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Loan interest rate cap bill falls short of finish line

Sen. Bill Soules, D-Las Cruces, answers questions during a March 2 floor session about his bill to lower the annual interest rate cap on New Mexico small loans. He said Friday the bill will not win final approval due to disagreements between the House and Senate. (Eddie Moore/Journal)

SANTA FE — A bill to lower New Mexico’s small-loan interest rate cap — to 36% from 175% — will not pass both legislative chambers before the 60-day session ends Saturday, its sponsor said late Friday.

Sen. Bill Soules, D-Las Cruces, said the House and Senate were essentially at a deadlock after passing different versions of the loan bill.

While both legislative chambers appointed members to participate in a conference committee to try to hammer out a compromise, Soules said an actual conference committee meeting would not happen because House members did want to negotiate.

“It’s essentially going to die stuck between the two chambers,” Soules told the Journal.

He said debate on the issue would continue and expressed optimism Gov. Michelle Lujan Grisham might add it to the agenda of next year’s 30-day session.

The initial version of the bill, Senate Bill 66, limited the annual interest rates for storefront loans to 36%. It passed the Senate this month on a 25-14 vote.

But the proposal was amended in the House amid concerns the bill could make it impossible for some New Mexicans who need quick access to small amounts of cash to get loans.

The House ultimately passed a revised version of the bill that featured two caps — one of 99% for loans of $1,100 or less and one of 36% for larger loans.

“We’re disappointed — we thought we had struck a good compromise,” said Rep. Susan Herrera, D-Embudo, another bill sponsor.

While they disagreed on the details, both Herrera and Soules also acknowledged the role played by lending industry lobbyists in stymieing the original legislation.

Backers of the initial measure had argued it would protect vulnerable New Mexicans while also bolstering the state’s economy by keeping residents out of “debt traps.”

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.

This year’s debate at the Roundhouse played out 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 was touted as a compromise after years of debate at the Capitol over payday loans.

But critics have insisted the 175% cap is too high for low-income New Mexicans, while also pointing out the U.S. armed forces have implemented a 36% annual percentage rate limit for loans obtained by active-duty military members.

“We’ve got to do a better job for New Mexicans,” Herrera said.

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