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Requirements for payday lending industry in New Mexico

Although payday lending is a legal business in New Mexico, the State legislation imposes tough restrictions on this industry. The State authorities try to make everything possible in order to secure its citizens and help them to avoid financial difficulties. Payday loans are the most expensive type of credit and can lead people to a debt cycle, particularly those who can only resort on their paychecks. The legislators of New Mexico control and monitor the operations of local payday lending firms and eliminate any attempts of usury practices used by these lenders. Despite this fact payday lending companies are considered to be extremely expensive credit alternative for common borrowers. It is advised to apply for payday loans only if a customer isn’t able to take a loan anywhere else. It is allowed for lenders to establish annual percentage rates making up three-digit numbers for payday loans together with extra charges and fees. All the other State laws restrict lenders in earning huge profits at the borrowers’ expense.

Under the legislation of New Mexico payday loans can be given for a term which ranges from 14 to 31 days. The maximum loan sum shouldn’t be more than $2,500. In addition, this amount, containing all financial charges, is prohibited to exceed 25% of a borrower’s income per month.

Every payday loan amounting $100 shouldn’t be charged with the interest rate exceeding $15.50. A verification fee paid by a borrower is to make up $0.50 for a $100 loan. $16 is the maximum sum of extra charges a payday lender is allowed to set for a loan. Consequently, the annual percentage rate for a $100 loan given for 14 days equals 417.14% yearly.

In accordance with the State law it is prohibited to roll over or extend a loan. It means that a borrower is required to fully pay back the loan till the deadline. In case he doesn’t have enough money to do it, a term of repayment can be renewed by a lender under condition that a borrower will be charged with additional fees. This measure was adopted in order to keep customers away from never-ending indebtedness. If a borrower is still unable to repay a loan on the due date, a repayment plan providing that equal installments can be made during 130 days is given by a lender. If it happens, a payday firm isn’t allowed to charge a customer with extra financial fees.

The State legislation forbids implying any criminal suits against payday borrowers. So, lending companies are strictly prohibited to threat their customers with any prosecutions. Non-ability of repaying a loan isn’t a criminal violation in New Mexico. A person can face with serious difficulties just if he took a loan without intensions to pay it back. In this case he can be judged in court and even be imprisoned.

There are also some limits concerning collection charges which are aimed at protecting customers in New Mexico. Under the law, the collection for non-sufficient funds shouldn’t be more than $15. This limitation also relates to all other collection fees.

The Financial Institutions Division of New Mexico is the main body that regulates activities of all lending companies statewide. If a borrower has some complaints or questions, or is interested in getting details about a lender, fees, loans, licenses, etc, he is free to apply to this body.