Weak Regulations Proposed For Predatory Lending

On May, Gov. Richardson and Attorney General Madrid announced a compromise on payday loan regulations. The new rules fall far short of Madrid’s earlier proposal to cap interest rates at 54 percent annually and set a minimum 120-day term for such loans.

“The problem is the new regulations support the industry model of getting consumers caught in a debt trap. If you don’t have $200 today you are not going to have it two weeks later,” said NMPIRG’s Consumer Advocate Ed Mierzwinski.

Although advertised as short term loans, the average borrower in New Mexico has to roll over their loan six times. A two-week loan becomes a three month loan with interest rates at 500 percent. The borrower is quickly paying more in interest than the original amount of the loan. Thousands of New Mexicans are getting caught in a debt treadmill as a result.

“We applaud the Governor’s efforts to protect New Mexicans from payday and other predatory lending practices, but we should follow the lead of other states and ban triple digit lending and give the consumer at least a minimum of 90 days to pay off their loans,” said Mierzwinski.