HOUSE BUSINESS AND INDUSTRY COMMITTEE SUBSTITUTE FOR

HOUSE BILL 438

53rd legislature - STATE OF NEW MEXICO - first session, 2017

AN ACT

RELATING TO FINANCIAL INSTITUTIONS; AMENDING THE NEW MEXICO SMALL LOAN ACT OF 1955; REQUIRING DISCLOSURES OF FEES AND INTEREST ASSOCIATED WITH TAX REFUND ANTICIPATION LOANS; ESTABLISHING REQUIREMENTS, PERMITTED CHARGES AND PROHIBITED ACTS FOR TAX REFUND ANTICIPATION LOANS.

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 have the following meanings unless the context clearly requires a different meaning. The meaning ascribed to the singular form applies also to the plural:

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

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

          [B.] C. "debit authorization" means an authorization signed by a consumer to electronically transfer or withdraw funds from the consumer's account for the specific purpose of repaying a loan;

          [C.] D. "department" or "division" means the financial institutions division of the regulation and licensing department;

          [D.] E. "director" means the director of the division;

          [E.] F. "installment loan" means a loan that is to be repaid in a minimum of four successive substantially equal payment amounts to pay off a loan in its entirety with a period of [no] not less than one hundred twenty days to maturity. "Installment loan" does not mean a loan in which a licensee requires, as a condition of making the loan, the use of postdated checks or debit authorizations for repayment of that loan;

          [F.] G. "license" 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 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 New Mexico Small Loan Act of 1955 and lawful regulations promulgated by the director and not otherwise;

          [G.] H. "licensee" means a person to whom one or more licenses have been issued pursuant to the New Mexico Small Loan Act of 1955 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 New Mexico Small Loan Act of 1955 and the lawful regulations promulgated by the director under that act and whose name appears on the face of the license;

          [H.] I. "payday loan" means a loan in which the licensee accepts a personal check or debit authorization tendered by the consumer and agrees in writing to defer presentment of that check or use of the debit authorization until the consumer's next payday or another date agreed to by the licensee and the consumer and:

                (1) includes any advance of money or arrangement or extension of credit whereby the licensee, for a fee, finance charge or other consideration:

                     (a) accepts a dated personal check or debit authorization from a consumer for the specific purpose of repaying a payday loan;

                     (b) agrees to hold a dated personal check or debit authorization from a consumer for a period of time prior to negotiating or depositing the personal check or debit authorization; or

                     (c) pays to the consumer, credits to the consumer's account or pays another person on behalf of the consumer the amount of an instrument actually paid or to be paid pursuant to the New Mexico Small Loan Act of 1955; but

                (2) does not include:

                     (a) an overdraft product or service offered by a banking corporation, savings and loan association or credit union; [and]

                     (b) installment loans; and

                     (c) refund anticipation loans;

          [I.] J. "payday loan product" means a payday loan or a payment plan pursuant to Section 58-15-35 NMSA 1978;

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

          L. "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;

          [K.] M. "renewed payday loan" means a loan in which a consumer pays in cash the administrative fee payable under a payday loan agreement and refinances all or part of the unpaid principal balance of an existing payday loan with a new payday loan from the same licensee. [A] "Renewed payday loan" includes a transaction in which a consumer pays off all or part of an existing payday loan with the proceeds of a payday loan from the same licensee; and

          [L.] N. "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."

     SECTION 2. Section 58-15-14.1 NMSA 1978 (being Laws 1983, Chapter 95, Section 2, as amended) is amended to read:

     "58-15-14.1. CHARGES--METHOD OF COMPUTATION.--The simple interest method shall be used for charging interest on loans, other than refund anticipation loans, made under the New Mexico Small Loan Act of 1955. Interest charges shall not be paid, deducted or received in advance. Interest charges shall not be compounded. However, if part or all of the consideration for a loan contract is the unpaid principal balance of a prior loan, then the principal amount payable under the loan contract may include any unpaid interest charges that have accrued within sixty days on the prior loan. Such interest charges shall be computed on the basis of the number of days actually elapsed. In addition to the simple interest allowed pursuant to this section, licensees making refund anticipation loans may also charge the precomputed interest, fees and charges permitted pursuant to Section 5 of this 2017 act, and as agreed by the parties."

