Payday Loan Times

Isabell Trujillo told New Mexico lawmakers that she took out a payday loan when she needed additional money to pay medical bills, then requested another when she couldn't pay off the sum. And so on. Twelve payday loans later, she owes $1,200 every two weeks in interest alone.

The Alamogordo News reports that the New Mexico Senate Corporations and Transportation Committee heard testimony on four bills last week, each designed to regulate payday loan businesses. The Committee Chairperson, Democrat Shannon Robinson of Albuquerque, said they would work to combine them into a single bill.

Advocates of the payday cash loan legislation say Trujillo's experiences are all too familiar, and that a 14-day loan term sets people up to fail. But Margaret Coyazo-Hernandez, owners of Fast Bucks in Alamogordo, calls the criticism unfair. She counsels borrowers on the dangers of short-term loans, and often advises them to seek other options.

Coyazo-Hernandez said many of her customers have already gone to more traditional lenders — and been denied.

"A lot of these people have already burned their bridges, and they come to me. We tell them, these loans are for short-term needs," she said.

According to Steve Solomon, V.P. of Fast Bucks, people use the cash advance loans for emergencies such as paying their utilities, avoiding late fees or bounced checks, etc.

"Tens of thousands of New Mexicans are asking the Legislature to keep these businesses going," Solomon said. "They vote with their feet every day."

State payday loan operators say they don't oppose regulation, but insist they would be put out of business if the legislation sponsored by Sen. Bernadette Sanchez, an Albuquerque Democrat, is passed. Three other state senators have also sponsored bills, but Sanchez's is the most drastic.

It would extend the length of the loan to 120 days, while others would lengthen it 90 days. Another idea is to limit borrowers to two rollovers and provide options for those unable to pay. The legislation also puts limits on interest rates and restricts the number of loans per person.

Joel Cruz Esparza, head of the Consumer Protection Division of the Attorney General's office, said that payday loan companies are exaggerating when they say the legislation will put them out of business.

"The intent of the legislation proposed by the attorney general is not to eliminate the industry. The intent is to change the product," he said.

Esparza said agencies could continue to offer online payday loans and keep their stores open, but with more consumer-friendly installment loans. This battle between New Mexico legislators and loan providers is similar to many throughout the country, notably a Central Illinois payday loan clash. Will the products offered by cash advance companies be dramatically altered? Only time will tell.