Master FIR (1988)

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F I S C A L I M P A C T R E P O R T

SPONSOR:	Watchman		DATE TYPED:	02/18/99		HB	417
SHORT TITLE:		Maximum Interest Rate				SB
					ANALYST:		Eaton

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY99

FY2000

$ (100.0)

Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

Regulation and Licensing Department

SUMMARY

Synopsis of Bill

This bill would amend chapter 56, article 8 of NMSA 1978 by setting a maximum interest rate of 15% on loans of $500 or less.

This proposed amendment would be consistent with existing sections of this article:

15% maximum interest in the absence of a written contract fixing a different rate (56-8-3);

15% maximum interest on monetary judgments and decrees (56-8-4);
15% maximum interest on open accounts (56-8-5).

FISCAL IMPLICATIONS

The Regulation and Licensing Department believes that this proposed legislation will result in fewer small loan licensees. Annual revenues to the Financial Institutions Division is estimated to fall $100,000.

ADMINISTRATIVE IMPLICATIONS

Increased loan company complaints to the Financial Institutions Division and the Office of the Attorney General.

OTHER SUBSTANTIVE ISSUES

The Regulation and Licensing Department claims this proposed legislation would force consumers to seek small loans from out-of-state and/or unregulated sources. This claim is speculative.

Consumer demand for small loans is strong in New Mexico. One may argue that unregulated interest rates permits the entry of otherwise non-competitive loan companies into the market.

A likely outcome of this legislation would be that the less competitive loan companies (companies with high operating costs) would close, leaving the more competitive loan companies to absorb the consumer demand for small loans.

This legislation would benefit low income New Mexicans the most.

JBE/gm