New Mexico releases new rules for payday loans; But you can still be charged up to 175% interest

Commentary: ALBUQUERQUE, NM – This week, the New Mexico Financial Institutions Division (FID) issued a highly anticipated statement settling a law that imposed a 175% interest rate cap on small loans. In addition to capping the small dollar loan APR, the law (HB 347) that was passed in the 2017 New Mexico legislative session, ensures that borrowers have the right to obtain clear information about total loan costs, allows borrowers to build a credit history through payments made on small loans and stipulates that all such loans have an original term of 120 days and cannot be subject to a repayment plan of less than four repayments principal and interest.

HB 347 and the proposed regulations signal progress toward fair lending terms and a more inclusive economy for all New Mexicans by eliminating short-term payday loans and enacting the first statutory rate cap on installment loans. But, while HB 347 moves toward ensuring that all New Mexicans have access to fair credit, regardless of income level, the 175% cap required by HB 347 remains unfair, unnecessarily high, and will cause serious financial hardship. for countless new Mexicans. .

“The proposed regulations are a first step in giving all New Mexicans access to fair credit, but we still have a long way to go. In the past, storefront loans in the state were largely unregulated and hard workers were forced to borrow at interest rates as high as 1500% APR, forcing them into a cycle without end of high-cost debt,” said Christopher Sanchez, supervising attorney for Fair Lending at the New Mexico Center on Law and Poverty. “All New Mexicans deserve a chance to participate more fully in our state’s economy. We hope to see additional regulations that would improve disclosures and language around loan renewals so that all borrowers can understand the terms of their loans.

Storefront loans have aggressively targeted low-income families and individuals, with sometimes four-digit interest rates or arbitrary fees and without regard to a family or individual’s ability to repay. .

“Combined with high interest rates and unaffordable payments, predatory lending prevents New Mexican families from building assets and saving for a strong financial future. This kind of unscrupulous lending practices only serve to trap people, rather than free them from cycles of poverty and debt,” said Ona Porter, president and CEO of Prosperity Works. “Regulatory enforcement and compliance is an essential step in protecting our families.”

The implementation and enforcement of HB 347, through regulation and IDF compliance reviews, is intended to finally enable all New Mexicans to participate more fully and equitably in the New Mexico economy. Momentum surrounding this issue was recently accelerated when New Mexico Senators Tom Udall and Martin Heinrich co-sponsored the Stopping Abuse and Fraud in Electronic Lending (SAFE) Act to clamp down on some of the worst abuses of payday lending industry and protect consumers from deceptive and predatory lending practices.

The regulations released earlier this week are the first set of proposed regulations. Before FID releases the second round, the department will accept public comments, including at a public rules hearing on April 3 in Santa Fe.


The New Mexico Center on Law and Poverty is dedicated to advancing economic and social justice through education, advocacy and litigation. We work with low-income New Mexicans to improve living conditions, increase opportunity, and protect the rights of people living in poverty.

prosperity works focuses on breaking down the systemic barriers that keep New Mexican families in cycles of struggle. We design, test, and implement high-impact strategies that empower New Mexicans to build assets, understand finance, and break free from poverty.

About Octavia A. Dorr

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