Bill targeting ‘predatory’ loans gains momentum

Democratic senses Katy Duhigg of Albuquerque and William Soules of Las Cruces support a bill that would lower the cap on interest rates for small loans to 36% from a current maximum of 175%. (Eddie Moore/Albuquerque Journal)

Copyright © 2022 Albuquerque Journal

SANTA FE — Legislation that would dramatically lower New Mexico’s interest rate cap for storefront lenders could move quickly through the Senate after winning bipartisan support in a late House vote — according to reports. revolutionary supporters, the bill is closer than ever to its passage.

In an attempt to crack down on what some describe as “predatory” loans, the proposal would lower the annual cap on interest rates on small loans to 36%, bringing the limit in line with what federal law allows for military members in active service. . The state now allows an interest rate of 175% per annum.

A similar measure to lower the cap died last year amid a standoff between the House and Senate over where to set the maximum rate.

But it was the House, not the Senate, that balked at approving a rate as low as 36% for all small loans during the 2021 debate.

In a reversal this year, the House voted Monday night 51 to 18 in favor of capping the interest rate at 36%. The bill, House Bill 132, was amended to also allow a one-time 5% fee – similar to an origination fee – for loans of $500 or less.

Democratic senses Katy Duhigg of Albuquerque and William Soules of Las Cruces — longtime supporters of the legislation — said they support the amended version of the bill.

“I think the bill that passed the House strikes the right balance to ensure that we end predatory lending in New Mexico without restricting access to funds that many in our state depend on,” Duhigg said. the newspaper.

In an interview, Soules said the legislation remains similar to that passed by his chamber last year, increasing the likelihood that it will finally make it to the governor’s office this year.

“It helps New Mexicans and keeps money in our communities,” Soules said.

He added: “It’s more advanced than we’ve done before.”

long debate

The House vote came around 11:30 p.m. Monday after a three-hour debate on the store lending industry.

Eight Republicans joined almost all Democrats in voting in favor of the bill, in addition to the support of Representative Phelps Anderson, a Roswell independent and co-sponsor of the bill. Two Democrats voted “no”.

The bipartisan support came after Rep. Micaela Lara Cadena, D-Mesilla, won approval of amendments to allow an additional 5% charge for loans of $500 or less and to impose reporting requirements on co-ops to credit if they offer small loans similar to those available. at showcase lenders.

Rep. Susan Herrera, an Embudo Democrat who introduced the bill to the House on Monday, said the proposal would help New Mexicans who are exploited by out-of-state corporations.

“These stories are poignant,” she said.

Critics of the legislation said it could put businesses out of business, leave their employees out of work and push borrowers to seek out unregulated lenders.

House Minority Whip Rod Montoya, a Republican from Farmington who opposed the bill, said it would have a host of unintended consequences, like causing people in need to pawn their property for money. silver.

“The way I see it,” Montoya said, “is that we don’t trust certain people. We think some people are too unsophisticated, too incapable of making their own decisions for their own families.

But supporters are optimistic the bill will get the necessary votes before the end of the session on Feb. 17 to end up on Gov. Michelle Lujan Grisham’s desk.

“The big bipartisan vote in the House is a watershed moment in the fight to end predatory lending in New Mexico,” Kristina Fisher, associate director of the nonpartisan group Think New Mexico, said in a written statement.

The 5% fee proposal drawn up by the House “is a reasonable compromise”, she said, “and we will not oppose it”.

‘Follow the rules’

Even before lawmakers got into debate on the bill on Monday, it was at the center of a procedural skirmish.

Rep. Eliseo Alcon, D-Milan, introduced a motion to send the bill to the Standing Orders and Order of Business Committee, the panel that determines whether a proposal falls within what lawmakers can adopt during a 30-day session.

The bill, he pointed out, was not specifically authorized by the governor and had been amended to remove his appropriation, a change that warranted sending it back to committee for further review. Tax and expense invoices are automatically authorized in 30-day sessions.

The legislation initially provided an appropriation of $180,000 for financial literacy programs, but the proposed spending was deleted at a previous committee hearing.

“We have to follow the rules whether we like the bill or not,” Alcon said.

But after intense debate over whether the bill should be sent to committee, Alcon abruptly withdrew its motion to send it to committee and no vote was taken.

Later Monday, Lujan Grisham formally authorized lawmakers to pass the bill.

National attention

New Mexico has long debated how to regulate 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 Think New Mexico, which pushed for the cap to be reinstated lower rate.

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.

The Roundhouse debate has caught the attention of many national businesses who have hired lobbyists to represent their interests.

Small loan companies made $140,000 in campaign contributions to New Mexico candidates and political committees during the 2020 election cycle, according to a recent report by New Mexico Ethics Watch.

Larry A. Schroeder