Justice deferred: erasure of the 175% interest rate | Local News


One of my lowest moments as a reporter in Santa Fe happened four years ago this week.

Stunned after a 60-day legislative session, I stupidly let a “winner” designation appear above a story about a controversial and predatory new law. The measure capped the interest rates charged by storefront lenders at 175%.

My boss was simmering when he saw the printed story.

“If people pay 175% interest, what do they get other than a trip to bankruptcy court? ” He asked.

He was right. The only winner in this story was the storefront lending industry.

It made nearly 13,000 loans in New Mexico with no interest caps in the year before the legislation.

A poor soul was paying an interest rate of 1679%. Rates of 300 or 400 per cent prevailed before the cap.

But storefront lenders were not going to suffer because of the reform.

A consumer protection group calculated that a loan of $ 5,000 over four years at 175% interest would require the borrower to pay a monthly payment of $ 730. The total interest on the loan would exceed $ 30,000.

New Mexico’s legislation setting the 175% cap has not been a victory for consumers. It was a small step towards progress.

The 175% were better but still immoral – still an endless debt trap for families trying to survive paycheck to paycheck.

State Senator Bill Soules, D-Las Cruces, was haunted and in conflict with the 175% cap bill.

He voted against the proposal while urging his colleagues to support it.

“It was the most difficult vote I have ever had to take in the Senate,” Soules told me.

He hated the bill. Still, Soules feared that vulnerable people would end up paying even more exorbitant interest rates if the rancid reform measure failed.

But Soules persevered. In turn, I have another chance to uncover the history of predatory lending.

Soules in this year’s legislative session is sponsoring Senate Bill 66. It would cap interest rates on loans at 36%.

“Some people still get angry and tell me it’s too high, but 36% is the rate set out in the Loan Act for military personnel. This is what we are trying to replicate, ”Soules said.

With the help of many impartial people, including the public policy organization Think New Mexico, Soules’ bill cleared the Senate by a 25-14 vote.

Twenty-four Democrats and Republican Senator Gregg Schmedes de Tijeras voted to lower the cap from 175% to 36%.

Thirteen Republicans and Democratic Senator George Muñoz of Gallup opposed the change.

Soules’ bill cleared another big hurdle on Friday. He advanced from the Chamber’s Commerce and Economic Development Committee.

The bill still has to go through the Judiciary Committee to reach the full House of Representatives, made up of 70 members.

With the Democrats in control of the House 45-25, Soules could be optimistic. He is rather cautious.

“I don’t take anything for granted,” he said. “Yes, we got the bill through the Senate and probably the toughest test in the House. But until it was upstairs and signed by the governor, nothing was achieved.

In years past, showcase lenders have said that an interest rate of 36% will cripple their business and end up denying those most in need access to the loans they desperately need.

This time Soules had the perfect counterpoint. The Credit Union Association of New Mexico supports SB 66. It says it can provide loans at 36% or less.

Soules and his camp made some minor compromises. The bill’s effective date would be January 1 rather than July 1, giving lenders more time to prepare for lower rates.

In addition, the bill contains a staircase in the event of hyperinflation, as was the case in the late 1970s and early 1980s.

Soules doesn’t see his bill as perfect. But her mood is brighter than it was four years ago.

He also started this session with the goal of capping the interest rates of storefront lenders at 36%. Many of the state’s most powerful lobbyists attacked the bill and won.

At the time, conservative Democrats were more prevalent in the Senate. They and the Republican caucus have been influenced by lobbyists.

“I pulled out when it became apparent that the payday loan industry was essentially rewriting the bill,” Soules said.

He and everyone else in the legislature know that 36% would still be a burden on many borrowers.

But they would not be lifelong slaves of the lender. The terror of a 175% rate would be limited to reruns of the The Sopranos.

Ringside Seat is an opinion piece on people, politics and current affairs. Contact Milan Simonich at [email protected] or 505-986-3080.

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