HB0172

HOUSE BILL 172

55th legislature - STATE OF NEW MEXICO - second session, 2022

INTRODUCED BY

Micaela Lara Cadena and Patricia A. Lundstrom and

Dayan Hochman-Vigil

AN ACT

RELATING TO LENDING; IMPOSING A CAP ON INTEREST RATES; VOIDING CONTRACTS THAT EXCEED THE INTEREST RATE CAP; LOWERING THE MAXIMUM ANNUAL PERCENTAGE RATE FOR LOANS PURSUANT TO THE NEW MEXICO BANK INSTALLMENT LOAN ACT OF 1959 AND THE NEW MEXICO SMALL LOAN ACT OF 1955; MAKING AN APPROPRIATION.

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

SECTION 1. Section 56-8-9 NMSA 1978 (being Laws 1957, Chapter 209, Section 1, as amended) is amended to read:

"56-8-9. EXCESSIVE CHARGES PROHIBITED--APPLICABILITY OF MAXIMUM RATES--DEFINITION.--

A. Unless otherwise provided by law, no person, corporation or association, directly or indirectly, shall take, reserve, receive or charge any interest, discount or other advantage for the loan of money or credit or the forbearance or postponement of the right to receive money or credit except at the rates permitted in Sections 56-8-1 through 56-8-21 NMSA 1978.

B. Except as provided for in this section, the maximum lawful rate of interest charged or received for the extension of credit shall not exceed thirty-six percent per year for amounts in excess of one thousand one hundred dollars ($1,100). The maximum lawful rate of interest charged or received for the extension of credit shall not exceed ninety-nine percent per year for amounts up to and including one thousand one hundred dollars ($1,100).

C. The calculation of interest shall include any periodic or nonperiodic interest, any periodic or nonperiodic finance charge, any ancillary products or services and any other charges or fees incident to the extension of credit.

D. Any contract for the extension of credit entered into on or after October 1, 2022 having a rate of interest in excess of the maximum lawful rate shall be void as to principal and interest.

E. The limitation on interest for the extension of credit shall not apply to any federally insured depository institution or government-issued bonds.

F. In the event the United States prime lending rate exceeds ten percent, the maximum lawful rate of interest charged or received for amounts in excess of one thousand one hundred dollars ($1,100) may exceed thirty-six percent per year but shall not exceed thirty percentage points in excess of the United States prime lending rate.

[B.] G. No provision of law prescribing maximum rates of interest that may be charged in any transaction shall apply to a transaction in which a corporation, limited liability corporation or other business entity is a debtor, regardless of the purpose for which the corporation was formed and regardless of the fact that an individual is codebtor, endorser, guarantor, surety or accommodation party. No corporation or its codebtor, endorser, guarantor, surety or accommodation party shall have a cause of action or affirmatively plead, counterclaim, set off or set up the defense of usury in any action to recover damages or enforce a remedy on any obligation executed by the corporation, and no civil or criminal penalty that would otherwise be applicable except as provided in Sections 30-43-1 through 30-43-5 NMSA 1978 shall apply on any obligation executed by the corporation.

[C. A lender may, in the case of business or commercial loans for business or commercial purposes in the amount of five hundred thousand dollars ($500,000) or more, take, receive, reserve or charge on any loan or discount made, or upon any note, bill of exchange or other evidence of debt, interest at a rate agreed to by the parties.

D.] H. In addition to the maximum interest or discount that a lender is permitted to charge by law, the lender may charge, take, reserve or receive a premium or points in an amount up to but not exceeding three percent of the face amount of the loan on interim construction loans; provided that the total amount does not exceed the maximum lawful rate of interest as provided in Subsections B through F of this section. The lender may charge and require the borrower to pay the premium upon execution of the loan agreement, whether the proceeds are delivered to the borrower immediately or whether there are to be obligatory or permissive future advances. The lender shall not be required to refund this charge in the event of prepayment of the obligation. For the purposes of this section, "interim construction loan" means a loan secured by a first mortgage and used by the borrower primarily for financing the construction of buildings, structures or improvements on or to the real property on which the first mortgage has been taken.

