A strange spectacle 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 New Mexico is one of the poorest places in America. But his state’s House of Representatives allowed a powerful industry to enslave people in debt by charging exorbitant interest rates.
The state Senate earlier this year 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 percent rates, but no one was fooled. It was written by the credit industry. In another concession to storefront lenders, the Alcon Amendment kept the 175% rate in place for an additional 15 months.
The bill was further amended on the floor of the House to allow a combination of interest rates of 99% and 36%, depending on the size of a loan. Alcon voted against the revamped proposal.
Because Senate and House bills clashed, a committee of lawmakers from each chamber had to meet to attempt a compromise. At least, that’s how the system is supposed to work.
House Speaker Brian Egolf, D-Santa Fe, appointed Representative Patty Lundstrom, D-Gallup, as one of three House members enlisted to work with Senators in search of land agreement.
At this point, lawmakers’ accounts degenerate into assertions, he / she-says. Senator Bill Soules, D-Las Cruces, claimed that Lundstrom had warned that it would not back down on anything. Egolf says Soules’ claim is false, that his members were prepared to work with senators.
The conference committee did not meet anyway. Storefront lenders celebrated as 175 percent interest rates stayed on the books.
It was an epic failure for Democrats. They control the House 45-24-1, but Egolf was unable to muster the 36 votes needed to approve the lower rate.
This brings us to the present. Few issues have been studied more 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 kind of interest rate deal can be reached before the 30-day regular legislative session begins in January.
“The governor absolutely agrees that this is an important issue and supports measures taken to protect New Mexicans,” said Nora Meyers Sackett, press secretary for Lujan Grisham. “Our office has engaged in conversations aimed at building consensus among stakeholders and legislators to move legislative action forward.”
Nothing prevents Lujan Grisham from showing the way. She wanted to legalize recreational cannabis and called a special legislative session to make sure that happens. Lujan Grisham can push just as hard for lower interest rates if she so chooses.
Approving a 36% cap is not a bold stance. Eighteen states and Washington, DC, have adopted this rate. It already applied to soldiers under the Federal Military Loans Act.
Some states are doing better. Arkansas caps consumer loans at 17% annual interest. The state that brought the West Memphis Three forward and tried to keep Little Rock Nine out of high school is more progressive than New Mexico in predatory loan verification.
Morales has told me that his meetings with lawmakers are important if a compromise proposal is to be on the legislative agenda for next month.
“This is one of those bills that can take a lot of energy and emotion,” he said.
It shouldn’t. Democrats say they are determined to end 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 fight difficult.
So far, Morales has met with these lawmakers:
u Rep. Doreen Gallegos, D-Las Cruces, House Majority Whip. She’s not straightforward about interest rates, but her husband was. This is lobbyist Scott Scanland, who has championed the lending industry in the past.
u Representative Micaela Cadena, D-Mesilla. Cadena in March gave a rambling speech supporting rates of 99 percent. She said she had a friend who needed an abortion but didn’t have the money. When the friend could not get a loan, Cadena charged the procedure to her credit card herself. How this made a case for the creditworthiness of high interest lenders continues to bewilder.
u Rep. Herrera and Sens. Soules and Katy Duhigg, D-Albuquerque. They favor the 36 percent rate.
In fact, all Senate Democrats except George Muñoz of Gallup supported the 36% cap. Even a Republican senator, Gregg Schmedes de Tijeras, voted in favor.
Representative Phelps Anderson of Roswell, the only independent in the House, said he was also in favor of the 36% cap.
New Mexico credit unions committed this year to small loans at that rate. Credit unions in New Mexico outnumber storefront lenders, 561 to 147. But the engagement of credit unions should silence claims that the chronically poor need high-rate lenders for cash. emergency.
The Alcon rep did not see it that way.
“Why are credit unions getting involved now? He asked after advocating interest rates of 99 percent.
He should have wondered how he could deal with the people in his neighborhood. The same goes for Egolf. The speaker objected to the 99% rate in a hearing before the House Judiciary Committee, but never publicly confronted the industry on why it was its magic number.
Egolf told me that he had worked hard behind the scenes to get support for the 36% rate, but was unsuccessful. Herrera vouches for Egolf’s efforts. Lender lobbyists have been more effective than Egolf in persuading his Democratic caucus.
States with little in common – liberal California and conservative Nebraska, mountainous Colorado and flat Illinois – have set caps of 36%.
Then there’s New Mexico, where window lenders are more powerful than the House of Representatives.
Ringside Seat is an opinion piece on people, politics and the news. Contact Milan Simonich at [email protected] or 505-986-3080.