2023 New Mexico Statutes › Chapter 56 - Commercial Instruments and Transactions › Article 8 - Money, Interest and Usury › Section 56-8-9 - Excessive charges prohibited; applicability of maximum rates; definition.

A. Unless otherwise provided by law, no person, corporation or association, directly or indirectly, shall take, reserve, receive or charge any interest, discount or other advantage for the loan of money or credit or the forbearance or postponement of the right to receive money or credit except at the rates permitted in Sections 56-8-1 through 56-8-21 NMSA 1978.
B. No provision of law prescribing maximum rates of interest that may be charged in any transaction shall apply to a transaction in which a corporation, limited liability corporation or other business entity is a debtor, regardless of the purpose for which the corporation was formed and regardless of the fact that an individual is codebtor, endorser, guarantor, surety or accommodation party. No corporation or its codebtor, endorser, guarantor, surety or accommodation party shall have a cause of action or affirmatively plead, counterclaim, set off or set up the defense of usury in any action to recover damages or enforce a remedy on any obligation executed by the corporation, and no civil or criminal penalty that would otherwise be applicable except as provided in Sections 30-43-1 through 30-43-5 NMSA 1978 shall apply on any obligation executed by the corporation.
C. A lender may, in the case of business or commercial loans for business or commercial purposes in the amount of five hundred thousand dollars ($500,000) or more, take, receive, reserve or charge on any loan or discount made, or upon any note, bill of exchange or other evidence of debt, interest at a rate agreed to by the parties.
D. In addition to the maximum interest or discount that a lender is permitted to charge by law, the lender may charge, take, reserve or receive a premium or points in an amount up to but not exceeding three percent of the face amount of the loan on interim construction loans. The lender may charge and require the borrower to pay the premium upon execution of the loan agreement, whether the proceeds are delivered to the borrower immediately or whether there are to be obligatory or permissive future advances. The lender shall not be required to refund this charge in the event of prepayment of the obligation. For the purposes of this section, "interim construction loan" means a loan secured by a first mortgage and used by the borrower primarily for financing the construction of buildings, structures or improvements on or to the real property on which the first mortgage has been taken.
E. A lender may charge, take, reserve or receive points or a premium on any loan secured by real property; provided the points or premium together with the interest or discount charged, taken, reserved or received do not exceed the maximum interest or discount permitted by law. The lender shall not be required to refund this charge in the event of prepayment even if the prepayment would result in a higher charge to the borrower than permitted by law.
F. A loan in an amount equal to five thousand dollars ($5,000) or less shall be made only pursuant to the New Mexico Bank Installment Loan Act of 1959 [58-7-1 to 58-7-3, 58-7-5 to 58-7-9 NMSA 1978] or the New Mexico Small Loan Act of 1955 [Chapter 58, Article 15 NMSA 1978].
History:
1953 Comp., § 50-6-15, enacted by Laws 1957, ch. 209, § 1; 1977, ch. 293, § 4; 1980, ch. 39, § 6; 2017, ch. 110, § 1.
ANNOTATIONS
Cross references.
— For rates and charges on bank installment loans,
see
58-7-1 to 58-7-9 NMSA 1978.
The 2017 amendment,
effective January 1, 2018, provided that no provision of law prescribing maximum rates of interest that may be charged in any transaction shall apply to transactions in which a limited liability corporation or other business entity is a debtor, removed a reference to a repealed provision of law, and provided that loans in the amount of five thousand dollars ($5,000) or less shall be made only pursuant to the New Mexico Bank Installment Loan Act of 1959 or the New Mexico Small Loan Act of 1955; in Subsection B, after "corporation", added "limited liability corporation or other business entity"; in Subsection C, after "agreed to by the parties", deleted "even if the rate exceeds the rate set forth in Section 56-8-11 NMSA 1978"; and added Subsection F.
Applicability.
— Laws 2017, ch. 110, § 26 provided that the provisions of Laws 2017, ch. 110 shall apply to loans subject to the New Mexico Small Loan Act of 1955 and the New Mexico Bank Installment Loan Act of 1959 executed on or after January 1, 2018.
What constitutes forbearance.