[E.] I. A lender may charge, take, reserve or receive points or a premium on any loan secured by real property; provided the points or premium together with the interest or discount charged, taken, reserved or received do not exceed the maximum interest [or discount permitted by law. The lender shall not be required to refund this charge in the event of prepayment even if the prepayment would result in a higher charge to the borrower than permitted by law] as provided in Subsections B through F of this section.

[F.] J. A loan in an amount equal to five thousand dollars ($5,000) or less shall be made only pursuant to the New Mexico Bank Installment Loan Act of 1959 or the New Mexico Small Loan Act of 1955."

SECTION 2. Section 56-8-13 NMSA 1978 (being Laws 1957, Chapter 209, Section 4) is amended to read:

"56-8-13. PENALTIES AND FORFEITURES.--

A. The taking, receiving, reserving or charging of a rate of interest greater than allowed by [this act] Section 56-8-9 NMSA 1978, when knowingly done, shall be deemed a forfeiture of the entire amount of such interest [which] that the note, bill or other evidence of debt carries with it or which has been agreed to be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid or [his] the person's legal representatives may recover [back] by civil action twice the amount of the interest thus paid from the person, corporation or association taking or receiving the same; provided that such action is commenced within two [(2)] years from the time the usurious transaction occurred.

B. Any contract for the extension of credit entered

into on or after October 1, 2022 having a rate of interest in excess of the maximum lawful rate shall be void as to principal and interest."

SECTION 3. Section 58-7-7 NMSA 1978 (being Laws 1959, Chapter 327, Section 8, as amended) is amended to read:

"58-7-7. RESTRICTIONS.--

A. No lender shall make a loan pursuant to the New Mexico Bank Installment Loan Act of 1959 to a borrower who is also indebted to that lender pursuant to the New Mexico Small Loan Act of 1955 unless the loan made pursuant to the New Mexico Small Loan Act of 1955 is paid and released at the time the loan is made.

B. No lender other than a federally insured depository institution shall make a loan pursuant to the New Mexico Bank Installment Loan Act of 1959 if a loan has an initial stated maturity of less than one hundred twenty days.

C. No lender other than a federally insured depository institution shall make a loan pursuant to the New Mexico Bank Installment Loan Act of 1959 unless the loan is repayable in a minimum of four substantially equal installment payments of principal and interest.

D. No lender, other than a federally insured depository institution, shall make a loan pursuant to the New Mexico Bank Installment Loan Act of 1959 that has an annual percentage rate greater than [one hundred seventy-five] thirty-six percent for a loan in an amount in excess of one thousand one hundred dollars ($1,100) or ninety-nine percent for a loan in an amount up to and including one thousand one hundred dollars ($1,100), calculated pursuant to 12 CFR Part 1026, known as "Regulation Z", except as provided in Subsection I of this section.

E. The provisions of Subsections B and C of this section shall not apply to refund anticipation loans. As used in this subsection, "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.

F. Except as provided by Section 58-7-3.2 NMSA 1978, any rollover, renewal, refinance or modification of an existing loan agreement with a lender, except a modification without any additional cost to the consumer, shall constitute a new loan and shall require new disclosures pursuant to the federal Truth in Lending Act.

G. Any contract for the extension of credit entered into on or after October 1, 2022 having a rate of interest in excess of the maximum lawful rate shall be void as to principal and interest.

H. The limitation on interest for the extension of credit shall not apply to any federally insured depository institution or government-issued bonds.

I. In the event the United States prime lending rate exceeds ten percent, the maximum lawful rate of interest charged or received for amounts in excess of one thousand one hundred dollars ($1,100) may exceed thirty-six percent per year but shall not exceed thirty percentage points in excess of the United States prime lending rate."

