Copyright © 2021 Albuquerque Journal
SANTA FE – A hotly debated proposal to lower New Mexico’s small loan interest rate cap moved one step closer to final approval Friday after a House committee meeting in which an amendment was added – then removed – before the bill was advanced.
The political drama came after first-term Rep. Linda Serrato, D-Santa Fe, moved to strike an amendment she had previously supported.
She later said that debate on the bill made her think twice about the amendment after it had been approved, adding her decision was not prompted by any political pressure.
“Keeping (the bill) as it is protects my district and my community,” Serrato told the Journal, saying her district on the south side of Santa Fe has many storefront lending companies.
The short-lived amendment to the bill, Senate Bill 66, would have changed the annual interest rate cap in the legislation from 36% to 125% – it’s currently set at 175% – while adding new consumer protection provisions like a ban on late fees for tardy loan repayments.
Backers of the bill say the changes were aimed at gutting the legislation, which represents state lawmakers’ latest effort to curb predatory lending practices.
“This is an amendment to kill this bill – that’s what it’s about,” said Rep. Susan Herrera, D-Embudo.
But supporters of the amendment disputed the claim, while arguing the proposed 36% interest rate cap could put some lending companies out of business and push borrowers to use internet lenders, many of which are based in other countries and cannot be regulated.
“I don’t think anyone wants to have the predatory lending,” said Rep. Kelly Fajardo, R-Los Lunas.
“This would be the first time we’ve had real consumer protections,” she later added.
The amendments initially were approved by the House Commerce and Economic Development Committee on a 5-4 vote, with Serrato joining the panel’s four GOP members in support.
After Serrato’s subsequent motion to undo the changes was approved on a party-line vote, the bill passed the committee on a 6-4 vote with Democrats voting in favor and Republicans in opposition.
This year’s debate at the Roundhouse over storefront and installment loans is playing out just four years after the Legislature approved a law establishing the current 175% interest rate cap and banning 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 backers of this year’s bill, which passed the Senate last week, have argued the cap is too high for low-income New Mexicans who frequently get caught in “debt traps” due to high-interest loans that can get stacked one on top of another.
They also point out that the U.S. armed forces have implemented a 36% annual percentage rate limit for loans obtained by active-duty military members.
“High-interest loans don’t just hurt individuals, they hurt families and communities” said Sen. Bill Soules, D-Las Cruces, one of the bill’s sponsors.
This year’s measure is supported by Gov. Michelle Lujan Grisham and has won support from consumer advocacy groups, credit unions and the Navajo Nation.
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.
With the 60-day legislative session nearing its March 20 end date, the loan interest rate bill now goes to the House Judiciary Committee, its last assigned committee before reaching the full House.