans entered into by consumers;

(7) the average number of transactions and average aggregate title loan amount entered into per consumer each year;

(8) the number of consumers in default who deliver the motor vehicle to the title lender;

(9) the number of consumers in default who redeem the motor vehicle after it has been repossessed but before the sale of the motor vehicle; and

(10) the average amount of time for a title lender to return the certificate of title to a consumer who has paid the loan in full.

Section 13. [NEW MATERIAL] DATABASE--VERIFICATION.--

A. Before entering into a title loan agreement with a consumer, a title lender shall use a commercially reasonable method of verification to verify that the proposed loan agreement is permissible under the provisions of the Title Loan Act.

B. No later than November 1, 2009, the director shall certify that one or more consumer reporting service databases are commercially reasonable methods of verification. The list of consumer reporting services that the director has certified as providing commercially reasonable methods of verification shall be posted on the division's web site and shall be mailed to each licensed title lender by first class mail at the address of record as shown on the division's licensing files.

C. Each title lender who makes title loans shall comply with Subsection A of this section no later than November 30, 2009.

D. A consumer seeking a title loan may make a direct inquiry to the consumer reporting service to request a more detailed explanation of the basis for a consumer reporting service's determination that the consumer is ineligible for a new title loan, and the consumer reporting service shall provide a reasonable response to the consumer.

E. In certifying a commercially reasonable method of verification, the director shall ensure that the certified database:

(1) provides real-time access through an internet connection or, if real-time access through an internet connection becomes unavailable due to technical problems incurred by the consumer reporting service, through alternative verification mechanisms, including verification by telephone;

(2) is accessible to the division and to title lenders in real time in order to ensure compliance with the Title Loan Act regardless of where the consumer requests a title loan in New Mexico and in order to provide any other information the director deems necessary;

(3) requires title lenders to enter whatever information is required by the Title Loan Act or by a rule adopted under that act, including:

(a) the name, address and social security number or tax identification number of the consumer;

(b) the gross monthly income of the consumer;

(c) information on the motor vehicle securing the loan, including the vehicle identification number, year, make, model and fair market value;

(d) the amount of the loan;

(e) the interest rate charged;

(f) the due date of the loan;

(g) the date the title loan product was paid off;

(h) the date of the return of title;

(i) the date of release of lien;

(j) if a payment plan is entered, the date of the payment plan agreement and payment terms;

(k) the date of a notice of default;

(l) the fees charged in the event of default;

(m) the date of repossession;

(n) the date of redemption by the consumer;

(o) the title lender's expenses prior to sale;

(p) the date of sale and method of sale;

(q) the sale price of the motor vehicle after repossession;

(r) the surplus owed to the borrower;

(s) the date the surplus was paid to the borrower; and

(t) the number of loans per borrower within a twelve-month period;

(4) contains a real-time regulator interface that allows the division access to the consumer reporting service database for the required monitoring and reporting function, including the ability to determine consumer eligibility and to generate reports for title lender examinations, regulatory reporting and program monitoring;

(5) provides title lenders with no more than a statement that a consumer is eligible or ineligible for a new title loan and the reason for the determination;

(6) provides adequate safeguards to ensure that consumer information contained in the database is kept strictly confidential;

(7) provides sufficient information to enable a title lender to determine whether a proposed title loan would meet the requirements for title loans set forth in the Title Loan Act;

(8) ensures that information submitted to the certified database is kept confidential and shall not be released or otherwise made available to the public;

(9) demonstrates a working system to the division prior to the certification of the database; and

(10) is generated by a registered consumer reporting service that is subject to the applicable rules and regulations applied by the federal trade commission under the federal Fair Credit Reporting Act.

F. A title lender shall update the certified database by entering all information required under Paragraph (3) of Subsection E of this section at the time that:

(1) a title loan is made;

(2) a consumer elects to enter into a payment plan;

(3) a consumer's title loan product is paid in full; or

(4) a title lender determines a title loan product is in default.

G. A title lender may rely on the information contained in the certified database as accurate and is not subject to any penalty or liability as a result of relying on inaccurate information contained in the database.

H. In determining whether a consumer reporting service database should be certified as a commercially reasonable method of verification, the director shall consider whether the consumer reporting service is adequately capitalized, demonstrates the resources and the ability to perform the services required pursuant to this section and has appropriate surety to ensure performance of its obligations pursuant to this section and to protect claimants reasonably in the event that actions or inactions on the part of the consumer reporting service result in damages to title lenders or consumers.

I. The provisions of Section 14-7-1 NMSA 1978 shall not apply to access by the division to information for purposes of compliance monitoring or preparation of reports contained in a certified database established pursuant to this section.

Section 14. [NEW MATERIAL] VIOLATION OF ACT CONSTITUTES AN UNFAIR TRADE PRACTICE.--A violation of the Title Loan Act constitutes an unfair or deceptive trade practice pursuant to the Unfair Practices Act.

Section 15. [NEW MATERIAL] TITLE LOAN ACT ADMINISTRATION FUND CREATED--PURPOSE.--The "Title Loan Act administration fund" is created as a nonreverting fund in the state treasury. The fund consists of fees collected pursuant to the Title Loan Act, money that is appropriated or donated or that otherwise accrues to the fund and income from investment of the fund. The division shall administer the fund, and money in the fund is appropriated to the division to enforce the Title Loan Act. Money in the fund shall be disbursed on warrants signed by the secretary of finance and administration pursuant to vouchers signed by the director or the director's authorized representative. Any unexpended or unencumbered balance remaining at the end of a fiscal year shall not revert to the general fund.

Section 16. 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), or to a person making a title loan pursuant to the Title Loan Act.

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 17. SEVERABILITY.--If any part or application of this act is held invalid, the remainder or its application to other situations or persons shall not be affected.

Section 18. EFFECTIVE DATE.--The effective date of the provisions of this act is November 1, 2009.

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