HB0356

HOUSE BILL 356

52nd legislature - STATE OF NEW MEXICO - first session, 2015

INTRODUCED BY

Jane E. Powdrell-Culbert

AN ACT

RELATING TO FINANCIAL INSTITUTIONS; REQUIRING LICENSING OF PERSONS ENGAGED IN THE BUSINESS OF MAKING LOANS SECURED BY PROCEEDS OF AN INCOME TAX REFUND OR TAX CREDITS; REQUIRING DISCLOSURES OF FEES AND INTEREST ASSOCIATED WITH TAX REFUND ANTICIPATION LOANS; PROVIDING PENALTIES.

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

SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Refund Anticipation Loan Act".

SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Refund Anticipation Loan Act:

A. "consumer" means a person who enters into a loan agreement and receives the loan proceeds in New Mexico, who will file a federal or state personal income tax return and who applies for a refund anticipation loan;

B. "creditor" means any person who makes a refund anticipation loan, issues a refund anticipation check or takes an assignment of a refund anticipation loan or refund anticipation check;

C. "department" means the regulation and licensing department;

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

E. "division" means the financial institutions division of the department;

F. "license" means a permit issued under the authority of the Refund Anticipation Loan Act to make loans and collect charges therefor 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 Refund Anticipation Loan Act and lawful regulations promulgated by the director and not otherwise;

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

H. "refund anticipation check" means a check, stored value card or other payment mechanism:

(1) that represents the proceeds of a tax refund or tax credits;

(2) that was issued by a depository institution or other person that received a direct deposit of the tax refund or tax credits; and

(3) for which a fee or other consideration is paid;

I. "refund anticipation loan" means a loan that is secured by or that the creditor arranges or expects to be repaid, directly or indirectly, from the proceeds of the consumer's federal or state personal income tax refunds or tax credits, including any sale, assignment or purchase of a tax refund or tax credit at a discount or for a fee; and

J. "refund anticipation loan fee" means the charges, interest, fees or other consideration charged or imposed, directly or indirectly, by the creditor for the making of or in connection with a refund anticipation loan.

SECTION 3. [NEW MATERIAL] LICENSE AND REGISTRATION--APPLICABILITY.--

A. Without first having obtained a license from the director, a person shall not:

(1) solicit the execution of, process, receive or accept an application or agreement for a refund anticipation loan; or

(2) collect upon a refund anticipation loan.

B. A banking corporation, savings and loan association or credit union operating under the laws of the United States or of a state is exempt from the licensing requirements of this section.

SECTION 4. [NEW MATERIAL] APPLICATION--FEES--AGENT FOR SERVICE OF PROCESS--INVESTIGATION--QUALIFICATIONS.--

A. Applications for a license to be a creditor pursuant to the Refund Anticipation Loan Act and annual license renewal applications 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 the principal owners and members. An application shall also include a statement accepting the license, if granted, as a privilege to be enjoyed and exercised pursuant to the provisions of the Refund Anticipation Loan Act and rules promulgated pursuant to that act.

B. At the time of making an application for an original license, an applicant shall pay to the director the sum of one thousand dollars ($1,000). Additionally, at the time of issuance of the original license and at each annual renewal, the licensee for each licensed office shall pay to the director a license fee for the period covered of five hundred dollars ($500). In the event the application for annual renewal of the license is delinquent, the licensee shall also pay a delinquency fee of ten dollars ($10.00) per day for each day the licensee is delinquent in filing an application for renewal.

C. An application shall be accompanied by, and every licensee shall at all times maintain on file with the director, an appointed agent for service of process. In case of noncompliance with this subsection, such service, including service of all notices, 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.

D. 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. An applicant for 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 a license. False or misleading information willfully and intentionally furnished to the director prior to the issuance of any license is grounds for suspension or revocation.

F. The director shall enter an order granting the original application, file the director's findings and, upon payment of the license fees, issue and deliver a license to the applicant within sixty days from the filing of the application and payment of required fees, unless the period is extended by written agreement between the applicant and the director, if the director finds that:

(1) the financial responsibility, character and general fitness of the applicant for a license and of the individual members, officers or directors of the applicant are such as to warrant belief that the business will be operated lawfully, honestly, fairly and efficiently pursuant to the provisions of the Refund Anticipation Loan Act;

(2) allowing the applicant to engage in business will promote the convenience and advantage of the community in which the business of the applicant is to be conducted; and

(3) the applicant has available for operation of the business at the specified location cash or its equivalent, convertible securities or receivables of thirty thousand dollars ($30,000) or any combination thereof.

