The national movement towards a 36% APR Cap resumes. Our bureaucrats continue to ignore the needs of the 50% of US households slowly running out of money. Savings are dwindling, stipends have ended, and the cost of food, shelter & transportation is dramatically increasing.
The New Mexico Legislature is once again considering modifying statutory interest rate caps on loans that are not secured by real estate. Many may not know that 41 years ago, the New Mexico Legislature passed laws eliminating all caps on loans that were not secured by real estate in an attempt to reel in a big fish. This is that story.
The U.S. experienced very high inflation from 1979 through 1981. In each of those years, annual inflation was over 10 percent. Credit card companies couldn’t make any money because state laws limited the interest rate that could be charged on credit card debt. New Mexico had a fairly typical usury statute (NMSA 56-8-11 (1978)) that limited interest rates on unsecured loans to 12 percent and 10 percent on loans secured by personal property, such as a car loan.
Credit card companies began to lobby state legislatures around the country with the carrot that if a state would drop its interest rate cap for credit card loans, the companies would give serious consideration to setting up a national credit card headquarters in that state. Two of the first states to bite were New Mexico and South Dakota. On July 1, 1981, the New Mexico Legislature repealed NMSA 56-8-11 and replaced it with statutes that removed all interest rate caps on credit card loans
(NMSA 56-8-11.1 to 56-8-11.3 (1978)).
After the removal of interest rate caps, Citicorp came calling. It said that it wanted to set up a regional credit card processing center in Albuquerque and would be hiring about 1,000 people. Just one problem: Before Citicorp could do business in New Mexico, it had to obtain an in-state banking charter...
