New Mexico Advocacy Group Celebrates Credit Desert
This week in the Albuquerque Journal, the group Think New Mexico applauded imposition of a 36% rate cap in the state. But new data and research indicates that rather than helping New Mexico consumers, financial pain and hardship is on its way to the Land of Enchantment.
- A new study from J. Brandon Bolen of Mississippi College, Gregory Elliehausen of the Federal Reserve, and Dr. Thomas Miller of Mississippi State University, found that after the imposition of a 36% rate cap in Illinois, about 36% of those seeking small dollar loans no longer qualified due to poor credit or no credit. In short, folks who needed financial assistance the most couldn’t access safe, responsible credit.
- The 2022 Annual Report from the Congressional Black Caucus Institute found that “proposals to protect consumers from predatory practices through a 36% rate cap would cause more harm than help by limiting consumer access to credit.”
- The National Commission on Consumer Finance, Financial Health Network, and the Consumer Financial Protection Bureau’s own Taskforce on Federal Consumer Financial Law confirmed that rate caps are harmful and unworkable.
Consumers most in need of credit access in New Mexico are already seeing the effects of the counterproductive rate cap. Comparing numbers from the 2021 New Mexico Small Loan Act Annual Report with the current small lending directory shows that more than 215 lenders have left the state. That is roughly 33% fewer credit options for New Mexicans.
Think New Mexico should try to understand the implications of the policies they propose before they force them on people they claim to want to help.
January 18th, 2023 by Dan Bucherer