NM HB 132 Signing and Comment Letter
On Tuesday March 1, New Mexico Governor Michelle Lujan Grisham (D) signed HB 132/Chapter 23 into law. Effective January 1, 2023, this new law creates a 36 percent all-in Annual Percentage Rate (APR) rate cap. Once it takes effect, New Mexico will join Connecticut, Illinois, and South Dakota as the only states with an all-in rate cap. The 46 other states and the District of Columbia follow the federal Truth in Lending Act’s standard for calculating APR.
On March 3, AFSA sent a letter to the governor asking for technical amendments and a meeting to discuss the disastrous effects the new law will have on the availability of safe and affordable consumer credit in New Mexico. The law’s definition of APR will create a New Mexico-only calculation, which includes fees that are unrelated to the extension of credit but concurrent with the credit transaction and post-origination fees that cannot be predicted or calculated in advance.
The law will effectively deny a wide swath of New Mexicans access to credit. Based on consumer data, AFSA predicts the law will prevent 428,000 to 548,000 New Mexico consumers with non-prime credit histories, or about 36-46% of New Mexican adults, from the ability to borrow money when they need it most. It will also force New Mexicans of all economic tiers to borrow higher loan amounts than they need, effectively raising the price of what credit is still available statewide. Contrary to claims made during the legislative process, banks and credit unions simply are unable to balance their business models with the provision of safe and affordable credit for all borrowers, especially those who fall in the non-prime tier.
During the legislative process AFSA and its member companies testified in opposition of the bill in multiple committee and floor hearings. AFSA also sent a letter to the House Judiciary and Consumer & Public Affairs Committees. These letters, along with AFSA’s other comment letters, can be found on the advocacy page of AFSA’s website. AFSA also undertook an extensive public relations effort to educate policymakers and consumers about the harm rate caps will bring to New Mexicans.
March 9th, 2022 by Dan Bucherer