Small, quick loans often lead to an ever-increasing cycle of debt, according to the Consumer Financial Protection Bureau. New Mexico lawmakers plan to further regulate the industry here during the 2021 legislative session. Senate Bill 66 cap rates and fees to match national averages in an effort to help people at risk avoid a debt chasm they can’t get out of. KUNM sat down with reporter Jeff Proctor to talk about the effort.
JEFF PROCTOR: Basically what we’re talking about here is what people used to call payday loans and title loans. You can try oakparkfinancial.com In other words, you could walk into a storefront with a pay stub or your vehicle title and get a loan at an insanely high interest rate because you needed the money right now. So it’s been around in New Mexico for decades and decades. The industry often calls them installment loans: you pay them off in installments and the interest builds up over time.
There is a long history of lack of regulatory framework for this industry in New Mexico. We had what was called a usury in the state law, which set limits for all different types of loans. And when I say caps, I mean, above a certain interest rate, you weren’t allowed to charge. This ceiling therefore disappeared a few decades ago. That’s problematic in a place like this, because of course we’re dealing with the issues of lack of access to the American Dream and generational poverty.
So anyway, until the late 2000s, some lawmakers and then Attorney General Gary King started to regulate this industry. There had been all kinds of horror stories, it was hardly going anywhere, because the industry, which of course made tons of money, paid a bunch of lobbyists and poured money into it. money for the campaign on both sides of the aisle. In 2017, the Legislature passed what it called a compromise that capped the interest rate at 175% per annum.
KUNM: Now you know we’re in the midst of COVID which is having devastating effects on the economy. Does that increase the likelihood of the bill being passed or capped at 35% or 36%?
ATTORNEY: Some lawmakers now feel a sense of urgency, given the economic devastation the coronavirus pandemic has caused. And just quickly in case we haven’t gotten a good enough point on this for listeners, there’s a pre-tabled bill that would cap the rate at 36%. There is an important distinction with this year’s bill – it is not just the interest rate that could reach a maximum of 36%. 100 for the year. It also includes all fees, and that’s a total of 36%.
And then the other kind of hope comes from the little change in landscape that we have seen in the Legislature. Previously, we have seen some stalemate in reform efforts in this area, from some of the more conservative Democrats in both houses. And, of course, a handful of them were fired by more progressive candidates. Finally, the day our story was published, the Governor included this issue in her list of legislative priorities.
