Efforts resume to cap interest rates on small loans

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New Mexico lawmakers could reignite debate in the next 30-day legislative session on whether to change the interest rate cap on loans issued by storefront lenders, like this securities lending institution. in northeast Albuquerque. The annual interest rate cap for small loans was set at 175% in 2017 (Robert Browman / Albuquerque Journal)

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SANTA FE – Attempts to lower New Mexico’s annual interest rate cap on small loans – from 175% to 36% – failed in last year’s legislative session, but lenders plan to try again in the 30-day session starting this month.

Gov. Michelle Lujan Grisham is expected to add the issue to the session’s agenda for consideration, and a spokeswoman for the governor said there have been talks to try to reach a compromise before the start date of January 18. .

However, several lawmakers said on Tuesday that no such deal had been reached.

“I’m counting now to see if I have the votes,” said Rep. Susan Herrera, D-Embudo. “It’s still in the air.”

One area of ​​compromise could be lowering the cap on the maximum annual percentage rate for small loans, but by an amount lower than some advocates prefer. Proponents say such action is necessary to keep New Mexicans out of “debt traps.”

Senator Bill Soules, D-Las Cruces, who sponsored last year’s bill that died after the House and Senate passed different versions of the legislation, said he was open to possible gradual implementation of a lower interest rate cap.

But he said he was keen to avoid a repeat of last year’s legislative session, in which the bill was amended in the House – with a higher rate cap on loans of 1,100. $ or less – amid fears the proposal may make it impossible for some New Mexicans who need quick access to small amounts of money to get loans.

“I’m not interested in starting on the 36% Senate side and then having it go to the House and change it into something I don’t think is reasonable,” Soules told the Journal.

New Mexico has had a checkered 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 a study by Santa Fe-based Think New Mexico, which called for the reinstatement of the lower rate cap.

After years of debate in the Roundhouse, lawmakers passed a 2017 bill that set the current cap on the small loan interest rate at 175% and outlawed payday loans with terms of less than 120 days.

But critics have insisted that the 175% cap is too high for low-income New Mexicans, while noting that the US military has put in place a 36% annual percentage rate limit for those with low incomes. loans obtained by servicemen on active duty.

Lujan Grisham spokeswoman Nora Meyers Sackett said the Democratic governor supported measures taken to protect New Mexicans from “predatory loans” and said the governor’s office had participated in conversations aimed at finding a consensus. Lieutenant Governor Howie Morales played a leading role in these discussions.

But she also said that if no agreement is reached, the issue may not be added to the legislative session’s agenda.

“We hope to be able to include such legislation within 30 days (session), but that will depend in part on the ability of the parties involved to identify a compromise or solution that will allow the bill to move forward and through. the legislature – and that would also ensure that disagreements on this do not affect the limited time we have, which will be needed for other key elements, ”Sackett said.

Critics of the push to lower the state’s current interest rate cap on small loans have argued that such a policy change could bankrupt many businesses and push borrowers to use internet lenders. , many of which are based in other countries and cannot be regulated.

During last year’s legislative session, a credit industry lobbyist said the industry employs about 1,300 people across New Mexico.

But Kristina Fisher, associate director of Think New Mexico, said many operating loan companies are based out of state, which means loan repayments do not bolster the state’s economy.

“We are really taking money out of the state,” she said in a meeting Tuesday with the Journal’s editors and reporters.

She and other supporters also said New Mexico credit unions stand ready to provide loans at lower interest rates to residents of the state who need cash quickly.

According to the New Mexico Center on Law and Poverty, about 60 percent of New Mexico’s small loan stores are within 10 miles of tribal lands, where many residents live below the federal poverty line.


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