SANTA FE — A bill that would lower New Mexico’s annual interest rate cap on store loans from 175% to 36% received final approval in the state House on Wednesday, marking the apparent end of a grueling multi-year debate.
The final approval came after Rep. Susan Herrera, D-Embudo, asked the House of Representatives to approve the Senate amendments.
The other chamber, she said, removed a provision to impose new reporting requirements on credit unions — a move she thought made sense because reporting would not provide meaningful data.
In addition, the legislation, House Bill 132, was revised to move its effective date from July to January 2023.
While critics have argued that lowering the state’s annual interest rate cap on small loans could lead to job losses and make it harder for New Mexicans to access credit, supporters said lenders are deliberately targeting low-income residents in the state.
According to the New Mexico Center on Law and Poverty, 65% of current New Mexico lenders are located within 15 miles of tribal areas.
“Nobody should be allowed to charge triple-digit interest rates,” said Ona Porter of Prosperity Works, one of the groups pushing for the change. “Nobody should have to choose between paying their rent and paying off a three-figure loan that often keeps them trapped indefinitely.
Opponents of the bill countered that passing it would force many of New Mexico’s estimated 400,000 consumers using alternative financial services to seek other sources of cash.
“Unfortunately, today marks a turning point in the wrong direction for New Mexico consumers, particularly for the many New Mexico consumers who are turning to alternative financial services to make ends meet,” said Andrew Duke, chief executive officer of Virginia resident Online Lenders Alliance.
A similar proposal fell through during last year’s 60-day legislative session amid deadlock between the House and Senate, but this year’s proposal passed both chambers of legislature with bipartisan support.
It passed the House of Representatives 51-18 and swept the Senate 19-8 late Tuesday.
Gov. Michelle Lujan Grisham signaled her support for the measure shortly after Wednesday’s vote in the House of Representatives to pass the legislative amendments. The Democratic governor has until March 9 to sign off on the measure or veto it.
“This legislation addresses an important issue affecting the most vulnerable New Mexicans in both rural and urban communities, which is why I have included such actions among my legislative priorities for 2021,” said Lujan Grisham. “I am pleased that the Legislature is reaching consensus on the measure, and I applaud members for voting to protect consumers in New Mexico.”
New Mexico has a long history of regulating the credit industry.
A previous 36% cap on lending rates was removed by the legislature in the 1980s in the face of high inflation, according to research by Santa Fe-based firm Think New Mexico, which has pushed for the reintroduction of the lower interest rate cap.
After years of debate in the Roundhouse, lawmakers passed legislation in 2017 that fixed the current 175% interest rate cap on small loans and banned so-called payday loans with terms of less than 120 days.
However, some lawmakers and advocacy groups have insisted that the 175% cap is too high and New Mexicans often get stuck in “debt traps.”