Gov. Richardson Vows to Tackle Predatory Lending

 

SANTA FE (By Walter Rubel, Las Cruces Sun-News) March 14, 2006 — Gov. Bill Richardson said Wednesday that the state will impose the kind of regulations on payday loan companies that the Legislature was unable to pass.

Richardson issued a moratorium on the licensing of any new payday loan companies in the state, and has directed the Regulation and Licensing Department to consider new regulations limiting renewals and rollovers and capping rates and fees.

Ed Lopez, secretary for Regulation and Licensing, said the state has authority under the existing Small Loan Act to place greater restrictions on payday loan companies.

"We believe we have the authority with our regulations to implement virtually all of the provisions that were within the legislation," said William Verant, director of the Financial Institutions Division of the state Regulation and Licensing Department.

A bill regulating payday loans sponsored by Rep. Patricia Lundstrom, D-Gallup, passed in the House but died the final morning when Sens. Leonard Tsosie, D-Crownpoint, and Bernadette Sanchez, D-Santa Fe, strung out debate because they believed the bill was not tough enough.

"Grandstanding killed an innovative way for New Mexico to deal with predatory lending," Richardson said.

Verant said the new regulations would likely be modeled on failed legislation, with Lundstrom's bill being the "front runner," and would certainly have fee caps and a limit on rollovers.

Richardson said he ordered a moratorium because of evidence that the market is saturated in New Mexico.

"We worked for almost a year with lenders and advocates to have a common-sense bill," Lt. Gov. Diane Denish said. "It would have meant some people would have gone out of business. The worst lenders, the most predatory, would have been put out of business." She said it would still be better to have the permanence that would have come with legislation, but added that the state could not wait to put protections in place.

Lopez said details of the new regulations have not been worked out yet. Once the state drafts a new set of regulations, there would be a public comment period. Verant said he hoped to have the regulations ready in 30 to 60 days.

"Licenses granted to payday loan companies are a privilege to be enjoyed if exercised only under all the terms and conditions in the New Mexico Small Loan Act, and not as a mechanism to abuse consumers in our state," Lopez said.

In public comments to legislative committees this past session, advocates for tougher regulations, including those from the Attorney General's office, said payday lenders prey on the poor with short-term loans that the vast majority will never pay off on time, beginning a cycle of limitless rollovers.

Payday lenders said they provide emergency help to people who have no other options. The reason so many new businesses are opening is because the demand is so great, they said.

The Attorney General's Office has also imposed its own regulations on payday lenders, setting caps on interest rates and a minimum term of 120 days. Those regulations were scheduled to go into effect Feb. 15, but have been challenged in court.

Richardson said they want to change licensing regulations for further protection because of the uncertainty of the court case.