ALBUQUERQUE, N.M. — It took years for New Mexico lawmakers to finally reach consensus on overhauling the storefront lending marketplace by capping interest rates. But state regulators have yet to finalize the rules needed under the new law to bolster consumer protections and enforcement.
A panel of lawmakers heard from consumer advocates this week who are pushing for the regulations to be finished and for loopholes to be closed.
An interim legislative committee passed a resolution Monday asking regulators to report on how they’re enforcing the law. That report is due later this year.
The Regulation and Licensing Department’s Financial Institutions Division has received four complaints against licensed small-loan lenders since January, when the law took effect. The agency didn’t release details about those cases but said each complaint is thoroughly investigated.
Lindsay Cutler, an attorney with the New Mexico Center on Law and Poverty, said without more information on enforcement, consumer advocates don’t have a clear picture of how the small loan industry is doing business under the new law.
“All New Mexicans deserve access to fair and transparent loans under reasonable terms, but generations of low-income families and Native American communities have been aggressively targeted by unscrupulous store front lenders,” she said in a statement.
Financial Institutions Division spokeswoman Bernice Geiger said the agency is in the final stages of reviewing comments collected during public hearings held earlier this year in Santa Fe and Gallup as it works to finalize the regulations.
There are now about 600 licensed small-loan outlets in New Mexico, according to the agency.
The local store-front lending industry has defended high interest rates as a way to ensure borrowing options for low-income residents in New Mexico, where high poverty and unemployment rates are chronic.
Legislation approved in 2017 by the Democrat-led Legislature and Republican Gov. Susana Martinez included a variety of consumer protections to discourage predatory lending practices. Limits on fees and interest for loans are combined with requirements giving borrowers at least 120 days to repay in at least four installments — effectively eliminating payday loans tied to the next paycheck.
The anti-poverty group Prosperity Works is concerned about renewals of loans made before the changes were adopted.
Michael Barrio, the group’s director of advocacy, said some contracts that have been reviewed include provisions that a failure to pay in full could trigger numerous automatic renewals without expressed consent and that lowering the interest rate to the new cap requires borrowers to refinance or seek more principal from lenders.
“We know what it actually comes down to is these kinds of loans really serve to just keep people in a cycle of debt rather than liberating them from it,” Barrio said.
There are efforts underway to bring to New Mexico more small-loan alternatives. A number of local governments already are offering loans with moderate interest rates for public employees with little or no credit history. The loans are repaid through payroll deductions.
The issue is that program is only available to governments and companies with 200 workers or more. Barrio said that cuts out a significant number of people who can participate given the number of small businesses in New Mexico.