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New Mexico rules to cap payday loan fees

May 18, 2006 - Albuquerque, New Mexico

Gov. Bill Richardson and Attorney General Patricia Madrid today announced new regulations aimed at curbing the predatory loan business in New Mexico.

The regulations, which target payday lenders, would go into effect July 16 after a public comment period in June.

Chief features of the regulations set a fee cap of $15.50 per $100 borrowed and limits the total amount borrowed at 25 percent of the borrower's gross income.

Now, it is estimated that people pay fees of between $25 and $35 on loans of $100. That can lead to a cycle of debt the consumer might never be able to pay off, observers say.

"We have to do this," Richardson said during a news conference in Albuquerque today. "We have to stop abusive practices against consumers."

The regulations would:

  • Set a flat fee for new loans and renewals at $15.50 per $100.
  • Give consumers the sole discretion of renewing a loan two times at a maximum fee of $15.50 per $100.
  • Cap the amount of borrowed money at 25 percent of the consumer's gross income.
  • Give consumers the chance to enter into a longer-term payment plan -- up to 130 days -- with no additional fees after a second loan renewal.

"In the past," Madrid said, "people had only two weeks to pay. We are going to lengthen the time. They all want to pay. Now, we are going to make that possible."

Madrid has attempted to get legislation regulating payday loans passed since she became attorney general in 1999, to no avail.

These regulations, she said, do not require legislative approval.

Ed Lopez, superintendent of the state Regulation and Licensing Department, said the public will have the opportunity to comment on the payday regulations from June 15 to June 28.

News Source

The Albuquerque Tribune, Ollie Reed Jr., Tribune Reporter

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