Storefront Lenders Succeed In Squashing Rate Caps
Storefront lenders scored a win in Santa Fe Tuesday when the House Business and Employment Committee unanimously sidelined an effort to cap interest rates on installment loans.
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 trap low-income borrowers in a cycle of debt.
State Rep. Miguel Garcia, D-Albuquerque, told the other members of the House Business and Employment Committee he worried the bill would damage mom-and-pop lenders in his district.
A review of information from the state Regulation and Licensing Department shows that although there are nearly 700 small loan companies currently registered in New Mexico, most are based out of state.
Supporters of rate caps argued 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, a lobbyist 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 get caught 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. The measure was tabled in the same committee, with some Democrats voting to keep the issue alive
This year, 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.”
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