February 21, 2017

Compromise sought on payday loan rates

Clyde Mueller/The New Mexican

A Check 'n Go store in Santa Fe offers payday loans.

A former state senator who is helping lead the fight against high-interest payday and other small loans said Monday that a bill to cap rates at 36 percent is dead.

“The governor would veto it anyway,” former Sen. Steve Fischmann, co-chairman of the New Mexico Fair Lending Coalition said, referring to House Bill 26, sponsored by Rep. Patricia Roybal Caballero, D-Albuquerque.

But Fischmann, a Mesilla Park Democrat, said supporters of the bill are in negotiations with certain parts of the industry that are backing another bill aimed at regulating businesses that offer small loans at high interest rates.

“I think we are getting close to a deal,” Fischmann said. That bill, HB 347, sponsored by Rep. Patty Lundstrom, D-Gallup, would in effect set maximum interest rates of 175 percent.

Both bills were discussed Monday in the House Business and Industry Committee. However, committee Chairwoman Debbie Rodella, D-Española, asked the committee not to vote in order to give the two sides time to negotiate.

Roybal Caballero said after the meeting that she has not been in on any negotiations. Fischman said most of the negotiations have been between him and Dan Najjar, a lobbyist for Axcess Finance, a self-described “leader in the sub-prime auto finance industry.”

Over the past decade or so, the Legislature has repeatedly considered but declined to approve legislation to cap interest rates on payday and similar small loans. The industry has fought the legislation with top-shelf lobbyists and significant campaign contributions to lawmakers.

Lundstrom’s bill would create a fee-based financing structure for all small loans under $5,000. It would eliminate one-month, one-payment payday and car title loans. Loans for less than four months would be prohibited. But even though interest rates in HB 347 are not spelled out, the cost to the borrower for installment loans under the bill would in effect be about 175 percent.

Though he would prefer a lower interest rate, Fischmann said 175 percent would be much better for New Mexicans than the status quo. “It would save consumers a ton of money,” he said. “The average rate for these loans is about 347 percent.”

According to a fiscal impact study of HB 26, the state Financial Institutions Division has said that interest rates vary wildly in New Mexico and some are astronomical.

Car title loans can go up to 456.3 percent, while unsecured installment loans can have interest rates of more than 900 percent. Secured installment loans can have interest rates amounting to nearly 5,000 percent, while “refund anticipation” loans can soar to 9,000 percent.

A dozen states have laws limiting interest rates to 36 percent or less, Fischmann told the House Business and Industry Committee. “These states have not experienced economic cataclysm,” he said.

Albuquerque lawyer Nick Madison told the committee he often has to counsel clients who have been victims of “predatory loans.” He added, “This state is a natural experiment in what happens when you have unregulated predatory lending.”

Laurie Weahakee of the Native American Voters Alliance spoke against Lundstrom’s bill, saying high-interest loans have had a negative effect on Indian communities. She said she was concerned because under the bill, many loans wouldn’t be reported to the state.

Former House Speaker Raymond Sanchez, a lobbyist for the Consumer Installment Loan Association, told the committee how his father couldn’t get a loan from a bank when he was starting a business after World War II. He said Roybal Caballero’s bill “would wipe out loans for people like my father.”

Former Republican state Sen. Mickey Barnett, a lobbyist for Independent Finance Association, spoke in favor of Lundstrom’s bill. He said he normally prefers that the market place regulate industries. “But sadly [in the area of payday loans], the market doesn’t work as well as I would like it,” he said.

High-interest loan companies and the associations that serve them contributed more than $118,000 to lawmakers, other candidates and PACs in 2015 and 2016, according to a report published Monday by New Mexico In Depth.

The Consumer Lending Alliance, a trade industry association contributed $32,950. The next biggest contributor was FastBucks, which gave $21,050. Late last year, a Santa Fe district judge ordered FastBucks to pay more than $32 million in restitution to customers for unfair and unconscionable business practices.

Contact Steve Terrell at 505-986-3037 or sterrell@sfnewmexican.com. Read his political blog at www.santafenewmexican.com/news/blogs/politics