"Don't let a payday loan company be your Santa Claus." That was the basic message Tuesday from Lt. Gov. Diane Denish and Attorney General Gary King.

Denish and King for years have fought for stricter restrictions on payday lending — which critics say is legal loan-sharking. The high-interest loans got their name from transactions where borrowers get short-term advances of cash against a future paycheck.

"During this holiday season, many New Mexicans will be looking for a few extra dollars to buy last-minute gifts, but before taking out a predatory title or installment loan, it's important to know the facts," Denish said in a news release. "I encourage all New Mexicans to seek other options before getting trapped in a never-ending cycle of debt."

Denish endorsed a bill by state Sen. Peter Wirth, D-Santa Fe.

Senate Bill 33 would cap interest rates for all payday loans. For loans of $2,500 or smaller, the APR must not exceed 45 percent. For loans larger than $2,500, the APR must not exceed 36 percent under the bill.

The bill also would establish a statewide database to track the number of loans issued, rates of loans issued, interest rates and specifics of the loan. This, Denish said, would put additional oversight on the industry.

In 2007, the Legislature passed a bill that put a cap on the fees lenders can charge consumers — $15.50 for each $100 borrowed. Terms of loans were limited to a maximum of 35 days.

But even before the law went into effect, watchdogs said there were gaping loopholes. The Center for Responsible Lending, a nonprofit research and policy group, told The Associated Press in 2007 that New Mexico's law didn't impose a meaningful cap on loan costs and won't prevent borrowers from becoming mired in debt. "In those states that have those types of protections that New Mexico is just now implementing, they have some of the worst debt-trap lending in the country," a spokeswoman told the wire service.

King said Tuesday, "Earlier this year my office filed lawsuits against two lenders who were using a loophole in the law to continue to charge extremely high rates, in some cases, more than 1,000 percent. These practices take advantage of consumers and are against public policy and will be vigorously challenged by the Attorney General's Office."

He was referring to a case against Farmington-based Cash Now Loans, which allegedly prolonged the repayment time on its short-term credit, thus manipulating a loophole in a state law that caps fees on such loans. According to the lawsuit, the company put borrowers on 12-month repayment plans for loans of $100 — which ended up costing customers more than $1,000, or 1,000 percent annual interest.

King's office also has filed charges against branches of Fastbucks, another payday lender.

Contact Steve Terrell at 986-3037 or sterrell@sfnewmexican.com. Read his political blog at roundhouseroundup.com.