Why NM Legislators Should Vote for HB 150
Committees: First House Commerce & Economic Development; then House Judiciary
Summary: This bill cleans up consumer protections and closes potential loopholes in the NM
Installment Loan Act of 1959 and the NM Small Loan Act of 1955. It requires all loan agreements to
specify the full cost of the loan, including interest and fees. It specifies that any rollover, renewal,
refinance, or modification of an existing loan agreement constitutes a new loan and requires new
disclosures under NM law and the federal Truth in Lending Act. It requires loan agreements to give
borrowers the right to rescind the loan without fee within one business day. It defines all violations of
these acts as unfair practices. This bill provides that any violation of the Small Loan Act in the making or collecting of a loan renders the loan void, and the lender forfeits the right to collect or retain principal,fees, or interest. It limits judgments on loans to costs, attorney fees, and post-judgment interest, and forbids attorney fees unless a good-faith effort at collection has been made. It requires detailed reporting on small loans: interest rates, repayment periods, frequency of refinancing, frequency of repossessions, missed payments, defaults, and more.
History: In 2017, legislation capped the interest rate at 175%; before that, rates reached more than 300%. Defenders of the industry argue that high interest rates are at least a way to ensure borrowing options for low-income residents of the state. In 2017, bills capping the small-loan interest rate at 36% per annum met with opposition from the loan industry and died in the Senate Corporations and Transportation Committee and the House Business and Industry Committee. This bill seeks to close
some of the potential loopholes that have allowed predatory lenders to soak the poor regardless of the nominal interest rate.
Why This Bill Is Good for NM
- Predatory lenders target the most vulnerable New Mexicans.
- This bill cleans up consumer protections and closes potential renewal loopholes that add hidden costs to what are already exorbitant interest rate.
- This bill requires collection of better data on the industry, so that it’s possible to know whether lenders are adhering to the law and whether the law is effectively protecting New Mexicans.