Indian Affairs Committee panel proposes payday-loan limit
December 8, 2005 - Santa Fe, New Mexico
Payday loans would be forgiven after customers repay 175 percent of the amount that they originally borrowed under a proposed bill endorsed Wednesday by the interim Indian Affairs Committee.
Rep. Patty Lundstrom, D-Gallup, is the chief backer of the proposal, which is similar to a payday-loan bill she sponsored during this year's regular legislative session. That measure, which limited the amount a borrower would have to pay to twice the amount of the original loan, cleared the House but died in the Senate Judiciary Committee.
Payday loans are short-term, high-interest cash advances against borrowers' paychecks.
Efforts to reach consensus on payday-loan legislation have failed for years. This year, the loan industry supported Lundstrom's bill, while Gov. Bill Richardson, Lt. Gov. Diane Denish and Attorney General Patricia Madrid pushed for interest-rate caps on payday loans.
Brian Condit, Richardson's deputy chief of staff, said the governor plans to put the payday-loan issue on legislators' agenda when they convene a 30-day session Jan. 17. But parties appear to be no closer to agreement on the matter.
Madrid has proposed rules capping annual interest rates on payday loans at 54 percent, while a governor-appointed task force is working on recommendations that likely will include limiting the number of times a borrower may renew a loan.
John J. Kelly, task-force chairman, said consumer advocates and loan-industry representatives remain at odds on an interest-rate cap. He said the task force hopes to issue its recommendations by the end of the year, but he was unsure if it would release a consensus report or outline areas of agreement and disagreement.
Lundstrom's proposed bill does not contain any specific limits on annual interest rates. However, the 175 percent repayment cap and loan-renewal limits in the measure would mean a $100 loan would be paid off in no more than 154 days, translating to a 178 percent annual interest rate.
The borrower would end up paying no more than $175 for the $100 loan under Lundstrom's proposal.
The proposed legislation would limit the size of payday loans to no more than $1,500. Lenders would be required to provide borrowers with English or Spanish copies of the loan agreement, and they would be barred from providing more than one payday loan at a time to each customer.
The New Mexican, reported by David Miles
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