Down for the count: Storefront lenders whip House of Reps
Mar. 20—This is a sad story about weak leadership.
Attempts to cut exorbitant interest rates charged by storefront lenders in New Mexico fizzled and died Friday.
The failure is squarely on the state House of Representatives. Many of its members cared more about appeasing the powerful lending industry than protecting the most vulnerable people — those who will be trapped in debt after taking out a small loan carrying an interest rate of 175 percent.
State senators — well, most of the Democrats and Republican Gregg Schmedes — did their best to stop predatory lenders.
They approved Senate Bill 66. It would have capped the interest rate on storefront loans at 36 percent.
Seventeen states and the U.S. military protect residents and soldiers with that same restriction on interest rates.
After senators approved the bill, it went to the House of Representatives. A mutilation followed.
House members rewrote the bill to allow a 99 percent interest rate on loans of less than $1,100. A 36 percent rate would apply to larger loans.
Just as bad, the lower rates would not take effect until July 2022.
Democratic Sen. Bill Soules of Las Cruces, primary sponsor of the original bill, said his colleagues would not accept the House's 99 percent interest rate.
Since the measure also had been watered down in the House to stall the lower rates for 15 months, Soules decided to kill the measure.
Lawmakers can try again to lower the interest rate to 36 percent in their next session starting in January.
For at least another year, consumers beware. Take out an installment loan, and you can still be hit with the crushing interest rate of 175 percent.
Not all House members are to blame.
Rep. Susan Herrera, D-Embudo, carried the reform measure in her chamber. She worked hard for its passage, personally calling on 40 of the 70 House members Tuesday.
Herrera said she couldn't get the votes she needed. The influence of the loan companies was too much.
"You know that elections are bought and sold by this industry," Herrera said of payday lenders.
That amounts to a denunciation of the House of Representatives by one of its own.
But many of the House's most vocal members claimed to be worried about consumers.
Rep. Eliseo Alcon, D-Milan, amended SB 66 to establish a 99 percent interest rate.
Other House members hailed this bill as progress. After all, 99 percent was better than 175 percent, even if consumers would have to wait 15 months to get the lower, still outrageous rate.
The credit union industry in New Mexico countered that it can make loans at 36 percent and remain in business. But Alcon said no credit union exists in the Grants area he represents, a claim that was incorrect.
Alcon admitted his error Friday, but that didn't change his opposition to capping interest rates at 36 percent.
He said he was worried that credit unions would not be able to provide small, emergency loans that the storefront lenders do.
Paul B. Stull, president and CEO of the Credit Union Association of New Mexico, had a tart reply.
"Credit unions are not-for-profit cooperatives. We help people get out of debt, not put them in debt that can ruin their lives," Stull said. "We charge rates that are a mere fraction of the 175 percent."
Even so, House Speaker Brian Egolf, D-Santa Fe, told me a majority of his members would not back a bill capping the interest rate at 36 percent.
Instead, Herrera and four other female members of the House devised the alternative proposal — a mix of 99 percent and 36 percent interest rates.
Egolf said he was consumed with other bills, including the state budget, so he hadn't paid close attention to the reform measure on interest rates.
But both Egolf and Alcon are members of the House Judiciary Committee. It was there that Alcon first pushed for a 99 percent interest rate.
Neither Egolf nor any other committee member challenged Alcon on the fairness of a rate that high. They didn't even ask Alcon how he settled on 99 percent. It was, of course, what the industry wanted.
By Friday, Egolf had distanced himself from the bill.
"My involvement in this at this point is zero," he wrote in a text message.
He didn't know it then, but the bill's chance of passage was the same.
Payday lenders have won another round. Consumers lose again, courtesy of the House of Representatives.
Ringside Seat is an opinion column about people, politics and news. Contact Milan Simonich at firstname.lastname@example.org or 505-986-3080.