We devote the entire post today to the mangling of SB 66, AKA Predatory Lending bill. For four years social justice advocates and legislators have worked to create a 36% cap on loan rates. Yesterday that effort was undermined by supposedly progressive Democrats. Read on!
“Progressive” Dems Do Predatory Lending Industry’s Bidding: Another Lesson in Legislative Malpractice
SB 66 Permitted Percentage Rates for Loans would have capped small loans at a 36% rate. It was one House committee from getting to the floor and a certain “do pass.” Remarkably, it was gutted in House Judiciary, a committee with an 8-4 Democrat majority. House Rep. Eliseo Alcon introduced the toxic amendment, and Georgene Louis, House Rep. and Congressional candidate, and Rep. Micaela Cadena did the gutting. While Retake is not inclined to hold legislators accountable for just one bad vote, Rep. Louis’ vote is particularly galling, as she is currently seeking Deb Haaland’s seat in Congress. I don’t think U.S. Rep. Haaland, soon to be Interior Secretary Haaland, would have voted as Rep. Louis did. I hope SCC members from CD 1 remember this vote. And maybe someone should suggest to Rep. Louis that she has an opportunity to fix her vote by asking the Speaker to work to amend the bill on the House Floor and restore the 36% cap.
This is another example of how, despite four years of election work resulting in a legislature that would appear to have been utterly transformed, it is still industry lobbyists like former Speaker Raymond Sanchez who continue to run the legislature. And it is not okay. After reading this post, I’d suggest you take a look at an excellent report from Common Cause NM, Lobbying in the Land of Enchantment: Special Interests and Their Hired Guns. Published in 2013 the report uses example after example and strong research connecting the dots to tell the story of lobbyist influence in the Roundhouse. Oh, how things have not changed.
The Retake Our Democracy 2021 Legislative Report Card will dive deeply into the murky waters of the Roundhouse and the various factors that continue to drown the voters’ voices. But today, we focus on SB 66, described quite accurately as the Predatory Lending Act.
Voters have made their views clear. They are seeking bold solutions and strong support and protections for our essential workers and other vulnerable New Mexicans. Almost 80% of New Mexicans support a 36% rate cap, and a sizable proportion of those who oppose it do so because they think that rate is still too high. In that context it is unconscionable that Democrats who most often vote reliably, can fail to do the voters’ will on some key bills. We have seen this in hearings on bills related to Energy Transition Changes, Community Solar, Local Choice Energy, Produced Water, and how SB 66. Here is what transpired.
The Hearing On Monday
At the bottom of this analysis, we provide a link to the hearing recording along with a minute-by-minute guide identifying when specific comments were made.
After a compelling introduction by bill sponsors Sen. Soules and Rep. Herrera, problems began when Rep. Alcon began to bemoan how he worried that someone needing just a $500 loan to fix his car so he could go to work would no longer have options. He grimaced and groaned endlessly. Rep. Ely, bill sponsor Katy Duhigg, and an expert witness from the credit unions repeatedly responded in such logical, fact-based testimony pointing to how:
- Credit unions have for decades offered low interest rates on small loans and they are widely available throughout the state;
- The bill would only eliminate the “bad actors,” laying out in detail how $500 loans become $2,500 loans overnight, and that when those loans can’t be paid, debt levels skyrocket, people lose title to their cars, etc.
- In states with 36% caps, many storefront lenders who were not “bad actors” remained in operation, offering 36% loans;
- The amendment would completely gut the intent of the bill to offer consumer protections and would allow lenders to charge any interest rate they wanted, even in excess of 175%; and
- Many people faced with the need for even smaller loans of say $100 are most often able to secure a loan at a low rate or go to a friend or relative to seek the loan.
And despite these compelling, logical rebuttals, Rep. Alcon continued to act as if he had ear plugs and pressed the same question focused on the guy with terrible credit and a need for $500. And in the end, Rep. Alcon’s amendment would:
- Allow lenders to offer rates up to 99% if a borrower could document having been turned down by another lender; and
- Strip the bill of all the anti evasion language in the bill which is what provides consumer protections. Indeed, by stripping the anti evasion language the bill would have allowed lenders to effectively charge as much as they wanted even in excess of 175%;
But all the discussion from lobbyists and Rep. Alcon had their desired effect. Their “concerns” about how at 36%, some borrowers with particularly weak credit, would find themselves without resources were heard by Rep. Louis and Rep. Cadena.
First Rep. Louis expressed her concerns that the bill would shut off loan options for those with bad credit, leading them to predatory online lenders. She also stated that she fought so hard in 2019 to pass a bill to collect lending data. She then asked that since the data being generated from that bill would be available in April, why not wait to revise what was done until the data is available? Rep. Louis is overlooking how appalled most Democrats were that the 36% rate cap proposed in 2017, was undermined and amended to allow 175% rates. There is an urgency to fixing this problem.
Then Rep. Cadena described concerns stemming from her college experience and her struggle with credit card debt, while failing to note that her credit card interest rate was 24%, not 175%.
While it is legitimate to worry about people with urgent needs for a loan and terrible credit, Rep. Cadena and Rep. Louis somehow managed to have not digested any of the counter arguments to their concerns. Sen. Duhigg’s testimony laid out so clearly that the predatory lenders routinely exploit these people. Sen. Duhigg and Reps. McQueen, Ely, and Chasey had painted such a clear picture of how rather than helping that person with bad credit, it lays them vulnerable to an industry that has a long history of preying on people in desperate need.