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

H. A written application for license renewal shall be filed on or before March 31 of each year. The director shall investigate the facts and review the files for the licensee made by the director and of complaints filed by consumers, if any. The director shall deliver a renewal license to the licensee if the director finds that:

(1) no valid complaints of violations or abuses of the Refund Anticipation Loan Act or of the rules promulgated pursuant to that act have been filed by consumers;

(2) investigation of the affairs of the applicant indicates the business has been conducted and operated lawfully and efficiently pursuant to the provisions of the Refund Anticipation Loan Act; and

(3) the experience and general fitness and character of the licensee remain such as to warrant the belief that the business will continue to be operated lawfully and efficiently pursuant to the provisions of the Refund Anticipation Loan Act.

I. If the director does not make the findings for a renewal application enumerated in Subsection H of this section, the director may grant a temporary extension of the license not exceeding sixty days pending a hearing, shall enter an order fixing a date for a hearing upon the application, shall notify the licensee, 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 licensee 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 licensee 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 the complaints of violations or other grounds are well-founded, the director shall enter an order denying the renewal application, notify the licensee of the denial and retain 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 licensee.

J. The division shall maintain a list of licensees and establish a complaint process whereby an aggrieved consumer or other person may file a complaint against a licensee.

K. In determining the fitness and character of an applicant or licensee pursuant to the provisions of this section, the fact that the applicant or licensee is a member of, interested financially in or connected or affiliated with, controls or is controlled by or owns or is owned by any other corporation, partnership, trust, association or other legal entity 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 law shall be given such consideration and weight as the director determines appropriate.

SECTION 5. [NEW MATERIAL] LIMITATION OF AUTHORITY GRANTED BY LICENSE--EFFECTIVE DATE OF LICENSE--MINIMUM ASSETS.--

A. No licensee pursuant to the Refund Anticipation Loan Act shall use the words "bank", "banker" or "banking" in its name or refer to itself as a bank or banker in any of its advertising.

B. Each license shall remain in full force until June 30 next following its date of issue, unless sooner surrendered, revoked or suspended as provided in the Refund Anticipation Loan Act, and shall expire and terminate on June 30 following its issue unless renewed and reissued as provided in that act. Such license shall entitle the person or persons whose names appear on the face of the license, and no others, to enjoy and exercise the revocable privileges and immunities provided for in that act, but only in the manner and subject to the restrictions herein provided for.

C. Every licensee shall maintain at all times cash or its equivalent, convertible securities or receivables of thirty thousand dollars ($30,000), or any combination thereof.

SECTION 6. [NEW MATERIAL] JUDICIAL REVIEW.--Any applicant or licensee or any person aggrieved by any act or order of the director pursuant to the Refund Anticipation Loan Act may file an appeal in the district court pursuant to the provisions of Section 39-3-1.1 NMSA 1978.

SECTION 7. [NEW MATERIAL] REFUND ANTICIPATION LOANS--REQUIRED DISCLOSURES.--

A. A licensee shall disclose the following information to the consumer at the time that an application for a refund anticipation loan is submitted:

(1) the fee schedule for refund anticipation loans used by the licensee; and

(2) a written statement or, if the transaction is conducted using electronic commerce, an electronic statement containing the following information:

(a) that the refund anticipation loan is a loan that creates a legally enforceable debt and that the loan is not the consumer's actual tax refund or tax credit;

(b) that the consumer may file a personal income tax refund electronically without applying for a refund anticipation loan;

(c) that neither the federal internal revenue service nor the department guarantees a person will be paid the full amount of an anticipated tax refund or tax credit, nor do they guarantee that an anticipated tax refund or tax credit will be deposited into a consumer's account or mailed to a consumer on a specific date;

(d) that the consumer is responsible for repayment of the refund anticipation loan, and payment of related fees and charges, if the anticipated tax refund or tax credit is not paid in the full anticipated amount;

(e) the estimated time frame within which the proceeds of the refund anticipation loan will be paid to the consumer if the loan is approved;

(f) the fee or charge that will be imposed, if any, if the refund anticipation loan is not approved;

(g) the estimated total interest, fees and charges to be incurred by the consumer if the refund anticipation loan is approved;

(h) the estimated annual percentage rate for the refund anticipation loan; and

(i) that the consumer is not required to take out a refund anticipation loan.

B. The disclosures required pursuant to this section shall be made in a ten-point or larger bold type and shall be provided in English, Spanish or other language as determined by the director.

