SANTA FE — A plan to lower New Mexico’s annual interest rate cap on storefront loans is headed to the full House after surviving a committee hearing during which critics claimed the bill was getting preferential treatment from top-ranking Democrats.
Before the House Judiciary Committee voted 7-5 to approve the bill, skeptics pointed out Gov. Michelle Lujan Grisham has not added the measure to the agenda of this year’s 30-day legislative session.
A Lujan Grisham spokeswoman said such a step was not necessary. The bill initially included a $180,000 appropriation for financial literacy programs, but that proposed spending was removed during a previous committee hearing.
Meanwhile, opponents also questioned the appointment of Rep. Deborah Armstrong, D-Albuquerque, to the panel on Wednesday.
Armstrong, who was previously not appointed to any standing committees as she dealt with family health issues, joined six other Democratic lawmakers in voting for the bill.
“I was unavailable earlier in the session due to family responsibilities but as those responsibilities lighten and allow, I am participating as much as I can in meetings and continuing to advocate for my constituents,” Armstrong said in a statement.
Four House Republicans cast “no” votes, as did Rep. Eliseo Alcon, D-Milan, who expressed concerns about the legislation’s trajectory.
“I’m not happy with the way the legislation was introduced and brought forward,” Alcon said during Wednesday’s hearing.
However, backers defended the process and said the measure would keep low-income New Mexicans from getting stuck in “debt traps.”
Top Navajo Nation officials recently sent lawmakers a letter in support of the bill and Austin Weahkee, the political director for New Mexico Native Vote, said storefronts lenders are especially prevalent in areas with high Native American populations.
“I am exactly who is targeted with a 175% loan that I couldn’t afford to pay back,” Weahkee testified during the committee hearing.
This year’s measure, House Bill 132, comes after a similar proposal stalled during last year’s legislative session due to a deadlock between the House and Senate.
It would lower the annual interest rate cap — from 175% to 36% — for those who take out small loans. That is the same cap the U.S. armed forces implemented for loans obtained by active-duty military members.
Critics of the legislation have argued that lowering the state’s interest rate cap for storefront loans could put companies out of business and leave their employees out of work.
They also claimed such a policy shift would push borrowers to use internet lenders, many of which are based in other countries and cannot be regulated.
“I think we have to be very careful that we don’t hurt a lot of people that we’re trying to help,” said House Minority Leader James Townsend, R-Artesia.
However, Juan Fernandez Ceballos of the New Mexico Credit Union Association said credit unions stand ready to provide low-interest loans to state residents who need quick cash.
He also said the legislation, if enacted, would not “extinguish” storefront lenders, though he acknowledged they could see smaller profits.
The current 175% small loan interest rate cap was enacted under a 2017 law that also banned so-called payday loans with terms of less than 120 days.
But backers have said the current cap is still too high, while citing studies showing that more than 20% of residents had taken out such loans in roughly half of New Mexico counties.
One Santa Fe resident who identified herself as Patricia testified during Wednesday’s hearing she took out $6,000 in storefront loans and eventually faced $34,000 in repayment costs.
“I thought that taking out this loan would solve my problems, but it only made them worse,” she said.
