Loan Shark Attack
Daily Loan Fact
Amazing information about the size and the destructive impact of the New Mexico Small Loan Industry.
Facts About New Mexico's Legal Loan Sharks
March 9, 2015
Even college business textbooks advise avoiding payday loans! "Be wary of using payday loans....These services tend to keep you upside down with your cash flow due to high interest rate charges encouraging repeat use."
Business Math, Volume 1, Jeffry Slater, McGraw Hill Education, Copyright 2014 Pg. 310
March 7, 2015
After Veronica Teico's son was born, money was tight. Her brother had been offered $25 for every family he could bring to a local payday lender, so they went to the payday lender and got a loan for $500 in 15 minutes.
When Veronica went to repay the $580 owed on the loan two weeks later, the lady at the counter said “would you like us to re-loan this $500 to you?” She and her husband said yes. "The lady at the counter was so happy for us and this loan was even faster than the first one." When Veronica went to pay that loan back two weeks later, not only did they immediately offer to re-loan the money to her, they also offered to pay $25 for any family that was referred to them for a loan. Veronica referred another family member and renewed her loan.
After a year of loan renewals she finally went to a credit union and discovered she had pretty good credit! She got a 6.5% loan that allowed her to pay off her payday loans and buy a good used car. The payday loans had been costing her 459%. (Veronica Taico, personal story from Hawaii, March 6 2015.)
March 6, 2015
Ben Francisco lives on the Navajo reservation near Gallup. Now in his mid nineties,he
only recently retired.
Francisco went to a storefront lending shop when his daughter fell ill with cancer and he needed gas money to drive her to her treatments. He took out a hundred dollars here, then another couple hundred there, and soon he was in way over his head. At the beginning of each month, Francisco turned over his retirement and social security checks to the lenders. But that left him without enough money for food or utility bills. His payments on the loans, which had triple-digit interest rates, ballooned until he couldn’t pay them.
Medicaid would have covered Francisco’s daughter’s transportation to medical treatments. But low-income people often aren’t aware of programs and services that are available to them. KUNM News, "Problems Linger for Borrowers of Fast Cash" by Ed Williams, March 5 2015.
March 3, 2015
The storefront lending industry claims it is impossible to make small dollar loans to low income borrowers without triple digit interest rates. Here are links to five separate enterprises with five unique business models that successfully loan to credit challenged consumers at rates between 10% and 36%. Three of them operate in New Mexico, and three of them are for profit. 36% interest caps are not a problem. The inefficient and greedy business models of current lenders are.
March 2, 2015
The Albuquerque Journal calls for 36% interest caps in a February 27, editorial.
"The House Regulatory and Public Affairs Committee need(s) to move (36% APR cap) legislation on to their House colleagues, who should send it to the Senate, which should send it to the governor, who should put New Mexico’s working poor on even borrowing footing with those in 20 other states and the military."
March 1, 2015
HB 356 would permit charges of $175 on a 15 day $325 tax refund anticipation loan. That is an annual percentage rate of 1270% and is three times as expensive as a payday loan! HB 356 will next be heard on the House Floor, and is being touted as a consumer protection measure.
February 27, 2015
One FastBucks employee testified in court that "we just basically don't let anybody pay off a loan.....we tell them how their tax refund is better used at Wal Mart....than at FastBucks, and we basically talk them into making a payment and continuing to be our customer.
February 25, 2015
Howard University has just released yet another study showing that high cost storefront lenders only increase economic suffering in the often low income communities they prey on. Howard Study.
February 24, 2015
NM legislation to license tax refund anticipation lenders (HB 356 and SB 527) would impose fees of up to $229, for the average 15 day $800 loan. IRS statistics show 92% of these borrowers live in poverty and over 62% receive earned income tax credits. Both bills are headed to their second committees this legislative session.
February 23, 2015
The Navajo Nation has endorsed legislation to enact 36% APR caps across all New Mexico state regulated loans. Over 106,000 Navajos live in New Mexico, representing about half the state's Native American population.
February 20, 2015
There is not a single independent study that finds triple digit loans clearly benefit their consumers. There is a library's worth of independent studies that show these loans create financial emergencies. Not one state that has enacted interest rate caps has reported negative effects on borrowers or a reduction in available credit. Industry claims that capping interest rates will create a credit crisis are not only unsupported, all available evidence shows they are false.