C. Prior to executing a refund anticipation loan agreement, a consumer shall provide to the licensee a statement signed by the consumer stating that the consumer has received the disclosures required pursuant to Subsection A of this section.

SECTION 8. [NEW MATERIAL] REQUIREMENTS FOR REFUND ANTICIPATION LOANS.--

A. No licensee shall make a refund anticipation loan to a consumer that exceeds eighty-five percent of the consumer's anticipated combined total federal and state tax refunds and tax credits, inclusive of principal and all related interest, fees and charges.

B. Without affecting the rights of a consumer to prepay a refund anticipation loan at any time without additional cost or penalty:

(1) no refund anticipation loan shall have a stated maturity greater than thirty-one days; and

(2) no refund anticipation loan shall have a stated minimum term less than fifteen days.

C. A refund anticipation loan 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 licensee for a refund anticipation loan by no later than 5:00 p.m. on the first day of business conducted by the licensee following the execution of the refund anticipation loan. If a consumer exercises the right of rescission pursuant to this subsection, no interest or fee for the rescinded transaction shall be charged to the consumer, and the licensee shall not charge or impose on the consumer a fee for exercising the right of rescission pursuant to this subsection. If this subsection is applicable, any interest or fee collected by a licensee shall be refunded in full to the consumer.

D. Prior to the consummation of a refund anticipation loan, the licensee shall provide the consumer, or each consumer if there is more than one, with copies of disclosures required pursuant to Section 7 of the Refund Anticipation Loan Act in English, Spanish or other language as determined by the director. Consumers shall have the option to decide which language version of the disclosures they wish to receive.

E. The disclosure of the credit terms of a refund anticipation loan shall be according to and governed by the requirements of 12 CFR 226, known as "Regulation Z". The definitions and requirements of that regulation and commentary shall apply to refund anticipation loans as if those provisions are fully set out in this subsection.

F. A licensee shall collect on refund anticipation loans in default in a professional, fair and lawful manner. A licensee that complies with the requirements and prohibitions set forth in 15 U.S.C. 1692c-1692f of the federal Fair Debt Collection Practices Act shall be deemed to have operated in a professional, fair and lawful manner.

SECTION 9. [NEW MATERIAL] REFUND ANTICIPATION LOAN PERMITTED CHARGES.--The following provisions shall apply to refund anticipation loans:

A. a licensee shall not charge or receive from a consumer, directly or indirectly, interest, fees or charges except as provided in this section;

B. upon the execution of a new refund anticipation loan, the licensee may impose interest of not more than eighteen dollars ($18.00) per one hundred dollars ($100) of principal, which interest is fully earned and nonrefundable at the time a refund anticipation loan agreement is executed unless a refund anticipation loan is rescinded pursuant to Subsection C of Section 8 of the Refund Anticipation Loan Act and which interest is payable in full at the date due of the refund anticipation loan agreement or upon prepayment of the refund anticipation loan;

C. a one-time charge of an amount not to exceed seventy-five dollars ($75.00) may be charged if a consumer has not yet filed a tax return to defray the costs of preparing an estimated tax return and other disclosures that may be required by federal law;

D. a document fee not to exceed ten dollars ($10.00) per refund anticipation loan shall be permitted; and

E. a licensee shall not charge a consumer any additional interest, fees or other charges on the outstanding principal owed on a refund anticipation loan after the effective due date.

SECTION 10. [NEW MATERIAL] PROHIBITED ACTS.--A licensee shall not:

A. directly or indirectly represent a refund anticipation loan as a refund or tax credit;

B. charge or impose any fee, charge or other consideration in the making of a refund anticipation loan other than the fees permitted pursuant to Section 9 of the Refund Anticipation Loan Act;

C. require a consumer to enter into a loan agreement in order to complete a tax return;

D. engage in a transaction, practice or course of business that operates a fraud upon a consumer in connection with a refund anticipation loan, including making oral statements contradicting any of the information required to be disclosed pursuant to the Refund Anticipation Loan Act;

E. misrepresent a material fact or condition of a refund anticipation loan;

F. take or arrange for a creditor to take possession of or a security interest in any property of the consumer other than the proceeds of the consumer's tax refund or tax credit to secure payment of a refund anticipation loan;

G. advertise, display, distribute or broadcast in any manner whatsoever a false, misleading or deceptive statement or representation with regard to the charges, terms or conditions for refund anticipation loans; or

H. withhold from a consumer, or from a dependent of a consumer, original personal identification documents, including:

(1) certificate of degree of Indian blood;

(2) census card;

(3) social security card;

(4) birth certificate;

(5) driver's license;

(6) military identification card; or

(7) passport.

