SANTA FE—The New Mexico Senate passed a bill today cleaning up state law that regulates storefront lenders. House Bill 150, Installment & Small Loan Changes, protects New Mexico borrowers by ensuring accountability and transparency in the storefront lending industry. The bill now awaits Governor Michelle Lujan Grisham’s signature for approval.
“Everyone deserves fairness and transparency when taking out a loan,” said Lindsay Cutler, attorney at the New Mexico Center on Law and Poverty. “HB 150 cleans up loopholes in state law by mandating effective data reporting to the state and providing consistency so all New Mexico families can receive fairer loans.”
New Mexico’s first across the board interest rate cap went into effect in January 2018, capping interest rates on storefront loans at 175 percent APR. However, high fees and loan rollovers continue to drain income from New Mexico borrowers. The two laws that regulate storefront lenders, the Small Loan and Bank Installment Loan Acts, still contain inconsistent fee and disclosure provisions, do not require sufficient reporting to the state’s Financial Institutions Division to enforce consumer protections, and do not make clear borrowers’ rights on loan renewals.
If signed into law, HB 150 would:
Require lenders to provide effective data on small loans, enabling the FID to verify storefront lenders are adhering to small loans law and for the state to evaluate how the law is impacting New Mexicans;
- Allow borrowers 24 hours to rescind a high-interest loan;
- Align fee provisions and disclosure requirements so consumer protections are consistent for all borrowers;
- Protect New Mexican borrowers from potential loopholes when they renew or rollover loans by clarifying the definition of new loans; and
- Align the penalties for violating the small loan laws and the language around the Unfair Practice Act to ensure that companies are held accountable for unfair and deceptive and unconscionable practices.
“The small loan industry makes hundreds of millions of dollars from hardworking New Mexico families,” said Cutler. “ We need our laws to be clear of ambiguities and provide meaningful consumer protections that hold small loan companies accountable. We’re optimistic that the governor will sign the bill. Small loan reform is absolutely necessary if we hope to stop predatory lending practices.”