Editor’s note: This story was updated to correct the number of people employed by small loan companies in New Mexico. The error was based on testimony provided in a Senate Committee.
Copyright © 2021 Albuquerque Journal
SANTA FE – A renewed attempt to lower New Mexico’s small-loan interest rate cap – to 36% from 175% – cleared its first hurdle in a Senate committee Tuesday.
But the legislation, the latest chapter in a long-running debate at the Roundhouse over regulating storefront loans, faces a daunting road ahead as the 60-day session nears its halfway point.
About a dozen lobbyists and lenders testified against the measure during Tuesday’s meeting of the Senate Tax, Business and Corporation Committee, with many saying it would put small-loan stores out of business and leave fewer options for cash-strapped New Mexicans.
Sen. Bill Soules, D-Las Cruces, the lead sponsor of the measure, Senate Bill 66, said he would be willing to negotiate with opponents but suggested he would not make sweeping changes.
“The thing I won’t negotiate away is profits over people,” said Soules, who said the current law has left many New Mexicans in a debt spiral.
The bill ultimately passed the committee on a party-line 7-4 vote, with Democrats voting in favor and Republicans in opposition. It now advances to the Senate Judiciary Committee.
This year’s legislation has won support from consumer advocacy groups, credit unions and the Navajo Nation. Some religious leaders also back the bill, with the executive director of the New Mexico Conference of Catholic Bishops describing it as a “social justice” issue.
About 60% of New Mexico’s small-loan stores are within 10 miles of tribal land, where many residents live below the federal poverty line, according to the New Mexico Center on Law and Poverty.
Austin Weakhee, the political director for New Mexico Native Vote, addressed the issue, saying, “Now more than ever, our neighbors need access to capital and not recurring debt.”
But critics of lowering the maximum annual percentage rate cap for small loans argued that such a policy shift could put many workers out of business in an industry that employs an estimated 1,300 people across New Mexico. They also claimed it could push borrowers to use internet lenders, many of which are based in other countries and cannot be regulated.
“At some point, people will have to be responsible for their own actions,” Senate Minority Whip Craig Brandt, R-Rio Rancho, said during Tuesday’s debate.
Critics also pointed out that the Legislature approved a law just four years ago that established the 175% small loan interest rate cap and banned so-called payday loans with terms of less than 120 days.
The 2017 legislation, which was signed into law by then-Gov. Susana Martinez, was intended as a compromise after years of debate at the Capitol over payday loans.
But the enactment of the 175% cap has not halted debate on the issue, with skeptics arguing it is too high for low-income New Mexicans.
“I do think there’s a role for the government to step in” and set loan limits, said Senate Majority Leader Peter Wirth, D-Santa Fe.