SANTA FE — A plan to lower New Mexico’s annual interest rate cap on storefront loans is heading through the House after surviving a committee hearing in which critics claimed that the bill received preferential treatment from senior Democrats.
Before the House Judiciary Committee voted 7-5 to approve the bill, skeptics pointed out that Governor Michelle Lujan Grisham had not added the measure to the agenda of the 30-day legislative session. of this year.
A spokeswoman for Lujan Grisham said such a move was unnecessary. The bill originally included a $180,000 appropriation for financial literacy programs, but that proposed expense was deleted at a previous committee hearing.
Meanwhile, opponents also questioned the nomination of Rep. Deborah Armstrong, D-Albuquerque, to the panel on Wednesday.
Armstrong, who was not previously named to any standing committees as she dealt with family health issues, joined six other Democratic lawmakers in voting for the bill.
“I was unavailable earlier in the session due to family responsibilities, but as those responsibilities lighten and allow, I am attending meetings as much as possible and continuing to stand up for my constituents,” Armstrong said in a statement.
Four House Republicans voted “no,” as did Rep. Eliseo Alcon, D-Milan, who expressed concerns about the trajectory of the legislation.
“I’m not happy with the way the legislation has been presented and presented,” Alcon said at Wednesday’s hearing.
However, supporters defended the process and said the measure would prevent low-income New Mexicans from getting stuck in “debt traps.”
Top Navajo Nation officials recently sent lawmakers a letter in support of the bill, and Austin Weahkee, the political director of New Mexico Native Vote, said storefront lenders are especially prevalent in areas with large Native American populations. .
“I was exactly the target of a 175% loan that I couldn’t afford to repay,” Weahkee said during the committee hearing.
This year’s measure, House Bill 132, comes after a similar proposal was stalled in last year’s legislative session due to a deadlock between the House and Senate.
This would lower the annual interest rate cap – from 175% to 36% – for those taking out small loans. This is the same cap that the US Armed Forces has in place for loans obtained by active duty military personnel.
Critics of the legislation have argued that lowering the state interest rate cap for storefront loans could put businesses out of business and leave their employees unemployed.
They also claimed that such a policy change would push borrowers to use internet lenders, many of which are based in other countries and cannot be regulated.
“I think we have to be very careful not to hurt a lot of people that we’re trying to help,” said House Minority Leader James Townsend, R-Artesia.
However, Juan Fernandez Ceballos of the New Mexico Credit Union Association said credit unions are ready to provide low-interest loans to residents of the state who need money fast.
He also said the legislation, if enacted, would not “switch off” storefront lenders, although he acknowledged they could see lower profits.
The current 175% interest rate cap on small loans was enacted under a 2017 law that also banned so-called payday loans with terms of less than 120 days.
But lenders said the current cap is still too high, while citing studies showing more than 20% of residents had taken out such loans in about half of New Mexico’s counties.
A Santa Fe resident who identified herself as Patricia testified at Wednesday’s hearing that she took out $6,000 in storefront loans and ultimately faced $34,000 in repayment charges.
“I thought taking this loan would solve my problems, but it only made things worse,” she said.