Lawmakers Give Final Nod to Loan Interest Rate Bill

John Nye, owner of Money Now Installment Loans in El Prado, testifies against a bill to lower New Mexico’s annual interest rate cap on business loans during a Senate Judiciary Committee hearing Tuesday . The bill received final legislative approval on Wednesday and will now go to Gov. Michelle Lujan Grisham’s desk. (Eddie Moore/Diary)

SANTA FE — A bill that lowers New Mexico’s annual interest rate cap on business loans from 175% to 36% received final approval Wednesday in the state House of Representatives, marking the apparent end of a multi-year debate.

Final approval came after Rep. Susan Herrera, D-Embudo, urged the House to accept the Senate’s amendments to the bill.

The other chamber, she said, eliminated a provision to impose new reporting requirements on credit unions, a move she said made sense because the reports would yield no meaningful data.

Additionally, the legislation, House Bill 132, was revised to push back its effective date, from July to January 2023.

While critics argued that lowering the state’s APR cap on small loans would lead to job losses and could make it harder for New Mexicans to access credit, supporters said lenders are intentionally targeting residents. low-income states.

Specifically, 65% of current lenders in New Mexico are located within 15 miles of tribal land, according to the New Mexico Poverty and Law Center.

“Nobody should be allowed to charge triple-digit interest rates,” said Ona Porter of Prosperity Works, one of the groups that pushed for the change. “No one should have to choose between paying rent and making triple-digit loan payments that often keep them stuck endlessly.

Opponents of the bill countered that its enactment would force many of the estimated 400,000 New Mexico consumers who use alternative financial services to seek other sources of cash.

“Unfortunately, today marks a shift in the wrong direction for New Mexico consumers, particularly the many New Mexico consumers who use alternative financial services to make ends meet,” said Andrew Duke, CEO of Online Lenders Alliance, based in Virginia.

A similar proposal fell short during last year’s 60-day legislative session amid a deadlock between the House and Senate, but this year’s proposal passed both houses with bipartisan support.

It passed the House on a 51-18 vote and passed the Senate Tuesday night on a 19-8 vote.

Gov. Michelle Lujan Grisham signaled her support for the measure shortly after Wednesday’s House vote to adopt the bill’s changes. The Democratic governor has until March 9 to sign or veto the measure.

“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 action in my 2021 legislative priorities,” said Lujan Grisham. “I’m glad to see the Legislature reached a consensus on the measure and I applaud members for voting to protect New Mexico consumers.”

New Mexico has a long history of regulating the lending industry.

The Legislature abolished an earlier cap of 36% on loan interest rates in the 1980s amid high inflation, according to research by Santa Fe-based Think New Mexico, which has pushed for it to be lifted. reset the lower rate cap.

After years of debate in the Round House, lawmakers passed a 2017 bill that set the current small loan interest rate cap at 175% 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 often leaves New Mexicans trapped in “debt traps.”