On March 29, the New Mexico Financial Institutions Division of the Regulation and Licensing Department’s (NM FID) new rule on the New Mexico-Annual Percentage Rate (NM-APR) becomes effective. We previously blogged about New Mexico’s 36% APR cap on loans of $10,000 or less under the Small Loan Act (SLA) and Bank Installment Loan Act (BILA) that became effective on January 23, 2023. This new rule addresses the types of charges excluded from the 36% NM-APR cap.
In general, the 36% NM-APR cap is an “all-in” limit that includes:
- Finance charges under Regulation Z;
- Charges for any ancillary product or service sold or any fee charged in connection or concurrent with the extension of credit;
- Charges for credit insurance premium fees; and
- Charges for single premium credit insurance and any other insurance-related fees.
These charges must be included in the NM-APR even if they would be excluded under the Regulation Z finance charge calculation.
The new rule specifically excludes charges based solely on a borrower’s individual behavior after the extension of credit that cannot reasonably be predicted at the time of the NM-APR disclosure, such as:
- Actual expenditures, including reasonable attorney fees, for legal process or proceedings to collect on a loan pursuant to statutory limitation;
- Cost of ancillary products, such as insurance, sold after the extension of credit that are not required as a condition for extension of credit, are properly disclosed, which the customer authorizes a minimum of seven calendar days after the extension of the credit;
- Delinquency fee charges pursuant to statutory limitations and as properly disclosed in loan agreements;
- Premiums for force placed or similar collateral insurance in the event that a borrower fails to maintain in effect any collateral insurance required in connection with a loan transaction, pursuant to statutory conditions;
- Charges imposed by third parties in connection with credit or debit card transactions, ACH payments, or similar, provided that a specific method of payment by the borrower is not required as a condition of the extension of credit;
- Non-sufficient funds (NSF) charges for debits not honored by the drawee’s financial institutions and are subsequently reversed from the lender’s account, subject to statutory limitations;
- Parking or similar fees if they are charged to all individuals who utilize the parking area for which the fees are associated;
- Reimbursement for Global Positioning Systems (GPS) or similar devises installed on vehicles or other movable collateral when required as a condition of the extension of credit, when those devises are removed or destroyed by the borrower without the lender’s authorization and subsequently not returned in working order to the lender within 15 days of such removal; and
- Any other charges arising solely from the borrower’s behavior that are not required by the lender as a condition for the extension of credit and are not either prohibited or prohibited from exclusion by law.
Fees paid to a public official relating to the extension of credit, including fees to record liens, are excluded. As to loans of $500 or less, there is also an exclusion for a fee not exceeding five percent of the total principal of the loan if that fee is not imposed on any one borrower more than one time per 12-month period.
The rule is available at N.M. Admin. Code § 18.104.22.168. In addition to the NM-APR rule, the NM FID replaced the consumer information language and brochure sample on its website. Entities subject to the SLA and BILA should review their New Mexico APR calculations and update mandatory brochures as necessary.