One of the most shameful episodes orchestrated by the New Mexico House of Representatives has thrilled storefront lenders.
They still charge 175% interest rates in one of America’s poorest states.
The new Mexicans who have the least money and need the money the most are trapped in debt because of this government-sanctioned system of credit spoofing.
Horror stories about the storefront lending industry are common. I will mention one.
A person with a disability borrowed $ 6,000 from one of these businesses. It took him four years to repay the loan at a cost of $ 34,000.
Other borrowers often risk and lose ownership of their vehicles when they cannot meet 175% of loan repayments.
A bill to verify predatory loans this year wiped out the state Senate with ease. He would have limited interest rates to 36%.
This rate may seem exorbitant, but it reflects the US Military Loan Act, which was created to prevent young soldiers from being crushed by debt.
Senator Bill Soules, D-Las Cruces, succeeded in convincing the Association of Credit Unions to support the bill to cap interest rates at 36%. His initiative should have reversed the long-held argument that low-income people would have no place to turn for loans without these benevolent lenders.
Instead, the storefront lending industry and its lobbyists have shown strength.
The Senate bill was roughed up by the House Judiciary Committee, where Democratic Representative Eliseo Alcon from Milan introduced an amendment drafted by the lenders.
Alcon’s proposal would have set interest rates at 99%. But that would also have kept the 175% interest rate going for another 15 months.
Democratic representatives Micaela Cadena of Las Cruces and Georgene Louis of Albuquerque have favored Alcon’s bill. They said a 99 percent rate was needed.
These lawmakers ignored all testimony from credit union executives, who said they could make small loans to people with bad credit or no credit at 36%.
“Let me ask you a question,” Alcon said one day during the heat of the debate. “Why are credit unions getting involved now?”
A lawmaker in a low-income region, Alcon should have celebrated a chance to cut interest rates for his constituents. Instead, he polled companies that have emerged to blunt predatory lenders.
A showcase lender exists for 3,800 people in the state. By comparison, McDonald’s has one restaurant for 23,300 New Mexico residents. Credit unions outnumber storefront lenders 561 to 147.
Alcon left no doubt which companies have the most influence.
In the end, the Senate reform bill failed. The 175% interest rate remains in place, just as industry lobbyists wanted.
Soules said the loss had left him depressed for two weeks. He has recovered enough to start working on another bill to end the 175% interest rate.
His idea is to launch the bill in the House next time.
“They seem to be more concerned with who gets the credit for things,” Soules said.
In truth, members of the House should be worried about backlash in their defense of heinous interest rates.
Louis may have already felt the negative effects of helping storefront lenders. His campaign for a seat in Congress went nowhere soon after defending 99% interest rates.
House Speaker Brian Egolf, D-Santa Fe, said the votes just weren’t there to cut interest rates to 36%.
If Egolf had gathered his members, most of whom claim to be the champions of the little guy, the bill should have been passed. Democrats dominate the House 45-24.
There is also an independent representative, Representative Phelps Anderson of Roswell. Anderson, from a wealthy family who founded the Atlantic Richfield oil company, told me that an interest rate of 36 percent was more than enough to make small loans profitable.
Count Anderson as a vote for the reform bill. If an independent opposes storefront lenders, Egolf’s caucus should have no reason to perpetuate a system that keeps people in poverty.
Soules plans to ask a legislative committee, the Rural Economic Opportunities Task Force, to draft a bill capping interest rates at 36%.
Neighboring Colorado, 16 other states, and Washington, DC, limit interest rates to 36%. They followed the model of the army.
When it comes to legalizing recreational cannabis, most lawmakers have said that if Colorado can do it, New Mexico could do it too. They have made cannabis a priority, even meeting in extraordinary session to legalize the drug.
This brash spirit did not extend to cutting predatory lending rates.
Cannabis companies have lobbyists, lawyers, and spin-docs. People so desperate that they can be tricked by storefront lenders have asked nothing of the House of Representatives. This is exactly what they have.
Ringside Seat is an opinion piece on people, politics and current affairs. Contact Milan Simonich at [email protected] or 505-986-3080.