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SANTA FE – Starting next year, New Mexico will join more than 30 other states with interest rate caps of 36% on storefront loans, after Gov. Michelle Lujan Grisham signed a bill Tuesday that was passed by lawmakers after a multiyear debate on the issue.
Backers say enactment of the new law will help ensure New Mexicans avoid getting caught in debt spirals by what they describe as “predatory lenders,” many of which operate on or near tribal lands.
Currently, title loans and other small loans can come with annual interest rates of up to 175%.
“This bill signifies an end to crippling loans that harm New Mexican families,” said Rep. Susan Herrera, D-Embudo, who was one of several lawmakers who sponsored this year’s measure.
Opponents of the bill, House Bill 132, argued during this year’s 30-day legislative session 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.
Andrew Duke of the Virginia-based Online Lenders Alliance said Tuesday the new law would prohibit about 95% of the current loans that are used by roughly 400,000 New Mexico residents.
“This bill does not lower the cost of credit – just the availability of credit,” Duke said in a statement.
However, New Mexico will join 32 other states and Washington in enacting a lower interest rate cap, according to the National Consumer Law Center.
In addition, the 36% cap is the same that was implemented by the U.S. armed forces for loans obtained by active-duty military members.
This year’s legislation comes just five years after 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.
The loan interest rate bill was one of 16 measures signed Tuesday by Lujan Grisham, who has until March 9 to act on 33 other bills approved during this year’s session that ended Feb. 17.
Among the bills signed was House Bill 148, which extends the deadline for small businesses to apply for a state loan program from May 31 to Dec. 31.
The governor also signed House Bill 164, a measure that calls for better interagency collaboration in cleaning up abandoned uranium mines around New Mexico.