House passes bill closing loopholes in small loans law

SANTA FE—The New Mexico House of Representatives passed a bill today cleaning up state law that regulates storefront lenders. HB 150 protects New Mexico borrowers and ensures accountability and transparency in the storefront lending industry.
 
“All New Mexicans deserve access to fair and transparent loans under reasonable terms, but unfortunately, the current law has loopholes that fail to carry out the legislature’s intent to protect borrowers,” said Lindsay Cutler, attorney at the New Mexico Center on Law and Poverty. “HB 150 proposes effective data reporting requirements and consistency in consumer protections for all borrowers, ensuring New Mexico families receive fairer loans and that the state can better monitor storefront lenders.”

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. Yet 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 language provisions, do not require sufficient reporting to the Financial Institutions Division to enforce consumer protections, and do not make clear borrowers’ rights on loan renewals.

If passed by the Senate and 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 evaluate how the law is impacting New Mexicans;
  • Allow borrowers 24 hours to rescind a high-interest loan;
  • Align fee provisions, disclosure requirements, and penalty provisions so consumer protections are consistent for all borrowers; and
  • Define what it means to make a new loan to protect New Mexican borrowers from potential loopholes in loan rollovers and renewals.

“The small loan industry makes hundreds of millions of dollars from hardworking New Mexico families,” said Cutler. “The House has taken an important step in passing HB 150 and we are optimistic that the Senate will follow suit. We cannot allow lenders to continue to circumvent protections put in place two legislative sessions ago. Small loan reforms are absolutely necessary if we hope to meaningfully stop predatory lending practices.”