February 19, 2015
The Department of Defense excluded installment loans over 90 days and title loans over 180 days from its 36% APR caps for active military when they were first installed in 2007. They have now concluded that these loans are just as dangerous as shorter term loans and are now proposing to enact interest caps across all consumer loan products.
February 18, 2015
Title and installment borrowers in New Mexico paid back $2 for every $1 they were loaned in 2013. Usually in a span of 6-8 months. (NM Dept. of Regulation & Licensing Statistics)
February 17, 2015
The typical credit card holder gets 15 to 30 days of credit for free. The typical payday loan borrower pays 210-417% APR for loans of 15-30 days.
February 13, 2015
Over 230 New Mexico Clergy leaders have signed on in support of 36% interest caps, and the number is growing daily! Like six out of seven voters, they know that calling triple digit interest loans "credit" doesn't change what they really are. Theft!
February 12, 2015
The average credit card holder pays about 15% APR on revolving credit from one to 24 months. The average installment loan storefront borrower in New Mexico pays 486% APR. (NM Dept of Regulatin 2013 statistics)
February 11, 2015
The CEO of one storefront lender stated in an employee training communication that the value of a $300 loan is the $7,500 paid to the company by keeping the borrower on the hook for ten years. (NMAG records)
February 10, 2015
Sean took out a $1,500 one month title loan. He renewed it over 40 times paying $11,500 in fees before receiving help from his family to pay off the principal. (Martin & Adams, 2012)
February 9, 2015
Small loan industry claims that borrowers will be hurt by interest caps contradict the facts. There is no research showing harm to borrowers in states that have enacted interest rate caps. There is no definitive research that shows financial benefit to consumers who take out high cost loans. There is lots of definitive research showing harm to borrowers who take out high cost loans. There is no risk to enacting caps on loan finance charges. The only risk is in not enacting caps which would prevent New Mexico's poor from being bilked out of well over $100 million per year. (DOD, CFPB, CRL, PEW research, NM dept. of Regulation & Licensing statistics)
February 6, 2015
Payday and many short term installment lenders directly debit customer bank accounts to receive payment. A nation wide study of payday loan customers shows 27% incurred bank overdraft charges from loan company account withdrawels. Though the industry claims its loans protect consumers from expensive overdraft charges, it appears they more commonly layer expensive finance fees on top of overdraft charges. (Pew Charitable Trust)
February 4, 2015
Local governments across New Mexico want relief from abusive high cost lending. The following local governments have passed resolutions asking the state to enact interest rate caps.
Alamogordo, Unanimous vote
Albuquerque, 7-1 vote
Bernalillo County, 4-1 vote
Deming, Unanimous vote
Dona Ana County, Unanimous vote
Farmington, Unanimous vote
Las Cruces, Unanimous vote
Mesilla, Unanimous vote
Luna County, Unanimous vote
Santa Fe, Unanimous vote
Silver City, Unanimous vote
The New Mexico Municipal League, Unanimous vote
The New Mexico Association of Counties, endorses cap legislation
February 3, 2015
The New Mexico Council of Catholic Bishops and over 120 faith leaders throughout the state have declared their support for 36% interest caps. The National Association of Evangelicals and the Southern Baptist Convention have issued calls for storefront lending reform. The Bible decries the practice of usury in over thirty passages. Loan sharking has no place among people of faith.
February 2, 2015
Roll all the title loan, payday loan, and installment loan statistics over 175% APR for 2013 together and this is the picture you get.
$653 average loan amount
$1260 the average paid back after rollovers & renewals
4-6 month average loan term
40% of loans not fully repaid.
In other words, the average customer spent $1260 to buy $653 and as often as not still wound up with another debt they could not repay. The average transaction does not look like a loan to us. It looks like a loan scam! *(2013 New Mexico Department of Regulation and Licensing Statistics)
January 30, 2015
Rise Credit gives you complete flexibility to choose the amount and length of your loan.
You can get a $1,000 one year loan for total payments of $3,406. Or you can borrow $5,000 for two years on a total payoff of $13,250.
Click this link and see what loan terms you can get. Scroll down to select your state to play with their loan payment calculator or go to "click here" in the notes below for pre-calculated total costs on a variety of loan amounts.
