## Facts

- Subprime lenders operated storefronts in New Mexico offering unsecured “signature loans” of $50 to $300, payable biweekly over twelve months.
- The loans carried APRs of roughly 1,147.14% to 1,500%.
- Examples included a $100 loan with a $999.71 finance charge and a $200 loan with about a $2,160.04 finance charge.
- The loans were marketed primarily to less-educated, financially unsophisticated, and often unbanked or underbanked consumers.
- Borrowers testified they did not understand interest rates or the long-term repayment consequences.
- The lending process was rushed, and disclosures allegedly obscured the loans’ true costs, including by emphasizing periodic payment amounts and not providing clear amortization information.
- Loan terms were non-negotiable and drafted solely by the lenders.
- The Attorney General sued under the Unfair Practices Act (UPA), alleging the products were procedurally and substantively unconscionable.
- After trial, the district court found procedural unconscionability and entered injunctive relief, but refused to deem the interest rates substantively unconscionable and denied restitution on that theory, reasoning rate limits were for the legislature absent a usury cap.
- Both sides appealed, and the issues reached the Supreme Court of New Mexico via certification.

## Issues

1. Whether the lenders’ marketing and origination practices made the signature loans procedurally unconscionable under the UPA and common law.
2. Whether the loans’ APRs (approximately 1,147% to 1,500%) were substantively unconscionable as a “gross disparity” between value received and price paid under the UPA.
3. Whether courts may declare price terms unconscionable under the UPA even when no statutory usury cap exists.

## Decision

- The Supreme Court of New Mexico affirmed the finding of procedural unconscionability and the related injunctive relief.
- The Court reversed the district court’s conclusion that it lacked authority to evaluate interest rates for substantive unconscionability absent a statutory cap.
- The Court held the loans’ extreme interest terms were substantively unconscionable and violated the UPA.
- The Court remanded for further proceedings, including consideration of restitutionary remedies premised on substantive unconscionability.

## Legal Principles

- The UPA authorizes courts to determine whether a contract results in a gross disparity between the value received and the price paid, including when the alleged unfairness concerns price.
- Substantive unconscionability may be found where price terms are grossly excessive and oppressive in relation to the transaction’s value.
- Procedural unconscionability may be shown by marked bargaining-power imbalance, adhesion terms, rushed or confusing presentations, and practices that obscure material costs for vulnerable consumers.
- Legislative silence on interest-rate caps does not preclude judicial scrutiny of lending terms under the UPA’s unconscionability standard.
- Evidence of both procedural and substantive unconscionability can support UPA remedies, including injunctive relief and restitution.

## Conclusion

The court held that New Mexico’s UPA permits judicial review of price terms for unconscionability and concluded that extremely high-interest signature loans, marketed and originated through unfair procedures to vulnerable borrowers, were unlawfully unconscionable, warranting remand for restitution and other relief.


State ex rel. King v. B&B Inv. Grp., Inc., 2014-NMSC-024, 329 P.3d 658 (N.M. 2014)