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HB 347 “limits” maximum finance charges to 175% APR

April 11, 2017
April 7, 2017 – For Immediate Release
Interest Cap Legislation signed by Governor
HB 347, limiting the maximum finance charges on loans under $5000 to 175% APR, has been signed by the governor.  Until now there has been no limit on small loan finance charges in New Mexico, and the average reported interest rate from small loan stores has been 350%.
While 175% APR is still way too high, we estimate the new law will save borrowers $250 million annually.  In addition, HB 347 eliminates bait and switch single payment payday and title loans; requires reporting to state regulators on the number, principal amount, and finance fees paid on small loans under 175% made by non-bank businesses; bans numerous “junk” fees that increase borrowing costs; specifies remedies for violations under the Unfair Practices Act; requires positive credit reporting for all loan repayments, and closes previous loopholes for higher cost lenders.
The New Mexico Fair Lending Coalition plans to continue pushing for an across the board 36% interest rate cap as adopted by 12 states and the US Armed forces.
The fair lending coalition also continues to promote adoption of affordable loan programs as an employee benefit at public sector organizations across the state. Dona Ana county has adopted the True Connect loan program.  In the first month, about 80 of their 850 employees borrowed an average of $1700 for a term of one year.  The typical county borrower will save $4,000 annually in finance fees versus the average state reported loan store interest rate of 350%.  So far, the county has not experienced any significant administrative drawbacks with the program.
The town of Bernalillo, NM has also adopted the True Connect program, and similar programs are under consideration by the New Mexico Association of Counties, Santa Fe Public Schools, the city of Albuquerque (which is considering an RFP process), NMSU’s AFSCME union, Bernalillo County and other public entities around the state.
At interest rates of 26% or less, these programs can be life-savers for employees, and help prove the case that triple digit interest rates are not necessary to provide credit to low income/ low credit score borrowers.
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