ALBUQUERQUE — Neon signs, some flashing neon, lure passers-by along historic Route 66 with promises of quick cash if they hit a dead end. Window dressings in malls, converted gas stations and other storefronts in New Mexico’s largest city signal to potential customers that they won’t have to “pay the maximum”.
The payday loan and home deed industry says that despite a negative reputation, small lenders offer one of the few options for low-income residents in New Mexico, where high poverty and unemployment rates are chronicles.
“People need money,” said Charles Horton, a New Mexico native and founder of FastBucks. “We’re licensed, we’re regulated, we don’t break kneecaps or do anything illegal to do the collections. What I always say is find something better that works and implement it.
The industry is once again the target of New Mexico lawmakers, as a pair of bills pending in the House and Senate call for interest rates to be capped at 36% on small loans issued by non-federally insured lenders.
Consumer advocates argue that New Mexico would not take a giant leap forward with the legislation. About 30 states have already banned auto title loans, and a dozen of them have capped rates at 36% or lower.
The most recent data from New Mexico regulatory and licensing officials shows that interest rates on title loans can range from an average of 238% to over 450%. Installment loans can go much higher.
Short-term, high-interest lending practices have been a target of consumer advocates for decades in New Mexico, but efforts to curb the activity are collapsing year after year. Some blame lobbyists; others blame the lack of political will.
Rep. Patricia Roybal Caballero, an Albuquerque Democrat who is sponsoring one of the measures this year, said predatory lending practices have become more urgent as state officials seek comprehensive ways to revive the economy. gloomy while helping working families. She sees the proposed cap as part of the state’s fight against poverty.
“They’re just targeting the state of New Mexico because we have a vulnerable population — and that’s what we want to stop,” she said. “The main thing is its exploitation.”
Of the more than 23,000 title loans reported in New Mexico in 2015, state figures show that about two-thirds were renewed, refinanced or extended. Consumer advocates argue that current interest rates make it difficult to repay loans along with other fees, forcing borrowers into a cycle of debt.
Ona Porter, head of the nonprofit Prosperity Works, said the borrowing was the result of people on limited incomes trying to bridge a gap between monthly expenses and income.
“They have all sorts of very creative ways to make this work, but one accident on the road – a hospital bill, a co-payment they can’t find, an explosion – and the whole house of cards comes crashing down. That’s when they try to fill that gap with one of these loans,” she said.
Porter argued that there are many laws aimed at protecting consumers when it comes to food, toys and drugs. “It’s an odious exception,” she said.
The industry says the proposed cap would force loan stores across the state to close.
“Banks don’t give people loans for $300 to $400 for a reason,” Horton said. “A two-week or one-month loan for $300 at 36% interest is only a few dollars, and you can’t afford rent and employees and especially bad debts for a few dollars. “
One proposal that interests Horton and lawmakers is a new loan option that would allow workers to draw interest rates on their wages that would be based on a percentage of monthly income. It would be billed as a social benefit but would be administered by a third party. Financial education would come with these loans.
Porter said Dona Ana County, Las Cruces, Albuquerque, Santa Fe Public Schools and other government employers are considering the program, and advocates hope the state will too.
Surveys indicate that at least 20% of public employees use payday loans, securities and other types of installment loans, Porter said.