Stop the NM debt cycle, cap high interest loans at 36%


Every day in New Mexico, people find themselves trapped in the cycle of high-interest consumer loans – in New Mexico, that means annual interest rates of up to 175% – unable to escape. These installment loans and car title loans are sometimes called “payday loans” because the payments are tied to when the borrower is paid. In New Mexico, there have been many attempts over the years to reduce the exorbitant interest charged, but these lenders have been allowed to continue operating at rates prohibited in many other states. It is high time to put an end to these predatory lending practices. We encourage Governor Michelle Lujan Grisham and the New Mexico Legislature to end these high interest loans.

Here’s the scenario: A family’s income is less than what they need for basic necessities, or the family faces an unexpected expense, such as a car repair, and borrows a few hundred dollars from a low-cost lender. high, at 175% annual interest. It’s an option they’ve seen advertised a lot, touting no credit checks and quick money. When it comes time to make a payment on the loan, the family either has no extra money to pay or is forced to move the money needed to pay other expenses to make a payment on the loan. Over time, the family may be encouraged to refinance the loan to ease the repayment difficulty, leading to increased debt and ultimately a debt trap when they cannot repay the loan .

In New Mexico, we let this cycle play out, relentlessly, with an interest rate cap of 175%. There are options to this predation. Credit unions across the state offer small loans at a reasonable interest rate — well below 36% — to borrowers, often without a credit check. Nearly one million New Mexicans are already members of a credit union, making this option easy and accessible. Municipal and county governments, schools, colleges and businesses across the state sign an alternative program, TrueConnect, which allows employees to take out small loans that are repaid over time as payroll deductions, with an interest rate between 20% and 25%. Lower interest rates do not mean that people will run out of options, but that the options available will allow borrowers to repay the loans they take out.

Make no mistake: High-interest lenders, 89% of which are out-of-state companies, are taking money out of the pockets of hard-working New Mexicans just trying to make ends meet. . Nobody wants to end up in need of a short-term loan, and those who do shouldn’t be fresh meat for loan sharks, hungry to cash in on someone else’s misfortune.

Capping interest rates at unconscionable levels has enjoyed broad bipartisan support for decades. President George W. Bush signed into law the Military Loans Act in 2006, which capped rates at 36% for active duty military personnel and their spouses. States across the country, from New York to Nebraska, from Maryland to Montana, are capping their lending rates at 36% or less. More than 80% of New Mexicans surveyed support a cap rate of 36% or less. This is the rate we have re-proposed, and it should pass.

We urge the Governor and Legislature to pass legislation protecting low-income New Mexicans without excuse or delay.


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