Advocate warns proposed exemptions could undermine interest rate caps and increase costs for borrowers

Katie Gutiérrez, Think New Mexico

Despite the success of New Mexico’s anti-predatory lending law in keeping credit accessible to low-income residents at dramatically lower interest rates, new threats are emerging.

In 2022, Think New Mexico worked with Rep. Susan Herrera, Sen. Bill Soules and members of the Fair Lending Coalition to pass legislation reducing the maximum annual interest rate on small loans from 175% to 36%. The law prevents lenders from charging more than 36% on small loans made in the state, including interest, fees and transfer charges.

At the time, predatory lenders and their lobbyists argued the cap would make it impossible to offer small loans in New Mexico. The American Financial Services Association claimed the proposal would “cut off an enormous number of New Mexico consumers from access to licensed, safe, affordable credit.” Data collected since the cap took effect in January 2023 show otherwise.

The Financial Institutions Division of the New Mexico Regulation and Licensing Department found that borrowers saved more than $50 million in fees and interest on small loans in 2023 and 2024 compared with 2022, the year before the cap.

At the same time, the total dollar value of small loans increased by 31.7%, after accounting for inflation. The number of lenders declined after the cap took effect, but 270 remain in business — down from 531 in 2022 — offering loans that comply with the 36% limit. More credit is being extended to New Mexicans, while borrowers are paying less in fees and interest.

It’s not just small loan institutions seeing increased borrowing. Member-owned nonprofit credit unions, tribal lenders and other financial institutions are providing safer, lower-cost options to borrowers who might otherwise turn to high-cost payday loans.

Data from the National Credit Union Administration show increases in both loan originations and total loan amounts. The number of loans rose nearly 30% between December 2022 and December 2025. These unsecured “payday alternative loans” have been capped at 28% APR since 2010, and growth has continued even with that limit in place.

However, a new group of financial technology companies offering “earned wage access,” or EWA, is seeking an exemption that would allow them to operate without an interest rate cap. Lobbyists pushed for such a carveout in 2025.

EWA products function like payday loans, with principal and fees deducted from a borrower’s account on payday. A report from the California Department of Financial Protection found these products carry an average APR of 367%. If exempted from New Mexico’s cap, borrowers could face costs roughly 10 times higher than the current limit for loans that carry minimal risk to lenders.

New Mexico already provides safe, regulated, low-cost options for small loans. Creating an exemption would undermine those protections and make emergency credit more expensive for the people who need it most.

If you have experienced predatory lending practices with interest or fees above 36%, visit the New Mexico Attorney General’s website and click “Get Help” to file a complaint.

Voters should also urge candidates for governor and the state House of Representatives to reject any exemptions to the small loan rate cap.

Katie Gutiérrez is the Tax, Budget, and Economic Reform Director for Think New Mexico, a nonpartisan results-oriented think tank serving New Mexicans since 1992.