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Looking for Ways to Tame the Payday Loan Sharks in NM

January 2, 2007

New Mexico is one of three states considered to be "saturated with payday lenders," and that spells big trouble for New Mexico's working poor. Legislators will make an attempt to regulate the industry yet again in Santa Fe later this month. State Senator Bernadette Sanchez of Albuquerque has been working to pass legislation capping interest on payday loans at 36 percent.

"A lot of other states actually have an interest cap, and Congress and our President have already taken action to protect our military with a 36 percent interest cap - that's how serious the problem is."

Sanchez says she wants that same protection for all New Mexicans. In the meantime, alternatives to payday lending are popping up.

One New Mexico credit union is hoping to compete with payday lenders and help borrowers learn to save. Ben Heyward is the president and CEO of First Financial Credit Union, which is offering "payday savings loans" where 80 percent of fees will be put into a savings account. He explains that after the borrower completes a financial literacy course and stays away from other payday lenders for a period of time, that account will be turned over to them.

"It just dawned on me that we could afford to use the very fees that people pay as an incentive to kick the habit. So, in other words, we hope to literally work ourselves out of the payday lending business, but that's a good thing."

According to Heyward, the loans will be available first in Gallup. The program will be extended to First Financial branches across the state later this month.

Governor Richardson attempted to regulate payday lenders last summer, but the regulations were thrown out by a court. The state is currently appealing that judgment.

New Mexico is one of three states that Morgan Stanley described as "saturated with payday lenders."

Eric Mack, Public News Service - NM