     SECTION 3. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

     "[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) a uniform fee disclosure form provided by the director for use by all licensees; 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 refund anticipation 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 or engaging in a refund anticipation loan;

                     (c) that neither the federal internal revenue service nor the taxation and revenue department guarantees that: 1) a person will be paid the full amount of an anticipated tax refund or tax credit; or 2) 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, including the related fees, interest and charges therein, regardless of whether the expected or anticipated tax refund or tax credit amount is paid; and

                     (e) any fee or charge imposed, if a request for a refund anticipation loan is denied.

          B. The disclosures required pursuant to this section shall be made in a ten-point or larger font 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 4. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

     "[NEW MATERIAL] REFUND ANTICIPATION LOANS--REQUIREMENTS.--

          A. No licensee shall make a refund anticipation loan to a consumer, the principal amount of which exceeds seventy percent of the consumer's anticipated combined total federal and state tax refunds and tax credits.

          B. A refund anticipation loan may be payable upon demand or for any term not in excess of one year.

          C. A licensee shall grant a consumer the right to rescind the refund anticipation loan transaction by returning in cash, or through certified funds, the principal loan amount advanced no later than 5:00 p.m. on the first business day following the day the refund anticipation loan agreement was executed. If a consumer exercises the right of rescission pursuant to this subsection, then all fees, interest and charges otherwise owing shall be rebated and refunded to the consumer's refund anticipation loan account. No licensee shall charge a fee for a consumer exercising the right of rescission pursuant to this subsection.

          D. Prior to the consummation of a refund anticipation loan, the licensee shall provide the consumer with a copy of the disclosures required pursuant to Section 3 of this 2017 act in English, and if requested by the consumers, a copy of the disclosures in Spanish or other language as determined by the director.

          E. The disclosure of the credit terms of a refund anticipation loan shall be made according to and governed by the requirements of 12 CFR 1026, known as "Regulation Z".

          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 relating to debt collectors set forth in 15 U.S.C. Sections 1692c(a), (b) and (d), 1692d, 1692e and 1692f of the federal Fair Debt Collection Practices Act shall be deemed to have operated in a professional, fair and lawful manner."

     SECTION 5. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

     "[NEW MATERIAL] REFUND ANTICIPATION LOANS--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. A licensee may charge:

                (1) precomputed interest of not more than eighteen dollars ($18.00) per one hundred dollars ($100) of principal for the term of the refund anticipation loan, which precomputed interest is fully due, earned and owing on the day a refund anticipation loan agreement is executed, which is payable in full upon maturity of the refund anticipation loan agreement and which is not subject to rebate upon prepayment in part or in full of the refund anticipation loan;

                (2) a one-time tax refund estimate charge in an amount not to exceed thirty-five dollars ($35.00) to defray a licensee's costs related to preparing, obtaining or securing an estimate, either internally or from a third-party professional, of the consumer's anticipated federal or state tax refunds;

                (3) a document fee not to exceed ten dollars ($10.00) per refund anticipation loan; and

                (4) 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; and

          B. the interest, tax refund estimate charge and document fee as set forth in Subsection A of this section are nonrefundable as of the time a refund anticipation loan agreement is executed, unless a consumer timely rescinds the refund anticipation loan pursuant to Subsection C of Section 4 of this 2017 act."

     SECTION 6. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

     "[NEW MATERIAL] REFUND ANTICIPATION LOANS--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, interest or other consideration in the making of a refund anticipation loan other than the fees, charges and interest permitted pursuant to Section 5 of this 2017 act;

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

          D. engage in a transaction, practice or course of business that defrauds a consumer in connection with a refund anticipation loan, including making oral statements contradicting any of the information required to be disclosed pursuant to Section 3 of this 2017 act;

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

          F. 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

          G. 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 7. A new section of the New Mexico Small Loan Act of 1955 is enacted to read:

     "[NEW MATERIAL] REFUND ANTICIPATION LOANS--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 8. 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 9. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2017.

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