New Mexicans will no longer be able to use “buy now, pay later” service Afterpay starting Jan. 1.
Last week, Afterpay emailed New Mexico customers informing them that due to “regulatory changes” in New Mexico, the company would no longer be doing business in the state.
“Due to a new state regulation effective January 1, 2023, Afterpay is unavailable to New Mexico residents,” read a statement provided to the Journal by an Afterpay spokesperson. “We hope to be able to offer our service to New Mexico customers in the near future.”
The regulation in question is House Bill 132, “Interest Rates for Certain Loans,” an amendment to the New Mexico Small Loan Act and New Mexico Bank Installment Act. The bill passed the New Mexico House and Senate last year and will take effect Jan. 1.
Rep. Daymon Ely, D-Corrales, one of five sponsors of House Bill 132, said the goal of the law was to limit predatory lending in the state and doesn’t prohibit “buy now, pay later” services.
“What it’s supposed to do is reduce the interest rates that people are supposed to charge,” Ely said. “It’s not supposed to eliminate it, it’s supposed to set a reasonable rate.”
Afterpay allows customers to pay for purchases in four equal installments, without interest. Customers can receive their purchases immediately, generally after making a down payment, and make the three remaining payments every two weeks. Although the installments are interest-free, late payments are fined.
The new law lowers the cap on small loan interest rates from 175% to 36%, and limits fees on late payments within 10 days to 5 cents on the dollar for the total installment price.
“People that are already in desperate financial situations, you don’t want lenders to be able to take advantage of them,” Ely said.
In the United States, Afterpay charges a maximum late fee of $8 per payment, with fees capped at 25% of the order amount. The customer’s account is frozen until the payment is made.
A September 2022 survey from the Consumer Financial Protection Bureau, which surveyed five different “buy now, pay later” companies, found that the industry has gone through rapid growth over the past few years. As a whole, the five surveyed companies – Affirm, Afterpay, Klarna, PayPal, and Zip – reported a 970% increase in the number of loans taken between 2019 and 2021. The five companies saw an increase in sales volume from $2 billion to $24.2 billion.
Like Afterpay, Klarna also doesn’t offer its services in the state of New Mexico due to unspecified local laws. A Klarna spokesperson was unable to provide information about how long Klarna has been unavailable in the state. Besides New Mexico, Klarna does not operate in Hawaii.
Ely said that the law is not intended to target “buy now, pay later” companies – or other loan providers for that matter.
“It’s not intended to run anybody out,” Ely said.
Editor’s Note: A previous version of this article incorrectly cited Afterpay’s U.S. late fee policy. It has since been updated.
