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A payday loan bill for consumer protection keeps its march through the New Mexico Legislature.
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A bill that would inflict new rules for consumer protection on the payday lending industry keeps its march through the New Mexico Legislature this week. But it's no longer the bill it used to be when it first came out in Santa Fe. Rep. Patricia Lundstrom, D-Gallup, said she didn't mind the changes made by her House colleagues to the bill she introduced. But it's only separated the groups at either extreme of the debate further apart. There still are some industry representatives who feel indignant about the fact that they're being singled out at all. The most loyal consumer advocates didn’t have a high opinion of the bill to begin with, and say the changes only worsen it. Legislators have been struggling with the idea of imposing regulations on the payday lending industry, which offers cash advances against a customer's payroll check, for years. Many believe their short refund terms and high interest rates averaging out more than 500 APR in agreement with the New Mexico Attorney General's Office entrap customers in cycles of debt. As presented, the key point of Lundstrom's bill suggested a cap on the sum of money a customer could borrow from a loaner at either $1,000 or 25 percent of his or her gross monthly income, whichever was less. It also offered charging borrowing fees that, as Lundstrom stated, would effectively restrain interest rates to 92 percent. The bill was doing fine until it was voted down by the House Judiciary Committee. It its place, the committee thought well of a substitute that maintained most of the bill's original language, but raised the cap on a loan to $1,500 or 30 percent of a customer's gross monthly income. Lundstrom said she agreed to the changes, and that religious groups together with the AARP had no problems with them either. Lundstrom personally had suggested a $1,500 cap in previous efforts to control the industry. So why did she stop at the $1,000 cap in her latest effort? The bill, introduced by Lundstrom, was actually the child of a task force Gov. Bill Richardson convoked last year to come up with a list of regulations that actually had an opportunity of passing the Legislature in 2006. The assembly succeeded in finding common grounds on a majority of ideas despite the all group's diversity. But general agreement on several critical points wasn’t reached even after eight meetings over the course of three-and-a-half months. Among those points there was the question how to restrict the amount of a payday loan. "Apparently" said Chris Cervini, Lt. Gov. Diane Denish's chief of staff, "(the bill) is not a consensus of the task force, but it is a reflection of the ideas of the task force." Arturo Jaramillo, General Services Cabinet Secretary, who assisted in drafting the bill, said most of the task force agreed on $1,000. From the beginning some industry representatives were insisted on not less than $1,500. An attorney for Fast Bucks, Stephen Solomon, who has an outlet in Gallup, feels like there isn’t any good reason for people to cavil at the payday industry. He wondered "Why should payday loans be targeted and restricted?" "Our decision allows our clients to keep their lights on, their homes warm." Also he added that "New Mexicans wouldn't keep walking through their doors if they didn't want their services." Perhaps nowhere more than in Gallup the state has ever seen rapid growth of payday outlets across the state over the past decade. Solomon pointed that "there wouldn't be so many stores unless there was a need". "Customers speak with their feet." Even the industry's most indelicate critics don’t say New Mexicans should not be able to get payday loans. The only thing they want is to make sure they can all do so on reasonable terms. The director of the New Mexico Public Interest Research Group, Jeanne Basset, highly values Lundstrom and every other government official willing to get down to the issue, but she does not believe the Gallup representative's bill does the job. The fees she's offering aren't nearly as effective as a restriction on interest rates, said Basset, who'd prefer a maximum APR of 54. She added that most customers currently have to pay back their loans in no more than 14 days, which gives the lenders the possibility to trap customers in cycles of debt and it often takes several months even years to get out of. However, the substitute bill does not mandate a longer repayment period. Moreover, it does not even guarantee 14 days. "Our main concern is that the bill will not stop the debt circle," she said. "Although it's great they're trying to do this, let's do it in a way we know helps (borrowers) escape the debt trap". The substitute version of Lundstrom's bill has already passed the House 63-4 and now the Senate Judiciary Committee will have to make a final decision about it. Payday Loans Articles Dollar Financial Corp Announces the Transition of Its U.S. CustomCash® Installment Loan Product to an Internet Based Platform; Reaffirms Previously Issued... 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