New Mexico puts the brakes on new payday loan licenses
May 25, 2006 - Santa Fe, New Mexico
The state has not issued a new license for a payday loan company since a moratorium was imposed in March, and will not issue a new license until the Legislature acts to change the laws regulating that industry, said Edward J. Lopez, superintendent of the state Regulation and Licensing Department.
The earliest that could happen is in January, when the Legislature meets for a 60-day session.
Until that time, the state will impose its own set of regulations on the industry, and will prevent any new businesses from opening, Lopez said.
"We are going to end the lack of protection," he said.
Darrin Andersen, president of the Community Financial Services Association of America, said in a prepared statement that they were concerned that state regulations would restrict New Mexicans' access to lending services.
"CFSA members do not support the placement of arbitrary restrictions on their customers, who are hard-working, educated adults, capable of making appropriate financial decisions for their families," Andersen said in the statement.
Steven Schlein, a spokesman for the Financial Services Association, declined to comment on the moratorium, and said he could not expand on the prepared statement until the official version of the proposed regulations is entered.
The should happen by June 15, Lopez said.
The proposed regulations would:
- Give consumers sole discretion to renew a loan two times, at a maximum fee of $100.
- Prohibit consumers from borrowing more than 25 percent of their gross monthly income.
- Provide a payment plan of up to 130 days, with no additional fees, after a second renewal.
- Set a flat fee for new loan renewals at $15.50 per $100.
The state will also launch a campaign to inform consumers that they do not have to repay payday loans made by companies not licensed to issue such loans.
Lopez said his department is doing the final cleanup on the proposed regulations, and they will be entered into the Public Register on June 15. There will then be a two-week public comment period. Comments will be taken by mail and e-mail, instead of holding a formal hearing.
"We feel it's going to yield a higher-quality level of feedback," Lopez said.
The comments will be reviewed, and a final decision will be made June 30, Lopez said. It is expected that the new regulations will become effective July 15.
Madrid said payday loan companies have boomed in New Mexico because it is one of a few states without a usury cap.
"The cycle of debt predatory lending creates for New Mexicans can be devastating," Madrid said. "These proposed regulations stop that cycle. They guarantee payday loan consumers the right to enter into a payment plan that provides needed time and creates a reasonable approach to paying back the debt."
Gov. Bill Richardson issued the moratorium and first announced that he would impose new regulations through the Regulation and Licensing Department days after the close of the legislative session, after lawmakers were unable to reach a compromise on a number of different bills dealing with payday loan regulation.
Senate Minority Whip Lee Rawson, R-Las Cruces, is among a bipartisan group of lawmakers who have been pushing for several years for tougher payday lending regulation. He said the proposed reform falls short because it does not give consumers the option of going to an installment loan.
"What they are doing is simply legalizing the status quo abuse of the consumer," Rawson said.
Sam Thompson, a spokeswoman for the Attorney General's Office, said the 130-day payment plan is a huge improvement over current law, in which consumers must come up with one lump payment at the end of the loan's term.
Las Cruces Sun-News, Walter Rubel, Sante Fe Bureau Chief
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- New Mexico Payday Loan Regulation [May 29, 2006] -
- New Mexico puts the brakes on new payday loan licenses [May 25, 2006]
- Judges won't hear payday loan cases [May 19, 2006]
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- Payday loan company makes travel donations to ... Richardson [April 1, 2006]
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