By MORGAN LEE, Associated Press
SANTA FE, NM (AP) — Lawmakers in the New Mexico House passed legislation aimed at discouraging predatory lending by lowering the state cap on annual interest rates on store loans.
Democratic MP Susan Herrera of Embudo is sponsoring the bill, which would lower the maximum interest rate on store loans to 36%. The bill would also double the maximum small installment loan size to $10,000, with repayment periods of up to two years.
The bill won the House of Representatives by a vote of 51 to 18 on Monday night and will go to the Senate for consideration.
Advocates have said restrictions are needed to ensure borrowers don’t fall into vicious cycles of debt that contribute to New Mexico’s poverty.
“This is an important step in improving financial stability for our neighbors who are struggling to make ends meet,” Herrera said in a statement.
The bill also bans garnishment of wages for non-payment of loans and stops interest accruing within 90 days of non-payment.
It strengthens disclosure requirements such as loan repayment schedules aimed at protecting consumers.
Similar legislative initiatives have repeatedly failed in recent years.
Opponents of the bill warned it could undermine access to small emergency loans for people without access to traditional lines of credit from banks or credit unions.
“I think there’s a danger for us … if we’re here as lawmakers and we’re trying to set interest rates for the consumer, instead of allowing the consumer and the lender to set those rates themselves,” Republican Rep. T. Ryan said Lane of Aztecs.
The New Mexico legislature eliminated payday loans against future earnings in 2017 and capped interest rates on small loans from in-store lenders at 175%.
The state’s microcredit industry issued about 224,000 loans worth $420 million in 2020, the most recent year on record, according to the Department of State Financial Institutions.
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed.