The legislation aimed to curb what critics call predatory lending was passed by the state Senate after a tense two-hour debate on Monday that sparked accusations of untruths and claims that the bill’s sponsors are oblivious to the harsh realities faced by people who live on paychecks.
Opponents argued that Senate Bill 66, which would reduce the maximum interest rate on small loans from 175% to 36%, would do more harm than good to struggling New Mexicans by causing the closure of high risk lenders.
The measure was adopted by 25 votes to 14 and will then be considered by the State House of Representatives.
Expect a lot of dissent and disagreement if Tuesday’s Senate sitting is any indication of what lies ahead.
One of the bill’s sponsors, Senator William Soules, D-Las Cruces, said about a third of people who called him about the legislation were angry it would cap interest at a rate so high.
“Predatory loans hurt families and push people into poverty,” he said. “They attack marginalized people and weaken the foundations of strong communities and economies on which they are built.
The bill, which Soules called a governor-approved priority, was passed mostly along party lines. A Democrat, Sen. George Muñoz of Gallup, joined Republicans in opposing the measure, and a Republican, Sen. Gregg Schmedes of Tijeras, sided with the Democrats.
“You don’t understand how the world really works,” a conservative Democrat who is the chairman of the Senate finance committee told Soules Muñoz.
“You don’t understand what you could do to people’s lives when they need it,” he added. “The people behind all of this don’t see these people carrying water every day, standing around the corner to have quarters to fill their tanks.”
Senator Bill Sharer, a Republican from Farmington, opposed the bill for nearly half an hour.
“All I can see here is that we are removing an option for people who have no other options,” he said. “It’s another one of those situations where we want to do the right thing. We want to do good, and we end up harming the very people we want to help. “
Senator Jerry Ortiz y Pino, D-Albuquerque, described the warnings as scare tactics.
“It’s stupidity that we are selling here on the floor,” he said.
Another Albuquerque Democrat, Senator Bill Tallman, echoed the sentiment.
“These arguments that the loans will not be available to people are just plain wrong,” he said. “There are 33 states that have interest rates capped at 33% or less. If it’s good enough for them, why isn’t it good enough for us? Are we going to be the last state in the country to reduce these [interest rates to a] reasonable price? “
Opponents also argued that the measure would force New Mexico storefront lending businesses to close.
“I contacted one of ours who we use in our area,” said Senator David Gallegos, R-Eunice. “They say they have 16 stores here in New Mexico and will have to close if this passes.”
Senator Antoinette Sedillo Lopez, of D-Albuquerque, said local businesses “manage to do quite well” by charging 36% or less.
“They contribute to the community; they are part of the community, ”she said.
In contrast, she said, showcase businesses are moving to areas with high Hispanic populations.
“They come up with these offers and then the documents are in English,” she said. “This is exploitation, and it must stop, and this bill is a great place to start to stop this kind of exploitation.”
Ortiz y Pino said the legislation had Navajo Nation support and more than 40 other states have interest rate caps – comments opponents questioned during the debate.
The state’s current 175% rate for small loans was approved by lawmakers and signed by former Republican Governor Susana Martinez in 2017. At the time, advocates lobbied unsuccessfully for a 36% cap.
“As families in New Mexico struggle to recover from the pandemic, they urgently need access to affordable credit rather than the endless cycle of debt brought on by triple-digit interest rates,” Fred Nathan, founder and executive director of the nonprofit policy think tank Think New Mexico, wrote in an email. “That’s why SB 66 is such a priority this session.”