But the questions and concerns raised by Reps. Cadena and Louis made it clear that the amendment would pass. And so, Speaker Egolf took a stab at preventing Rep. Alcon’s unfriendly amendment from being passed and spoke of how this session he and Senator Wirth had worked very hard to try to prevent bills originating from one chamber, being subject to unfriendly amendments advanced by fellow Democrats in the other chamber. His commentary was pleading for Rep. Alcon and other Dems in House Judiciary to support each other and not offer unfriendly amendments. He also pointed out that the bill had been amended to push back the implementation date to July 2022. He noted that this would give the legislature an opportunity to revisit the bill in the 2022 session.
Despite this plea, the amendment passed, and the bill then passed as amended and headed to the House floor.
Last night I was texting furiously with Speaker Egolf and ThinkNM’s Fred Nathan who is part of a coalition seeking to establish a 36% rate cap. It was an interesting exchange. Speaker Egolf shared that our only hope to save the bill is to press Democrats like Reps. Herrera, Montoya, McQueen, and others to approve the bill as amended to include the 99% rate cap. These are legislators who would refuse to vote for a 99% rate under any circumstances. But the Speaker’s perspective is that if enough of them supported the amended, gutted bill, the Senate would not concur and he would be able to “take care of it” in conference. If the House does not pass the bill, SB 66 would be dead.
Speaker Egolf’s strategy depends on 36 Democrats supporting a loan rate that is offensive. With all due respect to the Speaker, without an amendment to the bill there is no way that he would be able to garner the needed 36 Democratic votes. And so our strong recommendation is for the Speaker, perhaps working with Rep. Louis, to introduce a floor amendment to restore the rate to its original 36%. In that context it is highly likely that a “do pass” would be achieved. The Senate would not concur with the bill in this form, as there were other amendments inserted in House Judiciary to which they would not agree.
At that point, a public Conference Committee hearing would occur. This committee would be able to address the other toxic elements in the amendment.
And this is how sausage is made in the Roundhouse.
So our action today is to write and call Speaker Egolf to secure an amendment to SB 66 restoring the 36% cap rate and allowing a Conference Committee to fix remaining problems.
- Capitol Phone: (505) 986-4782
- Capitol Room: 104
- Office Phone: (505) 986-4782
- Email: email@example.com
Longer term, we need to advance legislation that would fund the significant expansion of Prosperity Works’ TrueConnect program statewide. In the hearing, we were repeatedly told by predatory lenders offering public comment that people with bad credit might not be able to access loans, and so we need to allow these 99% loans to be available. This was then restated by Republicans and Reps Alcon, Louis, and Cadena. But then, predatory lending lobbyists apparently got their hands on the amendment to create giant loopholes that allow unfettered plundering of desperate people. But a vastly expanded TrueConnect program would establish a legitimate option for those with bad credit.
From Prosperity Works: “TrueConnect is an employer-provided loan product that assists employees in accessing a fair loan. Employers across the state, and across all sectors, have adopted TrueConnect. With no cost or risk to the employer and no credit check for the employee, these loans of up to $5,000 have helped employees address short-term emergencies and reduce financial stress—all of which supports a healthier, more productive workplace.” While this program is currently limited to providing loans to employees, with state funding to guarantee loans it could possibly be operated by credit unions or cities and counties. We need to explore those options and come to the 2022 session prepared with legislation to expand TrueConnect statewide.
In the meantime, we need to press Speaker Egolf and insist that the needed changes occur in public, not behind closed doors. Our fear is that behind closed doors we will get “the best we could do was 99%, but we’ll have time in 2022 to fix it.”
If you want to watch the entire, sorry discussion on SB66, it can be viewed by clicking here. While the whole hearing went for over 4 hours:
- The discussion of SB 66 begins at 12:52 with bill sponsor testimony.
- At 1:22 Rep. Herrera closed sponsor introduction of the bill by outlining her discussion with Pam Cordova who operates a storefront lending business. Cordova told her that she could operate at 36% rate.
- At 1:25 a poll of the public was taken with 67% in support with public comment coming next.
- At 2:39 Rep. Alcon begins voicing his concerns.
- At 2:45 to 2:48 Rep. Alcon asks about whether credit unions are really an option for these people, with Sen. Duhigg giving a precise response as to how credit union loans are available and how storefront lenders exploit borrowers.
- At 2:48:30, Rep. Alcon introduces the amendment but avoids defending it, reporting to “not know much about money” and that he didn’t even know where he came up with the 99% rate. Instead of describing the amendment, he introduced a predatory lending operator to do so. My jaw hit the ground at this point.
- At 2:55 Sen. Soules laid out his opposition to the amendment, labelling it as “unfriendly.”
- But at 2:56 Sen. Duhigg absolutely shreds the amendment….this is worth watching as she describes how the amendment would create a giant loophole that would essentially eliminate all rate limits.
- At 3:05-3:10 Rep. Louis explains her concerns.
- At 3:11 Egolf pleads for Dems not to support the bill.
- At 3:16 Rep. Cadena offers her heartful concerns and reasons for supporting the bill.
Make no mistake, I think Reps. Louis and Cadena were speaking from their heart and were trying to do what is right, but regardless of good intentions, they failed the voters who elected them and who expect them to protect our most vulnerable New Mexicans. They should look to the bill sponsors as models, legislators who stick to principles and weigh the facts much more carefully. Given all that was shared from sponsors and expert witnesses, it is impossible to understand how these two legislators could have voted as they did. I actually really respect both Rep. Louis and Rep. Cadena. I’ve heard them cast difficult votes on tough issues. But when you are an elected official, you should expect to be held accountable by those who elect you. They will have an opportunity to right their bad votes on the House floor this afternoon or tomorrow.
In solidarity and hope,
Paul & Roxanne