New Mexico lawmakers took a giant step Wednesday toward shutting down a few hundred businesses.
They went from timid to tough-minded in a month, finally taking action to end more than three decades of legal loan sharking in New Mexico.
By approving House Bill 132, the Legislature sided with the residents of the state instead of the predatory wealthy loan companies. The bill would reduce the maximum annual interest rate on installment loans from 175% to 36%.
A late amendment by Sen. Cliff Pirtle, R-Roswell, pushed back the bill’s effective date from July 1 to January 1. Pirtle voted against the bill after amending it, demonstrating that a minority of state lawmakers still bow to an industry that takes from the poor and gives to the rich.
The House of Representatives approved Pirtle’s amendment. It was a painful but pragmatic compromise.
With less than 24 hours remaining in the 30-day legislative session, cutting the oppressive interest rate was more important than possibly losing the bill contesting Pirtle’s giveaway to storefront lenders.
Democratic Governor Michelle Lujan Grisham released a statement on Wednesday congratulating lawmakers for approving the measure. It was a clear indication that she will sign the bill.
“This legislation addresses an important issue that affects the most vulnerable New Mexicans in rural and urban communities, which is why I have included such action in my legislative priorities for 2021,” said Lujan Grisham.
Note that Lujan Grisham cited her support for reforms in 2021. She was mostly onlooker this year, having not endorsed the legislation until the hard work was done by others.
Before the start of the legislative session, Lujan Grisham asked Lieutenant Governor Howie Morales to try to find common ground among “stakeholders” on storefront loan rates.
Lujan Grisham’s idea was poorly conceived and led nowhere. Predatory lenders operating in New Mexico are almost all part of domestic corporations based in other states. These lenders were happy with the unreasonable 175% interest rate and wanted to keep it.
Predatory corporate lobbyists have been circling lawmakers for years. The dizzying experience was often supplemented with campaign contributions.
National business lobbyists expected to win again this time around. McDonald’s has a restaurant in New Mexico for 23,000 people. There is one showcase lender for every 4,000 inhabitants.
House Speaker Brian Egolf, D-Santa Fe, played a key role in the turnaround.
Last year, Egolf was so passive about a similar bill to end predatory lending that he told me he was unaware of its adoption prospect. This winter, Egolf co-sponsored HB 132 with Rep. Susan Herrera, D-Embudo.
Even with Egolf’s effort, the bill nearly collapsed. A supporter of the predatory lending industry, Democratic Rep. Eliseo Alcon of Milan, challenged the legality of the bill. Alcon correctly pointed out that Lujan Grisham did not allow it on the legislative agenda.
Egolf appealed to the governor, and she belatedly authorized the bill after it had been heard by two legislative committees. Lujan Grisham could have avoided any threat to the bill by acting weeks earlier.
With the president committed to fighting predatory lending, all but two of the 45 House Democrats voted for the bill. Alcon and Las Vegas Rep. Ambrose Castellano objected to rate cut
Eight of 24 House Republicans also voted for the bill, a reversal from last year when the GOP closed ranks to keep interest rates in the triple digits.
Two Republican senators, Steve Neville of Farmington and Gay Kernan of Hobbs, also supported lowering interest rates.
Sen. David Gallegos, R-Eunice, voted for the lower interest rate during a committee hearing, but later flip-flopped. Gallegos raised the same talking points as storefront lenders – proof that industry lobbyists attacked the bill to the end.
Another key figure in getting the bill passed was Juan Fernández, president and CEO of the Credit Union Association of New Mexico. A cold hand during the proceedings, Fernández told lawmakers that credit unions can and do emergency loans at an interest rate no higher than 28%.
Fernández’s effort refuted claims by storefront lenders that oppressed consumers would not have access to credit if the bill were approved.
Behind the scenes, a polite and persistent group helped push the bill through. The public policy organization Think New Mexico, led by Fred Nathan, has outplayed former lawmakers Debbie Rodella and Raymond Sanchez, who were part of an army of lobbyists for window lenders.
Representative Herrera worked for four years to get the bill passed. She compared herself to Sisyphus, a mythical figure forced to roll a rock down a hill for eternity.
Reducing outrageous interest rates shouldn’t have been difficult. The difference this year was that lawmakers listened to reason instead of industry lobbyists spreading their own mythology.