Wage, payday rules die

By Zsombor Peter
Staff Writer

GALLUP — The City Council won't be setting its own payday loan or minimum wage rules any time soon.

Defying many expectations, the New Mexico Legislature adjourned two weeks ago without passing either stricter payday lending regulations or a new minimum wage, both initiatives of Gov. Bill Richardson.

Disappointed by the failure of either issue to win the Legislature's support, Mayor Bob Rosebrough was looking for the political will among his fellow council members Tuesday evening to take local action on both issues. He wanted to find out if a majority of the five-member council was ready to at least consider a higher minimum wage and stricter payday lending limits in Gallup.

With only one other councilor ready to join the mayor on either issue, the City Council narrowly shot down his hopes.

Rosebrough was adamant about the need for stricter payday lending limits and a higher minimum wage.

At the federally set $5.15 per hour, Rosebrough said, a rate that hasn't budged for nearly a decade, a working couple still falls below the poverty line. By keeping the minimum wage so low, he argued, the government shifts the private costs of higher wages onto the public sector by creating a greater demand for public services.

A higher local rate, he said, would benefit not only the city's individual workers, but the entire local economy. If people were paid more, they'd have more money to spend. With more money to spend, he said, "it's a certainty that money will be spent in the local economy and circulated through the community."

Only Councilwoman Mary Ann Armijo liked the idea. Bolstered by Santa Fe's recent success defending its own decision to raise its minimum wage in court, she was ready to consider a higher rate for Gallup, but only with the support of both the community's employers and employees.

The rest of the City Council favored placing its faith in the invisible hand of the free market.

Councilman Frank Gonzales said a higher minimum wage would surely raise prices. He said he'd be willing to consider raising the rate, but insisted on the business community's support first.

A government mandate, said Councilman Pat Butler, would prove an "erosion" of the private sector's rights. Besides, he said, any good business will pay its employees more than $5.15 per hour.

Councilman Bill Nechero said it was the employee's responsibility to prove he or she deserved more.

"If the employee's good," he said, "he isn't going to be making minimum wage."

It was Nechero, however, who proved Rosebrough's sole supporter on payday lending.

Consumer advocates blast the payday loan industry for charging exorbitant interest rates and demanding unreasonably short repayment terms. Industry representatives defend their practices as the necessary costs of taking on the added risks of lending to people with limited or tarnished credit.

As a business owner, Nechero has seen his own employees caught in the industry's debt cycles, taking out loan after loan in a futile attempt to pay off the original principal.

"They're just taking everything from these people," he said.

Although the state's Attorney General's Office and Financial Institutions Division are both attempting to force their own rules on the industry, their efforts could be tied up in court for months, maybe years. The Legislature, meanwhile, has been turning down payday lending bills for years.

"I think (the City Council) should do something," Nechero said. "Why should we wait for the governor?"

Gonzales stood by his anti-regulation stance. If there were going to be any more limits placed on the industry, he said, it should come from the state. Armijo also decided the payday loan industry was a matter for the state, not the city. Butler felt satisfied with the moratorium the governor has placed on licenses for new payday lending outlet.

Unless a third councilor changed his or her mind, or the state's courts finally rejected the executive branch's efforts to impose new payday lending rules, Rosebrough said he would not raise the idea of taking local action on payday lending or the minimum wage any time soon.