Payday loan regulation bill passes Senate
March 16, 2007 - Santa Fe, New Mexico
A compromise bill regulating payday lenders has cleared the Legislature and is now awaiting the signature of Gov. Bill Richardson so it can become law.
The issue has been contentious for several years, with the final hours of last year's legislative session marked by debate that stalled action on other bills.
"This bill protects the most vulnerable consumers while keeping some short-term loans available to the public," said Lt. Gov. Diane Denish, who worked to get the bill passed.
The measure was one of Richardson's priorities for the session that ends Saturday. He announced a month ago that he had brokered a compromise in the longstanding dispute.
Critics of payday loans say the short-term, high-interest loans leave some of the poorest New Mexicans mired in debt, as they "roll over" loans -- taking out new ones to pay for the old ones.
The legislation doesn't permit rollovers. It allows loans for anywhere from 14 to 35 days, with the fees capped at $15.50 for each $100 borrowed, plus an additional 50 cents to fund a new loan database.
A borrower who couldn't repay a loan would automatically be offered a 130-day payment plan, with no fees or interest. Once the loan was repaid, the borrower would have to wait 10 days before obtaining another one.
The bill passed the Senate on a vote of 37-5 and went back to the House, which agreed to minor changes made by the Senate.
Opponents tried unsuccessfully to get amendments passed that would raise the fees charged by lenders and shorten the payment plan period.
"It just doesn't seem to be good policy to create laws that give people a disincentive to make timely payments on money that is being loaned to them," objected Sen. Mark Boitano, R-Albuquerque.
Critics also predicted that the legislation would drive one-third of New Mexico's nearly 300 payday lenders out of business.
"If you're good to your customers, they're going to come back," responded Sen. James Taylor, D-Albuquerque, who voted for the bill.
Denish said she hopes the bill will encourage banks to establish "a new customer base," giving payday loan customers access to the financial mainstream by helping them establish and keep savings accounts and a good credit standing.
The Santa Fe New Mexican, Deborah Baker, AP Writer
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