Leadership lacking in ending 175 percent interest rate
Astrange sideshow is underway in New Mexico. It centers on the obscene 175 percent annual interest rate loan companies can charge downtrodden consumers.
Everyone in power knows New Mexico is one of the more impoverished places in America. But its weak-kneed state House of Representatives has allowed a powerful industry to enslave people in debt by charging exorbitant interest rates.
The state Senate earlier this year approved a bill to cap annual interest rates on consumer loans at 36 percent. A handful of Democrats and Republicans in the House Judiciary Committee then mangled the bill by resetting the proposed interest rate at 99 percent.
Rep. Eliseo Alcon, D-Milan, sponsored the amendment for 99 percent rates, but no one was fooled. It was written by the lending industry. In another concession to storefront lenders, Alcon’s amendment kept the 175 percent rate in place for an extra 15 months.
The bill was further changed on the House floor to permit a mix of 99 percent and 36 percent interest rates, depending on the size of a loan. Alcon voted against the revamped proposal.
Because the Senate and House bills clashed, a committee of legislators from each chamber was to meet to attempt a compromise. At least that’s supposed to be how the system works.
House Speaker Brian Egolf, D-Santa Fe, appointed Rep. Patty Lundstrom, D-Gallup, as one of three House members enlisted to work with senators on finding common ground.
At this point, legislators’ accounts degenerate into he-said/she-said claims. Sen. Bill Soules, D-Las Cruces, claimed
Lundstrom warned she would not yield on anything. Egolf says Soules’ claim is false, that his members were ready to work with senators.
In any case, the conference committee didn’t meet. Storefront lenders celebrated, as 175 percent interest rates remained on the books.
It was an epic failure for Democrats. They control the House 45-24-1, yet Egolf couldn’t marshal the necessary 36 votes to approve the lower rate.
That brings us to the present. Few issues have been studied more or debated longer than the 175 percent interest rate. But Democratic Gov. Michelle Lujan Grisham wants more reflection.
She asked Lt. Gov. Howie Morales to meet with various legislators and people in the lending industry to see if some sort of understanding on interest rates can be reached before the regular 30-day legislative session begins in January.
“The governor absolutely agrees that it’s an important issue and supports action being taken to protect New Mexicans,” said Nora Meyers Sackett, Lujan Grisham’s press secretary. “Our office has been engaged with conversations geared at coming to consensus between stakeholders and legislators in order to move forward with legislative action.”
Nothing stops Lujan Grisham from leading the way. She wanted recreational cannabis legalized and called a special legislative session to make sure it happened. Lujan Grisham can push just as hard for lower interest rates if she wants to.
Endorsing a 36 percent cap isn’t a bold position. Eighteen states and Washington, D.C., have adopted that rate. It already applied to soldiers under the federal Military Lending Act.
Some states do better. Arkansas caps consumer loans at 17 percent annual interest. The state that railroaded the West Memphis Three and tried to block the Little Rock Nine from integrating a high school is more progressive than New Mexico in checking predatory lending.
Morales told me his meetings with lawmakers are important if a compromise proposal is to be placed on the legislative agenda next month.
“This is one of those bills that can take a lot of energy and emotion,” he said.
It shouldn’t. Democrats claim they are committed to ending the cycle of poverty in New Mexico. They dominate the Senate, House and Governor’s Office. Only the lending industry’s lobbyists and campaign contributions to politicians could make this another uphill fight.
Morales so far has met with these lawmakers:
Rep. Doreen Gallegos, D-Las Cruces, the House majority whip. She’s not outspoken on interest rates, but her husband has been. He is lobbyist Scott Scanland, who in years gone by advocated for the lending industry.
Rep. Micaela Cadena, D-Mesilla. Cadena in March gave a rambling speech supporting 99 percent rates. She said she had a friend who needed an abortion but had no money. When the friend couldn’t get a loan, Cadena herself charged the procedure to her credit card. How this made a case for the worthiness of high-interest lenders continues to boggle.
Rep. Herrera and Sens. Soules and Katy Duhigg, D-Albuquerque. They favor the 36 percent rate.
In fact, every Democrat in the Senate except George Muñoz of Gallup supported the 36 percent cap. Even one Republican senator, Gregg Schmedes of Tijeras, voted for it.
Rep. Phelps Anderson of Roswell, the only independent in the House, said he also favors the 36 percent cap.
New Mexico’s credit unions pledged this year to make small loans at that rate. Credit unions in New Mexico are outnumbered by storefront lenders, 561 to 147. But the commitment of credit unions should silence claims that the chronically poor need high-rate lenders to obtain emergency cash.
Rep. Alcon didn’t see it that way. “Why are the credit unions getting involved now?” he asked after advocating for 99 percent interest rates.
He should have asked himself how he could face the people of his district. The same goes for Egolf. The speaker opposed the 99 percent rate during a hearing in the House Judiciary Committee but never publicly confronted the industry on why that was its magic number.
Egolf told me he worked hard behind the scenes to obtain support for the 36 percent rate but fell short. Herrera vouched for Egolf’s efforts. Lobbyists for the lenders were more effective than Egolf in persuading his Democratic caucus.
States with little in common — liberal California and conservative Nebraska, mountainous Colorado and flatland Illinois — have established 36 percent caps.
Then there’s New Mexico, where storefront lenders are more potent than the House of Representatives.
Ringside Seat is an opinion column about people, politics and news. Contact Milan Simonich at msimonich@sfnewmexican. com or 505-986-3080.