March 3, 2021

New Mexico Senate passes bill to reduce cap on small-loan interest rates

Legislation aimed to rein in what critics call predatory lending passed the state Senate after a tense two-hour debate Monday that sparked accusations of untruths and assertions the bill’s sponsors are oblivious to the tough realities confronted by people who live paycheck to paycheck.

Opponents contended Senate Bill 66, which would cut the maximum interest rate on small loans to 36 percent from 175 percent, would do more harm than good for struggling New Mexicans by causing high-risk lenders to shut down.

The measure passed on a 25-14 vote and will be considered next by the state House of Representatives.

Expect plenty of dissension and disagreement if Tuesday’s Senate floor session is any indication of what lies ahead.

One of the bill’s sponsors, Sen. William Soules, D-Las Cruces, said about a third of the people who called him about the legislation were angry it would cap the interest at so high a rate.

“Predatory loans hurt families and push people into poverty,” he said. “They prey on people on the margins, and they weaken the foundation of strong communities and economies that they’re built upon.”

The bill, which Soules called a governor-endorsed priority, passed mostly along party lines. One Democrat, Sen. George Muñoz of Gallup, joined with Republicans in opposing the measure, and one Republican, Sen. Gregg Schmedes of Tijeras, sided with Democrats.

“You don’t understand how the world really works,” Muñoz, a conservative-leaning Democrat who is the chairman of the Senate Finance Committee, told Soules.

“You guys do not understand what you could do to people’s lives when they’re in need,” he added. “The people behind this don’t see those people haul water every day, stand on the corner to get quarters to fill up their tanks.”

Sen. Bill Sharer, a Farmington Republican, spoke in opposition to the bill for nearly a half-hour.

“All I can see here is that we’re removing an option for people that have no other options,” he said. “This is another one of those situations where we want to do the right thing. We want to do good, and we end up harming the very people that we want to help.”

Sen. Jerry Ortiz y Pino, D-Albuquerque, described the warnings as scare tactics.

“This is baloney that we’re being sold here on the floor,” he said.

Another Albuquerque Democrat, Sen. Bill Tallman, echoed the sentiment.

“These arguments that loans aren’t going to be available to folks are just bogus,” he said. “There’s 33 states that have interest rates capped at 33 percent or lower. If it’s good enough for them, why isn’t it good enough for us? Are we going to be the last state in the country to reduce these [interest rates to a] reasonable rate?”

Opponents also argued the measure would force New Mexico’s store-front lending businesses to close their doors.

“I contacted one of ours that we use in our area,” said Sen. David Gallegos, R-Eunice. “They say they have 16 stores here in New Mexico and that they will have to close down if this passes.”

Sen. Antoinette Sedillo Lopez, D-Albuquerque, said locally owned companies “manage to do quite well” charging 36 percent or less.

“They contribute to the community; they’re part of the community,” she said.

In contrast, she said, storefront companies set up in areas with high Hispanic populations.

“They offer these deals and then the paperwork is in English,” she said. “This is exploitation, and this has got to stop, and this bill is a great place to start to stop that kind of exploitation.”

Ortiz y Pino said the legislation had the support of the Navajo Nation and that more than 40 other states have interest-rate caps — comments opponents called into question during the debate.

The state’s existing 175 percent rate for small loans was approved by legislators and signed by former Gov. Susana Martinez, a Republican, in 2017. At the time, advocates lobbied unsuccessfully for a 36 percent ceiling.

“As New Mexico families struggle to recover from the pandemic, they urgently need access to affordable credit rather than the unending cycle of debt brought on by triple digit interest rates,” Fred Nathan, founder and executive director of the nonprofit policy think tank Think New Mexico, wrote in an email. “That is why SB 66 is such a priority this session.”