SECTION 4. Section 58-15-10.1 NMSA 1978 (being Laws 2011, Chapter 105, Section 1, as amended) is amended to read:

"58-15-10.1. LICENSEE REPORTING REQUIREMENTS-- PENALTIES.--

A. Licensees shall file with the director each year reports containing at least the following information for the preceding calendar year ending December 31 in an aggregated, nonidentifying consumer manner as specified below:

(1) a description of each loan product offered by the licensee, including:

(a) whether the loan product was secured or unsecured;

(b) whether the loan product was made pursuant to the New Mexico Small Loan Act of 1955 or the New Mexico Bank Installment Loan Act of 1959;

(d) the percentage of the total dollar amount of all principal for that product that was repaid; and

(e) the total number of individual borrowers who took out this type of loan product;

(2) the total number of loan transactions entered into for each loan product in the following amounts:

(a) five hundred dollars ($500) or less;

(b) five hundred one dollars ($501) to one thousand dollars ($1,000);

(d) three thousand one dollars ($3,001) to five thousand dollars ($5,000);

(3) for each loan product, the number of loans made and the total dollar amount of interest and fees charged on the contracts for loans made within the following categories of annual percentage rate calculated pursuant to 12 CFR Part 1026, known as "Regulation Z":

(a) less than or equal to [thirty-six] ten percent;

(b) more than [thirty-six] ten percent through [one hundred] eighteen percent;

(d) more than [one hundred fifty percent through one hundred seventy-five] thirty-six percent;

(4) for each loan product, the following aggregate amounts of fees and interest:

(a) a list of each fee charged by the lender and a description of each fee product or type, including fees charged for loan origination and credit insurance;

(b) the total dollar amount of each fee product charged by the lender and paid by the borrower; and

(5) for each loan product:

(a) the number of loans for which the original term of the loan was: 1) less than one hundred twenty days; 2) between one hundred twenty days and three hundred sixty-five days; 3) between three hundred sixty-five days and seven hundred thirty-one days; 4) between seven hundred thirty-one days and five years; and 5) longer than five years;

(b) for each item set forth in Subparagraph (a) of this paragraph, the average actual repayment time for the given loan product and loan term; and

(c) for each item set forth in Subparagraph (a) of this paragraph, the number of loans for which payments were due: 1) every two weeks; 2) every four weeks; and 3) monthly;

(6) the number of borrowers who took out one or two loans with the lender in the previous calendar year, and the percentage of all borrowers who took out one or two loans with the lender in the previous calendar year;

(7) the number of borrowers who took out three or more loans with the lender in the previous calendar year, and the percentage of all borrowers who took out three or more loans with the lender in the previous calendar year;

(8) for each loan product, the number of loans that have been repaid in full without an extension, renewal, refinance, rollover or new loan within thirty days of repaying that loan, and for each loan product, the percentage of all borrowers who have repaid their loans in full without an extension, renewal, refinance, rollover or new loan within thirty days of repaying that loan;

(9) for each loan product, the number of borrowers who extended, renewed, refinanced or rolled over their loans prior to or at the same time as paying their loan balance in full, or took out a new loan within thirty days of repaying that loan, and for each loan product, the percentage of all borrowers who extended, renewed, refinanced or rolled over their loans prior to or at the same time as paying the loan balance in full, or took out a new loan within thirty days of repaying that loan;

(10) for each loan product, the total number of loans for which a late payment fee was charged and the percentage of the total loans for which a late payment fee was charged;

(11) for each loan product, the total number of loans for which a late payment fee was charged more than once over the term of the contract, and the percentage of the total loans for which a late payment fee was charged more than once over the term of the contract;

(12) for each loan product, the number of loans for which a borrower has defaulted on a loan, and for each loan product, the percentage of total loans of that product for which the borrower has defaulted on a loan;

(13) for each loan product, the dollar amount of loan principal and accrued interest that was charged-off or written-off, and the number of borrowers for which the lender charged-off or wrote-off loan principal and accrued interest;

(14) the number of loans and percentage of all borrowers the lender filed action against for default;

(15) the total number of loans secured by a motor vehicle and the number of those loans for which the motor vehicle was repossessed;

(16) the total number of loans secured by non-motor vehicle personal property and the number of those loans for which the non-motor vehicle personal property was repossessed;

(17) the total number and percentage of borrowers of all loan products whose sources of income, as provided by borrowers in the loan origination process, included a means-tested public benefit as defined by 8 U.S.C. Section 1613(c);

(18) the total number and percentage of borrowers of all loan products who are aged sixty-five or older;

(19) the total number of loans of all loan products that were made to borrowers in each county in New Mexico; and

(20) the percentage of all borrowers who took out a refund anticipation loan who were eligible for a federal earned income tax credit.

