Indian Affairs Committee asks for FID report on law capping store front loans  

CHAMA—At a legislative hearing in Chama today, the New Mexico Indian Affairs Committee passed a resolution asking the Financial Institutions Division to report on how it is enforcing a new law that caps interest rates on small loans and to provide data collected from lenders on the loan products they sell. The FID report is due for presentation to the committee later this fall.

“All New Mexicans deserve access to fair and transparent loans under reasonable terms, but generations of low-income families and Native American communities have been aggressively targeted by unscrupulous store front lenders,” said Lindsay Cutler, attorney at the New Mexico Center on Law and Poverty. “The FID has a duty to enforce the new law and protect families from unfair lending practices. The new law went into effect in January, but FID still hasn’t updated its regulations to reflect the new standards. Without information on FID enforcement, we don’t have a clear picture of how the small loan industry is doing business with New Mexico families and how the new law is affecting New Mexicans. We’re grateful that the Indian Affairs Committee has asked the FID to report on its enforcement efforts.”

Before passage of HB 347 in the 2017 legislative session, most small loans were unregulated and borrowers were frequently charged interest rates of 300 percent APR or more. Reforms to the Small Loan Act are now in effect, capping interest rates at 175 percent APR and eliminating traditional short term payday and title loans. The new law requires lenders to provide clear information about the costs of loans, allows borrowers to develop a credit history when they make payments on small-dollar loans, and sets minimum contract terms for small loans, including at least four payments and 120 days to pay off most loans. Refund anticipation loans are exempt from those requirements.

The FID proposed regulations to implement HB 347 in late February 2018 to eliminate inconsistencies between the new law and the old payday lending regulations. Loan renewals, however, are not addressed by the FID’s proposed regulations. This loophole could leave borrowers vulnerable to interest rates and fees that are now illegal under the law for new loans. The Center urges the FID to close this loophole by clarifying that renewals are subject to the law’s fee limit, interest rate cap, and payment schedule requirements for new loans.

“Passing HB 347 was a necessary first step, but enforcing regulation and compliance with the law is the critical next step in protecting our families and ensuring that all New Mexicans have equal access to affordable loans and protection from predatory lending practices,” said Michael Barrio, Director of Advocacy for Prosperity Works. “The data and reporting transparency we seek is necessary to close loopholes that could render HB 347 ineffective, and to augment existing consumer protections in New Mexico. Our focus, now, is on creating transparency and eliminating loopholes that can be used to continue exploiting hard-working New Mexicans. We’re making progress every day.”

The FID’s proposed regulations can be found here: www.rld.state.nm.us/financialinstitutions/

The Center’s comments on the proposed regulations can be found here: https://wp.me/a7pqlk-10H

A factsheet on regulations the FID should enact to enforce the small loans act can be found here: http://nmpovertylaw.org/fact-sheet-fid-must-enact-regulations-to-enforce-the-small-loans-act-2018-07/

Hearing on proposed small loan regulations Monday

CHAMA—The New Mexico Legislative Indian Affairs Committee will hold an interim legislative hearing in Chama on Monday regarding the Financial Institutions Division’s proposed regulations on HB 347, which imposes a 175 percent APR interest rate cap on small loans. The New Mexico Center on Law and Poverty and Prosperity Works will ask the committee to pass a resolution requesting the FID provide information about how it is enforcing this new law and present that report to the committee later this fall.

Before passage of HB 347 in the 2017 legislative session, most small loans were unregulated and interest rates were even higher. HB 347 ensures that borrowers have the right to clear information about total loan costs, allows borrowers to develop a credit history when they make payments on small-dollar loans, and sets minimum contract terms for small loans including at least four payments and 120 days to pay off most loans. Refund anticipation loans are exempt from those requirements.

While the law and proposed regulations signal progress for fair loan terms, much more work remains to be done to ensure fair access to credit for all New Mexicans. Storefront lenders with predatory business practices that trap people in a cycle of unaffordable debt have deep roots in the state and have aggressively targeted generations of low-income families and Native communities, pushing loans with high-interest rates or arbitrary fees with no regard for an individual’s ability to repay.

The FID’s proposed regulations can be found here: www.rld.state.nm.us/financialinstitutions/

The Center’s comments on the proposed regulations can be found here: https://wp.me/a7pqlk-10H

The Center’s suggested changes to the proposed regulations can be found here: https://wp.me/a7pqlk-10I

WHAT: 
Indian Affairs Committee interim legislative hearing on proposed HB 347 regulations, which impose a 175 percent interest rate cap on small loans.

WHEN:
Monday, July 2, 2018 at 12:30 p.m.

WHERE:     
Lodge and Ranch at Chama
16253 S Chama Highway 84, Chama, NM 87520
Chama, NM 87520

WHO:
Indian Affairs Committee
New Mexico Center on Law and Poverty
Prosperity Works
FID
Member of the public