SECTION 11. [NEW MATERIAL] DUTIES OF DIRECTOR.--

A. At least once each year, the director or the director's authorized representative shall make an examination of the place of business of each licensee and the loans, transactions, books, papers and records of the licensee insofar as they pertain to the business licensed pursuant to the Refund Anticipation Loan Act, as the director may deem necessary. The licensee shall pay to the director for such annual examination a fee of two hundred dollars ($200).

B. The director may at any time suspend or revoke a license on any ground on which the director might refuse to grant a license, for failure to pay an annual fee or for the violation of any provision of the Refund Anticipation Loan Act.

C. No license shall be suspended or revoked except on fifteen days' notice to the licensee. Upon receipt of notice, the licensee may, within five days of its receipt, make written demand for a hearing at the licensee's cost. The director shall thereafter with reasonable promptness hear and determine the matter, and the director's decision shall be subject to judicial review pursuant to the provisions of Section 39-3-1.1 NMSA 1978.

D. The director may promulgate rules for the administration and enforcement of the Refund Anticipation

Loan Act.

SECTION 12. [NEW MATERIAL] REVOCATION, SUSPENSION AND REINSTATEMENT OF LICENSE.--

A. The director shall not suspend or revoke a license issued pursuant to the Refund Anticipation Loan Act unless the director first serves upon the licensee a written notice that states in general the grounds therefor, together with the time and place of hearing, which shall be held not less than fifteen days after the mailing of such notice to the licensee by registered mail as provided in this section. Following the hearing, the director may suspend or revoke a license if the director finds that:

(1) the licensee, either knowingly or without the exercise of due care to prevent the same, has violated a provision of the Refund Anticipation Loan Act or a regulation or order made pursuant to and within the authority of that act; or

(2) a fact or condition exists at the time of the proposed suspension or revocation that, if it had existed at the time of the initial application for the license or for a renewal thereof, clearly would have justified the director in refusing to issue or renew the license.

B. If the director finds that probable cause exists and that enforcement of the Refund Anticipation Loan Act requires immediate suspension of a license pending investigation, the director may, upon three days' written notice by registered mail and a hearing, enter an order suspending a license for a period not exceeding thirty days.

C. Whenever the director revokes or suspends a license issued pursuant to the Refund Anticipation Loan Act, the director shall enter an order to that effect and shall forthwith in writing notify the licensee of the revocation or suspension by registered mail, which notice shall state the grounds therefor.

D. A licensee may surrender a license by delivering it to the director with written notice of its surrender, but such surrender shall not affect any civil or criminal liability of the licensee for acts committed prior thereto.

E. No revocation, suspension or surrender of a license shall impair or affect the obligation of a preexisting lawful contract between the licensee and an obligor thereon.

F. The director may reinstate a suspended license or issue a new license to a person whose license or licenses have been revoked if no fact or condition then exists that clearly would have justified the director in initially refusing to issue the license pursuant to the Refund Anticipation Loan Act.

G. Whenever the Refund Anticipation Loan Act provides for service of notice by registered mail, such service shall be deemed complete upon deposit of such notice in the post office. For the purpose of this section, mailing of notice addressed to the person designated as the agent for service of process pursuant to the Refund Anticipation Loan Act or to the manager or person in charge of the licensed office shall be sufficient.

SECTION 13. [NEW MATERIAL] PENALTIES--GENERAL.--

A. Any person, copartnership, trust, association or corporation and the several members, beneficiaries, officers, directors, agents and employees thereof who violate or participate in the violation of any provision of the Refund Anticipation Loan Act are guilty of a misdemeanor and upon conviction shall be punished by a fine of not less than five hundred dollars ($500) or more than one thousand dollars ($1,000) or by imprisonment of not more than six months or both in the discretion of the court.

B. A person who facilitates refund anticipation loans for residents of New Mexico without a license required pursuant to Subsection A of Section 3 of the Refund Anticipation Loan Act is guilty of a misdemeanor and upon conviction shall be sentenced pursuant to the provisions of Section 31-19-1 NMSA 1978.

SECTION 14. [NEW MATERIAL] PREEMPTION.--The state has exclusive jurisdiction and authority regarding the terms and conditions of permitted refund anticipation loans, and counties, municipalities and other political subdivisions of the state are preempted from any regulation of terms and conditions of permitted refund anticipation loans by ordinance, resolution or otherwise.

SECTION 15. SEVERABILITY.--If any part or application of the provisions of this 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, 2015.

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