New Mexico regulators work on new payday loan rules
ALBUQUERQUE, NM – It took years for lawmakers in New Mexico to finally reach consensus on overhauling the storefront lending market by capping interest rates. But state regulators have yet to finalize the necessary rules under the new law to strengthen consumer protection and enforcement.
A panel of lawmakers this week heard from consumer advocates pushing for regulations to be completed and loopholes closed.
An interim legislative committee on Monday passed a resolution asking regulators to report on how they enforce the law. This report is expected later this year.
The Financial Institutions Division of the Regulatory and Licensing Department has received four complaints against approved lenders for small loans since January, when the law came into force. The agency did not disclose details of these cases, but said each complaint was fully investigated.
Lindsay Cutler, an attorney at the New Mexico Center on Law and Poverty, said without more information on law enforcement, consumer advocates don’t have a clear idea of how the industry small loans does business under the new law.
“All New Mexicans deserve to have access to fair and transparent loans on reasonable terms, but generations of low-income families and Native American communities have been aggressively targeted by unscrupulous lenders,” she said. stated in a press release.
Financial Institutions Division spokeswoman Bernice Geiger said the agency was reviewing comments gathered from public hearings held earlier this year in Santa Fe and Gallup as it strives to finalize the regulations.
There are now about 600 licensed small loan outlets in New Mexico, according to the agency.
The local storefront loan industry has championed high interest rates as a way to secure borrowing options for low-income residents of New Mexico, where poverty and high unemployment rates are chronic.
Legislation approved in 2017 by the Democratic-led legislature and Republican Governor Susana Martinez included a variety of consumer protections to deter predatory lending practices. Fee and interest limits for loans are combined with requirements that give borrowers at least 120 days to repay in at least four installments, thus eliminating payday loans tied to the next paycheck.
Anti-poverty group Prosperity Works is worried about loan renewals made before the changes are enacted.
Michael Barrio, the group’s advocacy director, said some contracts that were reviewed include provisions that a full default could trigger many automatic renewals without expressed consent and that lowering the interest rate to the new cap. forces borrowers to refinance or seek more senior lenders.
“We actually know that these types of loans are really about keeping people in a cycle of debt rather than freeing them from it,” Barrio said.
Efforts are underway to bring more small loan alternatives to New Mexico. A number of local authorities are already offering moderate interest loans for civil servants with little or no credit history. The loans are repaid by payroll deductions.
The problem is, the program is only available to governments and companies with 200 or more workers. Barrio said this eliminated a significant number of people who could participate given the number of small businesses in New Mexico.