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Capping interest at 36% is ethical, just

Over 240 faith leaders from across our state have joined together in support of the Loan Interest Rate Cap Act before the 2015 State Legislature.

This legislation will cap annual interest and fees on all non-bank loans at a rate no higher than 36 percent. Eighteen states, including Arizona, and the United States military have interest and fee caps set at 36 percent or lower.

We believe that New Mexico should be the next state to act.

As people of faith, we share deep convictions grounded in scripture warning against predatory usury, which has plagued humankind since biblical times and has reached crisis proportions in New Mexico.

The brutal consequences of predatory lending in our communities – especially as it impacts members of our armed services, working families and others who often live from paycheck to paycheck – takes a toll on all of us by draining our local economy.

Our communities need ethical banks and lenders that serve and strengthen families rather than place on them a burden of debt they cannot bear. The combination of loose lending rules and high poverty rates has made New Mexico a magnet for predatory lenders and had a devastating impact on those who can least afford it.

If a child falls and breaks a bone, or a family automobile breaks down and needs to be repaired, it may result in a financial emergency. People with few options will borrow money from unscrupulous lenders who charge up to 300 percent to 400 percent interest.

The statistics are irrefutable and shocking. One example from the New Mexico Attorney General’s Consumer Protection Division: A New Mexican named Gary took out a $556.82 loan from a loan store in April 2010. Three years and 13 roll-overs later, Gary had made $4,813 in payments and still owed a balance of $2,400. The loan was secured by personal property valued at $2,700.

This is not an aberration; facts demonstrate the breadth of the crisis facing us.

In 2013, 164,500 New Mexicans spent an average of $1,260 to repay the average $653 loan. The typical loan lasted four months and had a 350 percent APR, according to the New Mexico Department of Regulation and Licensing statistics.

There are currently 684 small loan licensees in New Mexico charging 80 percent to 3,000 percent interest registered with the Department of Regulation and Licensing. More than 75 percent of these companies reaping those profits are based out of state. By comparison, there are only 405 fast food locations in New Mexico operated by all the major and minor chains combined.

Some crises we face are hard to solve. Others require only a surge of ethical responsibility and an alternative plan for protecting consumers. The Loan Interest Cap Act offers a reasonable and just way forward.

This is the proven and effective form of regulation.

Just as we need speed limits to protect motorists and catch limits to protect fisheries, we need interest limits to protect borrowers.

All across our state, resolutions are being enacted calling for a cap on interest rates at 36 percent or lower. The list includes Alamogordo, Albuquerque, Bernalillo County, Deming, Doña Ana County, Farmington, Las Cruces, Mesilla, Santa Fe, Silver City, New Mexico Municipal League and the New Mexico Association of Counties.

A poll conducted by the Center for Responsible Lending Public Policy Poling in January shows that 86 percent of New Mexicans support interest caps of 36 percent or less.

Our religious traditions speak with one voice in calling us to do justice and to love kindness. Prophets like Isaiah cry out in no uncertain terms in opposition to those who “deprive the poor of their rights and withhold justice” from them.

We make the prophet’s cry our own and urge those who govern on behalf of the people of New Mexico to pass the Loan Interest Cap Act. There are no good arguments in favor of leaving some of our most vulnerable residents in the grip of lenders whose primary motivation is greed and self-aggrandizement.

The time to act is now.

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