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SANTA FE – A bill reducing New Mexico’s annual interest rate cap on storefront loans – from 175% to 36% – received final approval Wednesday in the state House, marking an apparent end to a multiyear debate.
The decisive vote came after Rep. Susan Herrera, D-Embudo, urged the House to agree to Senate amendments to the bill.
The other chamber, she said, had stripped out a provision to impose new reporting requirements on credit unions – a move she said made sense because the reporting wouldn’t yield meaningful data.
In addition, the legislation, House Bill 132, was revised to push back its effective date – from July to January 2023.
While critics argued that lowering the state’s annual interest rate cap on small loans would lead to job losses and could make it harder for New Mexicans to access credit, backers said lenders intentionally target low-income state residents.
Specifically, 65% of current lenders in New Mexico are located within 15 miles of tribal lands, according to the New Mexico Center on Law and Poverty.
“No one should be allowed to charge triple-digit interest rates,” said Ona Porter of Prosperity Works, one of the groups that pushed for the change. “No one should have to choose between paying their rent and making payments on a triple-digit loan that often keeps them trapped endlessly.”
Opponents of the bill countered that its enactment would force many of the estimated 400,000 New Mexico consumers who use alternative financial services to seek other sources for cash.
“Unfortunately, today marks a shift in the wrong direction for New Mexico consumers, particularly the many New Mexico consumers who use alternative financial services to make ends meet,” said Andrew Duke, the executive director of the Virginia-based Online Lenders Alliance.
A similar proposal fell short during last year’s 60-day legislative session amid gridlock between the House and Senate, but this year’s proposal passed both legislative chambers with bipartisan support.
It passed the House on a 51-18 vote and cleared the Senate late Tuesday via a 19-8 vote.
Gov. Michelle Lujan Grisham signaled her support shortly after Wednesday’s vote in the House to adopt the bill changes. The Democratic governor has until March 9 to sign or veto the measure.
“This legislation addresses an important issue that affects the most vulnerable New Mexicans in both rural and urban communities, which is why I included such action in my 2021 legislative priorities,” Lujan Grisham said. “I’m glad to see the Legislature reach a consensus on the measure and I applaud the members for voting to protect New Mexico consumers.”
New Mexico has a long history with regulating the loan industry.
A previous 36% cap on loan interest rates was abolished by the Legislature in the 1980s amid high inflation, according to research done by the Santa Fe-based Think New Mexico, which has pushed for the lower rate cap to be reinstated.
After years of debate at the Roundhouse, lawmakers passed a 2017 bill that established the current 175% small loan interest rate cap and banned so-called payday loans with terms of less than 120 days.
Journal Capitol Bureau reporter Dan McKay contributed to this report.