Payday Cash Loan Agreement Made in New Mexico
By Paul RizzoPayday Loan Writer
Two lawmakers who were carrying rival New Mexico payday loan bills have reached a compromise, Gov. Bill Richardson announced Tuesday.
Appearing at a news conference with Rep. Patty Lundstrom, D-Gallup, and Sen. Bernadette Sanchez, D-Albuquerque, the governor said the new plan includes “reasonable fees but with important safeguards for consumers.”
The proposal for regulating the short-term, high-interest fast payday loans would cap fees at $15.50 per $100 borrowed, plus another 50-cent per $100 fee to establish a state database on consumers with payday loans.
A borrower who didn’t repay his loan on time would automatically be placed into a 130-day payment plan in which there would be no additional fees.
No matter how many payday loans they had, borrowers would be able to borrow only up to 25 percent of their monthly incomes. The new database established under the bill would keep track of cash advance loans.
Before the compromise, both Sanchez and Lt. Gov. Diane Denish had said Lundstrom’s House Bill 92 did not offer enough consumer protection. Currently payday loan companies are unregulated and typically charge interest rates that amount to more than 500 percent annually.
“A sign of a good bill is that everyone’s not completely happy,” Denish told reporters.
Richardson acknowledged the new bill would put some payday advance offices out of business. He said he expects opposition from payday lenders. Although he said the compromise bill would be the toughest payday loan law in the country, 11 states have banned such business.
The House could act on a compromise bill as early as today, Lundstrom said. “I’m glad we’ve come to the table,” she said.
While payday loan companies have mushroomed all over the state in recent years, Lundstrom said her city has the most payday loan offices per capita in the nation. In December, The New York Times published a story about payday loans that focused on Gallup.
A fiscal impact study of Lundstrom’s bill says there are 667 small, personal loan companies registered in New Mexico.
Sanchez helped derail a Lundstrom payday loan bill during a stormy debate in the final hours of last year’s Senate session, saying that bill helped the payday lenders more than consumers. On Tuesday, Sanchez said the compromise bill was a good first step. Her bill, Senate Bill 393, is going through the Senate committee process.
Allen Sanchez, director of the New Mexico Conference of Catholic Bishops, said the compromise would help consumers stay out of a cycle of perpetual debt because it doesn’t allow rollovers — taking out new check cash advance loans to pay off old ones.
“It’s an expensive product, but it’s not the trap that it was before,” said Allen Sanchez, who is not related to the senator.
Ben Heyward of First Financial Credit Union — who is a major critic of payday-loan practices — gave the compromise a somewhat lukewarm endorsement.
“It’s a temporary solution to protect people who need it the most,” he said. “It will stop the flow of hundreds of millions of dollars out of New Mexico.”
Industry spokesman have argued that payday loan companies serve consumers who would be turned down by banks and credit unions.
Richardson said he realized it was important to broker a compromise after Congress passed a law limiting how much payday loan companies can charge members of the military.
The governor, while serving as chairman of the Democratic Governors Association, took several rides on corporate jets owned by payday-loan companies.
