Storefront lenders won another victory Wednesday night, convincing a Senate panel to table a bill that would have capped interest rates on loans at 36 percent.
The Senate Corporations and Transportation Committee stopped the bill from advancing on a 6-3 vote.
Three Democrats and three Republicans voted against the cap. But one of them, Democratic Sen. John Sapien of Corrales, said he only opposed the bill so he later could use a parliamentary maneuver to revive it. Several senators said they hoped proponents of the loan cap could find middle ground with the industry for a compromise.
Sen. Mimi Stewart, D-Albuquerque, who voted for the bill, had a tart response.
“I just don’t believe this industry wants to compromise,” Stewart said.
She said she would buy dinner for the 10-member committee if the industry actually reached an agreement with proponents of the cap.
The state attorney general, Hector Balderas, clergy members and numerous city and county governments have endorsed capping loan rates at 36 percent. Seventeen states already have caps at that rate or even lower.
But storefront lenders came to the hearing with heavyweight lobbyists, including a former Republican attorney general of New Mexico and a former Democratic speaker of the state House of Representatives. Their message was that a 36 percent cap on loans would dry up credit for the most needy people and wreck well-established lending businesses.
One lobbyist, Scott Scanland, said he represents a lending company with 12 stores in New Mexico that pays its employees average salaries of $24,000 a year with benefits.
“This bill will kill jobs because my client will go out of business,” he said.
Democratic Sen. Bill Soules of Las Cruces, the bill’s sponsor, said storefront lenders charge interest rates of more than 400 percent and trap borrowers in a cycle of debt that only deepens as loans are extended.
But Sen. Mark Moores, R-Albuquerque, said a cap of 36 percent sounded arbitrary.
“Why are the 112 of us [legislators] in this building smarter than the free market?” Moores said.
Moores said “Guido on the corner” is the real predator in loans, not storefront businesses. Soules quickly criticized Moores for injecting race into the debate. Moores seemed puzzled, not realizing that Italians often are stereotyped as organized crime members who specialize in loan-sharking.
A few people in the industry said a bill sponsored by Sen. Steve Neville, R-Aztec, is more to their liking. The committee chairman, Sen. Phil Griego, D-San Jose, said he had hoped Soules and the industry would have gotten together to work out a bill that both sides could live with.
But Neville’s bill was only introduced Monday, after Griego finally agreed to give Soules’ bill a hearing. Soules had pre-filed his bill in December.
Two other bills to cap loan rates at 36 percent previously were tabled by a committee in the House of Representatives. If Soules’ bill is not revived, all the measures would likely be dead until the next 60-day legislative session in 2017.