Recently proposed legislation would allow New Mexico state employees to take out short-term personal loans and then repay them through their paychecks.
This bill was introduced by Democratic state Senator Bill Tallman, who previously worked as a city manager for several medium-sized cities across the United States. “It’s a nice benefit we can give to state employees,” Tallman said, explaining that this legislation will give state employees borrowing options so they don’t have to resort to high-interest storefront lenders.
Consumer advocates have long decried many of the predatory lending practices that have taken place in New Mexico, a state that has one of the highest poverty rates in the country. Many New Mexicans are unable to borrow money from a bank, and they often resort to storefront lenders, who have historically charged astronomical interest rates.
In an effort to cut down on these predatory lending practices, New Mexico passed a bill in 2017 that caps the annual interest rate on small personal loans at 175 percent, a rate that many consumer advocates argue is still too high. However, Tallman’s proposed bill would limit the interest rate to 30 percent for state employees and cap the repayment at 12 percent of their gross salary.
Many public agencies in New Mexico are already a part of a program called TrueConnect, which offers short-term loans that can be repaid through employees’ salaries. For instance, the Santa Fe Public School System offers its employees loans through TrueConnect ranging anywhere from $1,000-$3,000. And according to district spokesman Jeff Gephart, after paying its own administrative expenses the district doesn’t make any money off of these loans.
The bill would also require the New Mexico Department of Finance and Administration to come up with a loan program as well.
The New Mexico state government has almost 20,000 employees, and this bill could minimize the burden of debt on many state workers. If passed, this bill could help many state employees, especially those with large amounts of credit card debt who aren’t eligible to take out a personal loan through a bank or other lender.
However, it remains to be seen how the average consumer in New Mexico who is not employed by the state will be affected going forward. While the recent cap on interest rates will likely save many borrowers money, it also may mean that others that are struggling won’t meet the requirements to take out a loan.
Author: Andrew Rombach
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