Storefront lenders scored a win Tuesday in Santa Fe when the House Business and Employment Committee unanimously voted to block an effort to cap interest rates on installment loans.
The bill (HB 84), sponsored by Rep. Patricia Roybal-Caballero, would have put the question of rate caps in front of voters in the 2016 general election. A 2014 Public Policy Polling survey showed 80 percent of respondents would support limiting interest rates to 36 percent.
Critics say these types of loans, such as car title loans, amount to predatory lending because they come with interest rates that average 300 percent and leave financially vulnerable people unable to repay loans that then get refinanced over and over, compounding interest and fees.
During the hearing, State Rep. Miguel Garcia, D-Albuquerque, told the other members of the House committee he worried the bill would damage mom-and-pop businesses that lend money in the South Valley area he represents.
A July 2015 review of information from the state Regulation and Licensing Department showed that although there are nearly 700 small loan companies currently registered in New Mexico, most are based out of state, New Mexico in Depth reported.
Supporters of rate caps told the committee that an extraordinary number of New Mexicans who take out title loans end up having their vehicles repossessed. But industry representatives disputed those figures and others.
Andrew Morrison, a Texas-based industry executive who had traveled to Santa Fe to represent the Consumer Installment Loan Association, said industry-sponsored surveys show most current customers oppose rate caps, and would be willing to help preserve access to short-term loans.
“Those are people who are prepared to get out and make their representatives understand how seriously they need access to credit and how much they value access to this particular product,” Morrison said, adding: “We didn’t have to bring them in today. This was an 11-nothing decision, which is as about as conclusive as it gets.”
Conroy Chino, who represents Acoma Pueblo and the Jicarilla Apache nation, said after the meeting that the proposal was a long shot, but a worthwhile effort because members of tribal communities who use storefront loans often find themselves trapped in a cycle of debt.
In 2015, the industry had two dozen lobbyists working on the issue in Santa Fe and the different companies gave thousands in campaign contributions to lawmakers. Similar measures, sponsored by Democrats, were tabled in the same committee, on a party-line vote.
This year, with a unanimous vote to block rate caps, things were different, said Ona Porter, a consumer financial advocate with Prosperity Works.
“Even if the Democrats had voted with us, it still would have been tabled,” she said. “We really have to wonder why our legislators cannot vote in the interest of their constituents and low-income consumers in New Mexico. It makes no sense. All the evidence is on our side. But we don’t have the money to grease the wheels.”