B. The reports required pursuant to Subsection A of this section shall be submitted to the director on or before the fifteenth day of April each year.

C. The reports required pursuant to Subsection A of this section shall be accompanied by a sworn statement by the licensee under penalty of perjury that the report is complete and accurate.

D. A licensee that fails to timely submit complete and accurate reports as required pursuant to Subsection A of this section on or before the fifteenth day of April may:

(1) be fined an amount not to exceed one thousand five hundred dollars ($1,500) per day for each day after the fifteenth day of April, a complete and accurate report is not filed; and

(2) have a license required pursuant to the New Mexico Small Loan Act of 1955 suspended pursuant to Section 58-15-8 NMSA 1978."

SECTION 5. Section 58-15-17 NMSA 1978 (being Laws 1955, Chapter 128, Section 15, as amended) is amended to read:

"58-15-17. REQUIREMENTS FOR MAKING AND PAYING OF LOANS--INCOMPLETE INSTRUMENTS--LIMITATIONS ON CHARGES AFTER JUDGMENT AND INTEREST.--

A. Every licensee shall:

(1) at the time a consumer becomes contractually obligated on a loan pursuant to the New Mexico Small Loan Act of 1955, deliver to the borrower or, if there are two or more borrowers on the same obligation, to one of them, a statement on which shall be printed a copy of Section 58-15-14.1 NMSA 1978 and which shall disclose in clear and distinct terms:

(a) the amount of the loan;

(b) the date the loan was made;

(d) the type of the security, if any, for the loan;

(e) the name and address of the licensee;

(f) the name of the person primarily obligated for the loan;

(g) the amount of principal;

(h) the annual percentage rate as disclosed pursuant to 12 CFR Part 1026, known as "Regulation Z", and the amount in dollars and cents;

(i) all other disclosures required pursuant to state and federal law; and

(j) the charge for any other item allowable and included pursuant to the New Mexico Small Loan Act of 1955, so stated as to clearly show the allocation of each item included;

(2) for each payment made on account of a loan, give to the person making the payment a plain and complete receipt specifying the date and amount of the payment, the amount applied to interest and principal and the balance unpaid. When payment is made in any other manner than by the borrower in person, by an agent of the borrower or by check or money order, the licensee shall mail the receipt to the borrower's last known address or retain and deliver the receipt upon request of the borrower. A licensee may deliver the receipt electronically to the borrower via text message or email, if requested to do so in writing by the borrower. A borrower may withdraw authorization for electronic delivery of receipts in writing at any time. A licensee shall not require a borrower to receive receipts electronically. The licensee shall maintain a copy of each receipt in the office of the licensee as a part of the licensee's records; and

(3) upon repayment of the loan in full, mark plainly every note and promise to pay signed by any borrower with the word "paid" or "canceled" and promptly file or record a release of any mortgage if the mortgage has been recorded, restore any pledge and cancel and return any note and any assignment given to the licensee. A licensee may mark and return a copy of the note, promise to pay or any assignment if the copy accurately reproduces the complete original.

B. A licensee shall not take a note or promise to pay that does not disclose the amount of the loan, a schedule of payments, or a description thereof, and the agreed charge or rate of charge or any instrument in which blanks are left to be filled in after execution.

C. A judgment against a party on a loan made pursuant to the New Mexico Small Loan Act of 1955 shall not include, and the loan shall not include, from the date of the judgment, charges against a party to the loan other than costs, attorney fees and post-judgment interest as provided by law.

