In the 2022 session New Mexico’s Democrat majority passed HB 132 which placed a 36% rate cap on “consumer loans.” Even in an inflationary environment, to middle and upper class people a 36% interest rate is not particularly attractive. Those people have collateral and other means of obtaining cash in a pinch. The Rio Grande Foundation continues to oppose this cap.
The same cannot be said for many poor New Mexicans who live paycheck to paycheck and are one emergency away from losing a job or car. While the legislation has passed, the New Mexican piece does a reasonable job of showing both sides of the debate.
Jobs in the industry are being lost as one unnamed employee says, “It’s kind of sucky that it’s happening, it’s closed our competitors’ stores, and of course we can no longer lend after Dec. 31st, so eventually my job will be gone once we do our collections and stuff like that. A lot of my old peers and co-workers have already lost their employment due to this new change.”
Quoting further from the article:
She said the loans, despite their high interest costs, help people who can’t go to a bank and just say, ‘Hey, I need to borrow this.’ It’s not easy to go to a bank and borrow money.”
Curt Cook, who operates Navajo Trading Co. in Farmington, which stopped offering installment loans about a month ago, agreed.
“Any place where it’s required that [borrowers] have a certain credit, certain assets and things like that to qualify — well, they don’t. That’s why they’re with me,” he said.
Cook said would-be borrowers “don’t quite make the connection” when his company informs them he is no longer offering installment loans.
Killing jobs AND cutting off banking opportunities for low-income New Mexicans is hardly good public policy. Worse, policymakers who supported the ban really haven’t offered any serious solutions.