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SANTA FE – Attempts to cut New Mexico’s annual small loan interest rate cap – from 175% to 36% – fell through last year’s legislature, but backers plan to reopen it during the 30-day session beginning this month to attempt.
Governor Michelle Lujan Grisham would have to put the issue on the meeting’s agenda for it to be considered, and a governor’s spokeswoman said talks had been held to reach a compromise before the Jan. 18 launch date.
However, several lawmakers said Tuesday that such an agreement had not been reached.
“I’m doing a head count 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 to lower the maximum annual rate cap on small loans, but by a smaller amount than some proponents prefer. Supporters say such measures are needed 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 various versions of the bill, said he was open to a possible gradual introduction of a lower interest rate cap.
However, he said he wanted to avoid repeating last year’s term in which the bill was changed in the House of Representatives – with a higher interest rate cap on loans of $ 1,100 or less – as he fears the proposal might make it impossible for some New Mexicans to do so need quick access to small amounts of money in order to obtain credit.
“I’m not interested in starting with 36% on the Senate side and then taking it to the House of Representatives and changing it into something I don’t think is sensible,” Soules told the Journal.
New Mexico has a troubled history of regulating the credit industry.
An earlier cap of 36% on lending rates was removed by the legislature in the 1980s amid high inflation, according to research by Santa Fe-based Think New Mexico, which pushed for the reintroduction of the lower rate cap.
After years of debate in the Roundhouse, the legislature passed a draft law in 2017 that set the current interest rate cap of 175% for small loans and banned so-called payday loans with terms of less than 120 days.
However, critics insisted that the 175% cap was too high for low-income New Mexicans, and also pointed out that the U.S. Forces introduced an annual percentage limit of 36% on loans received by active service members of the military .
Lujan Grisham spokeswoman Nora Meyers Sackett said the Democratic governor supported measures to protect New Mexicans from “predatory lending” and said the governor’s office was involved in talks aimed at finding consensus. Lt. Gov. Howie Morales played a prominent role in these discussions.
However, she also said the issue may not be put on the parliamentary term agenda if agreement is not reached.
“We hope to be able to include such laws in the 30 day (session), but that will depend in part on the parties involved finding a compromise or solution that will allow the bill to be pushed forward and through the legislature . “Successful – and that would also ensure that disagreements do not spread to the limited time we have, which will be required for other key elements,” said Sackett.
Critics of the push to lower the state’s current interest rate cap on small loans argued that such a policy change could put many businesses out of business and drive borrowers to use internet lenders, many of which are based in other countries and cannot be regulated.
During last year’s legislature, a banking industry lobbyist said the industry has an estimated 1,300 employees across New Mexico.
Kristina Fisher, associate director of Think New Mexico, however, said many of the lending companies are based out of the state, which means loan payments don’t boost the state’s economy.
“We’re really pulling dollars out of the state,” she said during a meeting Tuesday with the journal’s editors and reporters.
She and other supporters also said that New Mexico credit unions are ready to provide lower-rate loans to citizens in need of quick money.
According to the New Mexico Center on Law and Poverty, approximately 60% of New Mexico small loans are located within 10 miles of tribal land, where many residents live below the state poverty line.