— All the terms of Subsection A denote consensual agreements between the parties, indicating that a withholding or detention by the borrower not consented to by the lender is not within the article's purview. The mere fact that the parties have agreed to the rate to be paid after the debt is due does not make an arrangement a forbearance.
Smith Mach. Co. v. Jenkins
, 654 F.2d 693 (10th Cir. 1981).
Applicability of prohibition in Subsection B.
— Subsection B, prohibiting a corporation from bringing a usury action, has no applicability to an action involving a violation of 56-8-7 NMSA 1978, limiting commission rates on procuring loans.
Diane, Inc. v. Kapnison
, 1983-NMSC-056, 100 N.M. 143, 667 P.2d 450.
Obligations assumed in addition to maximum interest not usurious.
— Transaction requiring borrower to assume additional obligations of third party in order to get an extension on his loan is not usurious where there is a close business relationship between borrower and third party, and reason for the borrower to assume the obligations, as well as an absence of intent to exact a usurious return.
McCullough v. Snow
, 1967-NMSC-247, 78 N.M. 455, 432 P.2d 811.
Party asserting usury has burden of proof absent indication thereof on face.
— When the notes sued upon show no indication of usury on their face, the burden of proving usury is on the party asserting it.
McCullough v. Snow
, 1967-NMSC-247, 78 N.M. 455, 432 P.2d 811.
Applies to insurance premium financing arrangements.
— There is a limitation on the finance charge which is imposed for financing insurance premiums when the insurance is not written in connection with loans or financing. The premiums financing arrangement is a loan, as such it is subject to usury laws. 1971 Op. Att'y Gen. No. 71-52.
Lender may charge up to three points for interim construction.
— A lender, making a home loan for purposes of interim construction financing under the Residential Home Loan Act (56-8-22 to 56-8-30 NMSA 1978), may charge "points" not to exceed three percent of the face amount of the loan in addition to any amounts allowed as interest under 56-8-25 and 56-8-26 NMSA 1978 (since repealed). 1980 Op. Att'y Gen. No. 80-14 (rendered under prior law).
Service charge in addition to legal interest allowed.
— A person or corporation may charge a reasonable service charge for servicing a loan of money under this section in addition to the specified interest rates contained in former 56-8-11 NMSA 1978 as long as such is a bona fide cost incident to processing such loans and is not a subterfuge to exact a higher interest rate than permitted by law. 1965 Op. Att'y Gen. No. 65-09.
The vast weight of authority refuses to apply usury laws to time-sale transactions.
— The owner may sell property at whatever price and on whatever terms he may determine. Accordingly, he may sell it at a stated "cash price," or at stated "time price," and the fact that the difference exceeds the rate of interest permitted by the usury laws is immaterial. Obviously, the time price differential must take account of factors not present in making a loan to a prime rate borrower - heavier handling charges, heavier collection charges and so forth. 1958 Op. Att'y Gen. No. 58-184.
This section is equally inapplicable to revolving credit plans.
1958 Op. Att'y Gen. No. 58-184.
Am. Jur. 2d, A.L.R. and C.J.S. references. —
45 Am. Jur. 2d Interest and Usury §§ 166 to 237.
Taking or charging interest in advance as usury, 57 A.L.R.2d 630.
Usury as affected by repayment of, or borrower's option to repay, loan before maturity, 75 A.L.R.2d 1265.
What is "compound interest" within meaning of statutes prohibiting the charging of such interest, 10 A.L.R.3d 421.
Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.
Leaving part of loan on deposit with lender as usury, 92 A.L.R.3d 769.
Enforceability of provision in loan commitment agreement authorizing lender to charge standby fee, commitment fee or similar deposit, 93 A.L.R.3d 1156.
Application of usury laws to transactions characterized as "leases," 94 A.L.R.3d 640.
Validity and construction of provision of mortgage or other real-estate financing contract prohibiting prepayment for a fixed period of time, 81 A.L.R.4th 423.
Construction and application of Consumer Credit Protection Act provisions (18 USCS §§ 891-894) prohibiting extortionate credit transactions, 106 A.L.R. Fed. 33.
91 C.J.S. Usury § 1.