D. A loan made pursuant to the New Mexico Small Loan Act of 1955 that is filed and approved as a claim in any bankruptcy proceeding shall bear interest at the rate of ten percent per year beginning on the ninetieth day following the date of adjudication. This limitation shall not apply when the bankrupt is not discharged in bankruptcy or to any obligation not dischargeable under the provisions of the United States Bankruptcy Code presently in force.

E. A loan made pursuant to the provisions of the New Mexico Small Loan Act of 1955 shall not bear interest in excess of ten percent per year on the unpaid principal balance of a loan after ninety days following the date of the death of the borrower.

F. A loan made pursuant to the New Mexico Small Loan Act of 1955 shall not bear interest in excess of ten percent per year upon the unpaid principal balance of the loan after twelve months following the date of maturity of the loan.

G. A lender shall not make a loan pursuant to the New Mexico Small Loan Act of 1955 if a loan has an initial stated maturity of less than one hundred twenty days unless the loan is a refund anticipation loan.

H. A lender shall not make a loan pursuant to the New Mexico Small Loan Act of 1955 unless the loan is an installment loan or a refund anticipation loan.

I. A lender shall not make a loan pursuant to the New Mexico Small Loan Act of 1955, other than a refund anticipation loan, unless the loan is repayable in a minimum of four substantially equal installment payments of principal and interest.

J. A lender shall not make a loan pursuant to the New Mexico Small Loan Act of 1955 that has an annual percentage rate greater than [one hundred seventy-five] thirty-six percent for a loan in an amount in excess of one thousand one hundred dollars ($1,100) or ninety-nine percent for a loan in an amount up to and including one thousand one hundred dollars ($1,100), calculated pursuant to 12 CFR Part 1026, known as "Regulation Z", except as provided in Subsection O of this section.

K. Upon request from the borrower, all lenders licensed pursuant to the New Mexico Small Loan Act of 1955 shall give or forward to the borrower copies of all loan agreements concerning that borrower, a copy of all receipts maintained in that borrower's loan file and a written statement of that borrower's loan history, including all fees charged, amortization schedules, that borrower's payment history, including the dates and amounts of payments made, and the total amount unpaid pursuant to each contract. All lenders shall retain for seven years from the date of loan file origination or loan payoff, whichever is the later, the documentation specified in this subsection.

L. Any rollover, renewal, refinance or modification of an existing loan agreement with a licensee, except a modification without any additional cost to the borrower, shall constitute a new loan and shall require new disclosures pursuant to the federal Truth in Lending Act.

M. Any contract for the extension of credit entered into on or after October 1, 2022 having a rate of interest in excess of the maximum lawful rate shall be void as to principal and interest.

N. The limitation on interest for the extension of credit shall not apply to any federally insured depository institution or government-issued bonds.

O. In the event the United States prime lending rate exceeds ten percent, the maximum lawful rate of interest charged or received for amounts in excess of one thousand one hundred dollars ($1,100) may exceed thirty-six percent per year but shall not exceed thirty percentage points in excess of the United States prime lending rate."

SECTION 6. APPROPRIATION.--One hundred thousand dollars ($100,000) is appropriated from the general fund to the financial institutions division of the regulation and licensing department for expenditure in fiscal year 2023 to hire, contract with or retain expert consultants and other resources to assist in the development of a recommendation to the legislature prior to January 1, 2023 for the appropriate interest rates or other regulations for loans in an amount of five thousand dollars ($5,000) or less that are subject to the New Mexico Small Loan Act of 1955 or the New Mexico Bank Installment Loan Act of 1959 and for such other regulatory measures as the division deems appropriate to prohibit predatory practices by lenders and to assure the continued access to credit by New Mexicans, including those with low or poor credit ratings. Recommendations shall be developed after consideration of input from all interested parties, including representatives from the office of the attorney general, lending institutions, tribes and pueblos and consumer protection organizations. Any unexpended or unencumbered balance remaining at the end of fiscal year 2023 shall revert to the general fund.

SECTION 7. EFFECTIVE DATE.--The effective date of the provisions of Sections 1 through 5 of this act is October 1, 2022.

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