A strange side show is underway in New Mexico. It focuses on the obscene 175% annual interest rate that loan companies can charge oppressed consumers.
Everyone in power knows that New Mexico is one of the poorest places in America. But his weak state House of Representatives allowed powerful industry to enslave people in debt by charging exorbitant interest rates.
Earlier this year, the state Senate approved a bill to cap annual interest rates on consumer loans at 36%. A handful of Democrats and Republicans on the House Judiciary Committee then mutilated the bill by resetting the proposed interest rate to 99%.
Rep. Eliseo Alcon, D-Milan, sponsored the amendment for 99% rates, but no one was fooled. It was written by the lending industry. In another concession to storefront lenders, Alcon’s amendment kept the 175% rate in place for another 15 months.
The bill was further amended on the House floor to allow for a mix of 99% and 36% interest rates, depending on the size of a loan. Alcon voted against the revised proposal.
Because the Senate and House bills clashed, a committee of lawmakers from each house had to meet to attempt a compromise. At least, that’s supposed to be how the system works.
House Speaker Brian Egolf, D-Santa Fe, named Rep. Patty Lundstrom, D-Gallup, as one of three House members enlisted to work with senators to find common ground.
At this point, the lawmakers’ narratives escalate into he/she said assertions. Sen. Bill Soules, D-Las Cruces, claimed Lundstrom warned she wouldn’t back down on anything. Egolf says Soules’ assertion is false, that its members were willing to work with senators.
In any case, the conference committee did not meet. Storefront lenders celebrated as 175% interest rates remained on the books.
It was an epic failure for the Democrats. They control the House 45-24-1, but Egolf could not muster the 36 votes needed to approve the lower rate.
This brings us to the present. Few issues have been studied or debated longer than the 175% interest rate. But Democratic Governor Michelle Lujan Grisham wants more thought.
She asked Lt. Gov. Howie Morales to meet with various lawmakers and people in the lending industry to see if some sort of deal on interest rates could be reached before the regular 30-day legislative session begins in January.
“The governor fully agrees that this is an important issue and supports the steps being taken to protect New Mexicans,” said Nora Meyers Sackett, Lujan Grisham’s press secretary. “Our office has been engaged in conversations aimed at building consensus among stakeholders and lawmakers to move legislative action forward.”
Nothing prevents Lujan Grisham from leading the way. She wanted recreational cannabis legalized and called a special legislative session to make sure that happened. Lujan Grisham can push just as hard to lower interest rates if she chooses.
Approving a cap of 36% is not a bold position. Eighteen states and Washington, DC have adopted this rate. It already applied to soldiers under the federal military loans law.
Some states are doing better. Arkansas caps consumer loans at 17% annual interest. The state that released the West Memphis Three and tried to keep the Little Rock Nine out of high school is more progressive than New Mexico in the fight against predatory lending.
Morales told me his meetings with lawmakers are important if a compromise proposal is to be put on the legislative agenda next month.
“It’s one of those bills that can take a lot of energy and emotion,” he said.
It shouldn’t. Democrats say they are committed to ending the cycle of poverty in New Mexico. They dominate the Senate, the House and the Office of the Governor. Only credit industry lobbyists and campaign contributions to politicians could make this another uphill battle.
So far, Morales has met with these lawmakers:
u Rep. Doreen Gallegos, D-Las Cruces, House Majority Whip. She’s not outspoken about interest rates, but her husband was. This is lobbyist Scott Scanland, who for years has championed the credit industry.
u Rep. Micaela Cadena, D-Mesilla. Cadena in March gave a rambling speech supporting rates of 99%. She said she had a friend who needed an abortion but had no money. When the friend couldn’t get a loan, Cadena herself charged her credit card for the procedure. How this has made a case for the creditworthiness of high-interest lenders continues to balk.
u Rep. Herrera and Sens. Soules and Katy Duhigg, D-Albuquerque. They are in favor of the rate of 36%.
In fact, every Senate Democrat except George Muñoz of Gallup supported the 36% cap. Even a Republican senator, Gregg Schmedes de Tijeras, voted for it.
Rep. Phelps Anderson of Roswell, the only independent in the House, said he also supports the 36% cap.
New Mexico credit unions have pledged this year to make small loans at that rate. New Mexico credit unions outnumber storefront lenders, 561 to 147. But the credit unions’ commitment should silence claims that chronically poor people need high-rate lenders to get loans. emergency cash.
The Alcon rep didn’t see it that way.
“Why are credit unions getting involved now?” he asked after advocating 99% interest rates.
He should have wondered how he could cope with the people in his neighborhood. The same goes for Egolf. The speaker opposed the 99% rate during a hearing before the House Judiciary Committee, but never publicly confronted the industry about why that was his magic number.
Egolf told me he worked hard behind the scenes to get support for the 36% rate, but was unsuccessful. Herrera vouched for Egolf’s efforts. Lender lobbyists were more effective than Egolf in persuading his Democratic caucus.
States that have little in common — liberal California and conservative Nebraska, mountainous Colorado and flat Illinois — have caps of 36%.
Then there’s New Mexico, where storefront lenders are more powerful than the House of Representatives.