LETTER: Indigenous communities need legislative action to end predatory lending
It is urgent that the Legislature and Governor Lujan Grisham enact Bill 132 (Rep. Herrera, Speaker Egolf and Rep. Garratt) in the 2022 session to reduce the maximum annual interest rate on small loans from $175 %, one of the highest rates. rate in the nation, at 36%.
This question is personal to us, as the burden of predatory lending does not fall evenly on all New Mexicans.
Even though Indigenous lands make up less than 10% of the state’s geography, 64% of New Mexico’s predatory lenders operate within 15 miles of our reservation communities. It is our families, friends and neighbors who are caught in the cycle of insurmountable debt created by the high interest structure of predatory lending. This cycle drains the financial resources of individuals, families and our communities, and causes great personal and financial turmoil.
As proud members of the board of directors of Think New Mexico, the nonpartisan statewide think tank whose 2020 report made the compelling case for capping interest rates at 36% We know that a 36% interest rate cap can work because the federal government and other states have proven this.
Access to capital has always been a privilege offered to the American people. It is this access that fosters entrepreneurship and innovation among individuals and businesses. A cap of 36% interest on high-risk loans is a fair and competitive rate as determined by the federal government.
In 2006, the Department of Defense acknowledged that predatory lending had an impact on national security because so many service members were trapped in high-interest loans. So Congress and President George W. Bush, working in a bipartisan fashion, passed the Military Loans Act, capping annual interest rates on loans to military service members and their families at 36%. Thanks to this federal law, Native American service members and their families are already protected from predatory lending — but many families remain at risk.
At least 14 other states have passed hard caps of 36% APR or less on car titles and installment loans and have also eliminated or severely limited payday loans. Every time one of these laws is passed, high-cost lenders claim that communities like ours would lose access to credit. It’s wrong.
In fact, responsible lenders remained in these states and continued to offer loans at 36% or less, low-cost loans from credit unions increased, and community institutions ensured that affordable credit was widely available. . In South Dakota, for example, after interest rates were capped at 36% in 2016, two Indigenous-run Community Development Financial Institutions (CDFIs), the Black Hills Community Loan Fund and the Four Bands Community Loan Fund, have provided millions of dollars in affordable loans. loans to needy borrowers.
Here in New Mexico, we have 142 credit union branches statewide, as well as 17 CDFIs. A 2015 report from the New Mexico Legislative Finance Committee noted that “Native Community Finance, a CDFI, is able to provide financial advice and refinance loans at annual interest rates of less than 15% for subprime borrowers. Credit unions and CDFIs are ready and able to meet the financial needs of our communities at affordable rates.
Last year, Native American leaders including the All Pueblo Council of Governors and the Navajo Nation Council testified in favor of legislation that would have lowered the maximum annual interest rate on small loans from 175% to 36%. . The bill was also supported by the Native American Voters Alliance, the cities of Albuquerque and Las Cruces, and the counties of McKinley and Valencia, among others.
We were very discouraged when last year’s bill was amended in the House to allow 99% interest rates on all loans under $1,100, more than two-thirds of all small loans. The Senate naturally refused to support this excessive rate, which had been proposed by lobbyists for predatory lenders, which meant that the reform was postponed for a year and the rates remained at an inadmissible level of 175%.
Lujan Grisham and many lawmakers have expressed their support for Indigenous nations and their desire to end predatory lending. The time has come for lawmakers, including those representing the Indigenous communities targeted by these lenders, to step in and pass House Bill 132 to finally put an end to this financially exploitative practice.
LaDonna Harris is a citizen of the Comanche Nation and founder of Americans for Indian Opportunity.
Notah Begay III is Navajo-San Felipe-Isleta Pueblo and the founder of the NB3 Foundation