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For further information contact:

Joe McTigue

574.243.6040 ext. 239

jmctigue@carletoninc.com

New Mexico 36% APR Rate Cap Signed into Law

On March 1, 2022, Governor Michelle Lujan Grisham signed House Bill 132 enacting a 36% TILA APR rate cap for small dollar loans in New Mexico. This law goes into effect January 1, 2023, and amends the New Mexico Small Loan Act of 1955 and the New Mexico Bank Installment Loan Act of 1959 to make them substantially similar for consumers. As the consumer-finance industry awaits to see if regulations are released for guidance implementing the law, Carleton has already begun calculation changes to help our clients and partners stay ahead of this challenge.

Significant Provisions Impacting Computational Requirements:

• Threshold: The new law regulates loans up to $10,000 (increased from the previous $5,000 cap).

• Rate: A maximum 36% TILA Annual Percentage Rate (“APR”) limit replaces the previous limit of 175% TILA APR.

  • The new law also contains a rate escalator if the prime rate of interest exceeds 10% for three consecutive months. The director of the financial institutions shall post notice within 10 days if the provisions regarding the prime rate of interest are ever triggered.

• Fees:
  • Fees included in the finance charge, and therefore subject to the 36% APR Cap, include:
    • Charges for ancillary products or services sold or any fee charges in connection or concurrent with the extension of credit; or
    • Any credit insurance premium or fee and any charge for single premium credit insurance or any other fee related to insurance.
    • *These fees above are specifically included in the New Mexico finance charge definition for purposes of calculating the APR, even if TILA Regulation Z would have excluded them.
  • Amounts paid to a public officially in relation with the extension of credit are specifically excluded from the finance charge.
  • For loans that are $500 or less, a new fee is allowed that may not exceed 5% of the total principal and may be imposed only once a year. This fee is excluded from the finance charge, and therefore the 36% APR Cap.
• Effective Date: January 1, 2023. The law also clarifies that the applicable rate cap is determined on the date when the loan was made (i.e., no look back clause).
• Removed Provisions: The new law removed provisions previously included in both laws, including:
  • The 24-month maximum term;
  • Prohibitions on late fees, non-sufficient funds fees, origination fees, prepayment penalties, and charges for ancillary products.

Carleton has maintained regular communication with industry professionals and trade associations to ensure we are assisting our clients implement these necessary updates. The information contained herein is for informational purposes only and shall not be construed as legal advice. Submit a “Contact Us” request today.

About Carleton, Inc.:

Carleton is the country's leading provider of financial calculation software, loan origination compliance support, and document generation software. Based in South Bend, Indiana, Carleton possesses over 50 years of leadership in this rapidly-changing regulatory industry. Carleton guarantees accuracy in all their calculations and disclosures enabling their partners to fulfill compliance requirements today and into the future. To learn more about Carleton Lending Solutions, go to www.carletoninc.com or contact Joe McTigue, Client Engagement Executive at 800-433-0090 Ext. 239 or jmctigue@carletoninc.com.