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SANTA FE — Attempts to lower New Mexico’s annual interest rate cap on small loans — from 175% to 36% — failed in last year’s legislative session, but lenders plan to try again during the 30-day session that begins this month.
Governor Michelle Lujan Grisham is expected to add the issue to the session’s agenda for consideration, and a spokeswoman for the governor said there have been talks aimed at trying to reach a compromise before the start date of January 18. .
However, several lawmakers said on Tuesday that no such agreement had been reached.
“I’m counting now to see if I have the votes,” said Rep. Susan Herrera, D-Embudo. “It’s still up in the air.”
One area of compromise could be to lower the cap on the maximum annual rate for small loans, but to a lower amount than some proponents prefer. Proponents say such action is necessary to keep New Mexicans out of “debt traps.”
Sen. Bill Soules, D-Las Cruces, who sponsored last year’s bill that died after the House and Senate passed different versions of the legislation, said he was open to a possible gradual implementation of a lower interest rate ceiling.
But he said he wanted to avoid a repeat of last year’s legislative session, in which the bill was amended in the House – with a higher rate cap for loans of $1,100. or less — amid fears the proposal could make it impossible for some New Mexicans who need quick access to small amounts of money to get loans.
“I’m not interested in starting on the Senate side at 36% and then running it through the House and changing it to something that I don’t think is reasonable,” Soules told the Journal.
New Mexico has had a colorful history with regulation of the lending industry.
A previous 36% cap on loan interest rates was abolished by the Legislature in the 1980s amid high inflation, according to research by Santa Fe-based Think New Mexico, which has is pushing for the lower rate cap to be reinstated.
After years of Roundhouse debate, lawmakers passed a 2017 bill that established the current 175% interest rate cap on small loans and banned so-called payday loans with terms of less than 120 days.
But critics insisted that the 175% cap was too high for low-income New Mexicans, while pointing out that the US armed forces had implemented a 36% annual rate limit for loans obtained. by active duty personnel.
Lujan Grisham’s spokeswoman, Nora Meyers Sackett, said the Democratic governor supports steps to protect New Mexicans from “predatory lending,” and said the governor’s office has participated in conversations aimed at finding a consensus. Lieutenant Governor Howie Morales played a leading role in these discussions.
But she also said that if no agreement is reached, the issue may not be added to the agenda of the legislative session.
“We hope to be able to include such legislation in the 30-day (session), but that will depend in part on the ability of the parties involved to identify a compromise or solution that will allow the bill to move forward and to through the legislature. successfully – and it would also ensure that disagreements about this don’t spill over into the limited time we have, which will be needed for other key elements,” Sackett said.
Critics of the push to lower the current state interest rate cap on small loans have argued that such a policy change could bankrupt many businesses and push borrowers to use lenders on Internet, many of which are based in other countries and cannot be regulated.
During last year’s legislative session, a credit industry lobbyist said the industry employs about 1,300 people across New Mexico.
But Kristina Fisher, associate director of Think New Mexico, said many loan companies operating are based out of state, which means loan repayments don’t bolster the state’s economy.
“We’re really pulling state dollars,” she said during a Tuesday meeting with editors and reporters.
She and other supporters also said New Mexico credit unions are ready to provide loans at lower interest rates to residents of the state who need quick cash.
About 60% of New Mexico’s small loan stores are within 10 miles of tribal lands, where many residents live below the federal poverty level, according to the New Mexico Center on Law and Poverty.