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Senate approves bill lowering NM loan interest rate cap

Sen. Bill Soules, D-Las Cruces, answers questions during a Senate floor session Tuesday about his bill to lower the annual interest rate cap on New Mexico small loans. The legislation, Senate Bill 66, passed the Senate via a 25-14 vote. (Eddie Moore/Journal)

SANTA FE — A renewed attempt to lower New Mexico’s small-loan interest rate cap — to 36% from 175% — is headed to the state House after being approved by the Senate on Tuesday.

The Senate voted 25-14 to pass the interest rate cap, Senate Bill 66, after nearly two hours of pointed debate.

Backers of the measure said it would protect vulnerable New Mexicans while also bolstering the state’s economy by keeping residents out of debt cycles.

“When money moves, the economy improves,” said Sen. Bill Soules, D-Las Cruces, the bill’s lead sponsor.

And Sen. Katy Duhigg, D-Albuquerque, a co-sponsor of the legislation, compared allowing triple-digit loan interest rates to “giving a starving person poisoned food.”

But critics of lowering the maximum annual percentage rate cap for small loans argued that such a policy shift could put many companies out of business and push borrowers to use internet lenders, many of which are based in other countries and cannot be regulated.

“You don’t understand how the world really works,” Sen. George Muñoz, D-Gallup, said during Tuesday’s debate, predicting the bill would make it more difficult for cash-strapped New Mexicans to access loans.

The vote largely broke down along party lines, although Muñoz joined with most Senate Republicans in voting against the legislation. Sen. Gregg Schmedes, R-Tijeras, was the only GOP senator to cast a “yes” vote.

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.

Meanwhile, this year’s debate at the Roundhouse comes just four years after the Legislature approved a law that established the current 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.

Critics of this year’s proposal say that law is working as intended.

“I have real concerns we’re actually going to be hurting the people we’re trying to help if we pass the bill as it’s written,” said Sen. Steven Neville, R-Aztec.

But the enactment of the 175% cap has not halted debate on the issue, with critics arguing the cap is too high for low-income New Mexicans and pointing out that the U.S. armed forces have implemented a 36% annual percentage rate limit for loans obtained by active-duty military members.


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