In 2022, New Mexico Governor Michelle Lujan Grisham signed into law a 36 percent interest rate cap that took effect January 1, 2023. The law applied specifically to nonbank lenders, the financial institutions that provide the majority of personal loans to underserved consumers.
This survey had a singular goal: to better understand how this interest rate cap impacted consumers who took out loans with APRs above 36 percent before the imposition of the rate cap. Rate cap proponents often claim that most Americans support capping loans at 36 percent, yet they primarily survey those who are not users of short-term or small-dollar loans with APRs higher than 36 percent. This survey seeks to correct this imbalance by surveying the actual borrowers of these loans.
Key findings include:
Short-term, small-dollar loans help borrowers manage their financial situations, irrespective of the borrower’s income.
The rate cap has failed to improve the financial wellbeing of New Mexicans, specifically those who had previously relied on short-term, small-dollar loans.
Most former short-term, small-dollar loan users struggled with paying their bills since the rate cap took effect on January 1, 2023. At the same time, a majority of borrowers indicated they were unable to access credit at some point following the rate cap.
When unable to obtain credit, consumers said they were left with poor alternatives, including late bill payments, skipping urgent appointments or vital expenses, or pawning valuables.
The vast majority of borrowers want the option to return to their previous lender, demonstrating support for the loan options available before the rate cap.
Read the full study here.