SANTA FE, NM (AP) — New Mexico House lawmakers have approved legislation to discourage predatory lending by lowering the state cap on annual interest rates for storefront loans.
Democratic State Rep. Susan Herrera of Embudo is sponsoring the bill that would lower the maximum interest rate on storefront loans to 36%. The bill would also double the maximum size for small installment loans to $10,000, with repayment periods of up to two years.
The bill won House approval in a 51-18 vote on Monday night and was sent to the Senate for consideration.
Proponents said restrictions are needed to ensure borrowers don’t fall into vicious cycles of debt that contribute to poverty in New Mexico.
“This is an important step to improve the financial stability of our neighbors who are struggling to make ends meet,” Herrera said in a statement.
The bill also prohibits wage garnishment for non-payment of loans and stops accrual of interest within 90 days of non-payment.
It strengthens disclosure requirements such as amortization schedules for loan repayment that aim to protect consumers.
Similar legislative initiatives have repeatedly failed in recent years.
Opponents of the bill have warned that it could jeopardize 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… every time we’re here as legislators and we try to set the rates for the consumer instead of allowing the consumer and the lender to set those rates themselves. “said Rep. T. Ryan Lane, a Republican. of Aztec.
In 2017, New Mexico lawmakers eliminated payday loans against future earnings and capped interest rates on small loans by storefront lenders at 175%.
The state’s small loan industry provided about 224,000 loans worth $420 million in 2020, the most recent year with statistics on record, according to the state’s Financial Institutions Division.