SANTA FE – A bill reducing New Mexico’s annual interest rate cap on storefront loans – from 175% to 36% – received final approval Wednesday at the State House, marking the apparent end of a murderous debate of several years.
Final approval came after Rep. Susan Herrera, D-Embudo, urged the House to accept Senate amendments to the bill.
The other chamber, she said, had removed a provision imposing new reporting requirements on credit unions – a move she said made sense because reporting would not provide meaningful data.
Additionally, the legislation, House Bill 132, has been revised to push back its effective date – from July to January 2023.
While critics have argued that lowering the state’s annual interest rate cap on small loans would lead to job losses and could make it harder for New Mexicans to access credit, lenders said the lenders were intentionally targeting low-income state residents.
Specifically, 65% of current lenders in New Mexico are located within 15 miles of tribal lands, according to the New Mexico Center on Law and Poverty.
“No one should be allowed to charge triple-digit interest rates,” said Ona Porter of Prosperity Works, one of the groups pushing for change. “No one should have to choose between paying their rent and making payments on a three-figure loan that often holds them back indefinitely.
Opponents of the bill countered that its enactment would force many of New Mexico’s roughly 400,000 consumers who use alternative financial services to seek other sources of money.
“Unfortunately, today marks a shift in the wrong direction for New Mexico consumers, especially the many New Mexico consumers who use alternative financial services to make ends meet,” said Andrew Duke, executive director. from the Virginia-based Alliance of Online Lenders.
A similar proposal fell through last year’s 60-day legislative session amid a deadlock between the House and Senate, but this year’s proposal passed both legislative houses with bipartisan support.
It passed the House on a 51-18 vote and cleared the Senate Tuesday night via a 19-8 vote.
Governor Michelle Lujan Grisham signaled her support for the measure shortly after Wednesday’s vote in the House to pass the bill’s changes. The Democratic governor has until March 9 to sign or veto the measure.
“This legislation addresses an important issue that affects the most vulnerable New Mexicans in rural and urban communities, which is why I have included such action in my legislative priorities for 2021,” said Lujan Grisham. “I am pleased to see the Legislature reach consensus on the measure and applaud the members for voting to protect New Mexico consumers.”
New Mexico has a long history of regulating the lending industry.
A previous 36% cap on loan interest rates was abolished by the Legislature in the 1980s amid high inflation, according to research by Santa Fe-based Think New Mexico, which has is pushing for the lower rate cap to be reinstated.
After years of Roundhouse debate, lawmakers passed a 2017 bill that established the current 175% interest rate cap on small loans and banned so-called payday loans with terms of less than 120 days.
But some lawmakers and advocacy groups have insisted the 175% cap is too high and frequently leaves New Mexicans stuck in “debt traps.”