Note the prominent display of the New Mexico Financial Institutions Division as Rise's regulator at the bottom of the page. They have a link to the Financial Institutions webpage stating that consumer protection is their underlying purpose. It appears the state's main regulatory accomplishment here is to legitimize Rise Credit's operations.
January 29, 2015
Forty percent* of 2013 New Mexico title and installment loans charging over 175% APR were not paid off in full. This despite the fact that the average borrower paid 80-90% in finance charges. For these borrowers, storefront loans added another unpayable debt to their already precarious financial circumstances.
Though lenders call their high cost products "affordable", it is clear that for 150,000* New Mexico installment and title loan borrowers in 2013, high cost loans were the problem, not the solution. *(2013 New Mexico Department of Regulation and Licensing Statistics)
January 27, 2015
High cost small loans cost jobs. A recent independent study shows that for every dollar spent on expensive payday loans, the economy loses $.24 in purchasing power. That's money that could have been spent with local merchants and created local jobs*. The problem is worse in New Mexico where five out of six loan stores** are owned by out of state corporations so the profits go out of state. So while loan stores do hire folks, they get lots more folks fired. They cost New Mexico a net of about 500 jobs in 2013 using the calculations in this study. (*Insight Center for Community Economic Development. ** New Mexico Department of Regulation & Licensing)
January 26, 2015
Six out of seven New Mexicans favored loan interest and fee caps of 36% in a January 2014 poll by Public Policy Polling. The results were virtually identical to a 2013 study by UNM published in the Kent Law Review which found 86% of New Mexicans favor interest caps. Most respondents wanted caps lower than 36%.
January 22, 2015
Title loans are effectively banned in 30 states. New Mexico is one of only thirteen states that have no interest caps on title loans up to $2,500 at all. 29,700 low income New Mexicans took out one month title loans in 2013. The average borrower spent $1721 to repay a $769 loan after renewals.
January 21, 2015
75% of payday loan borrowers nationally roll over their original loan. Half of those borrowers roll over their loans ten or more times. The statistics are similar for one month title loans and short duration installment loans. Because most of New Mexico's loan licensees are outlets of national loan chains, statistics from court records show our numbers are similar. (cfpb payday loan study/ pew charitable trust, how borrowers choose & repay loans)
January 20, 2015
A single mother of three, Henrietta Charley had monthly take home pay of $1,300. Her monthly expenses before food and gas exceeded $1,000. She took out a $200 one year loan from a New Mexico lender to cover a cash shortfall. Finance charges on the loan totalled $2160.40. (NM Supreme Court Records)
January 19, 2015
52,800 New Mexicans took out unsecured installment loans with an average interest rate of 486% during 2013. The average borrower spent $968 to repay a $547 loan. As with that year's 59,600 secured installment borrowers, gouging was the norm, not the exception. (NM Department of Regulation & Licensing Statistics)
January 16, 2015
New Mexico borrower GK took out a $556.82 loan from World Finance on April 8, 2010. It was a 106% APR installment loan of the type the higher volume, lower cost small loan stores claim is safe for consumers. Three years and thirteen roll-overs later GK had made $4,813 in payments and still owed a balance of $2,400 at final default. The loan was secured by personal property valued at $2,700. (NMAG Consumer Protection Division)
January 15, 2015
59,600 New Mexicans spent an average of $1,140 to repay the average $649 secured installment loan over 175% APR in 2013. The typical loan lasted four months and had a 350% APR. Despite this data, many lenders insist installment loans are much safer than payday and title loans and should not be subject to interest rate caps. Secured installment loans are only one of many high cost loan products offered by the small loan industry. (New Mexico Department of Regulation and Licensing Statistics)
January 14, 2015
There are more state licensed loan shark locations than chain fast food outlets in the state of New Mexico. There are currently 684* small loan licensees typically charging 200% to 2000% interest on loans, while only 405 fast food locations are listed in the online business directory Manta.
Fast food chains listed include McDonalds, Burger King, Arbys, Long John Silvers, Blakes, Bob's Big Boy, Jack In the Box, Taco Bell, Kentucky Fried Chicken, Popeyes, Wendy's, Taco Cabana, TJ Cinnamon's, Pizza Hut, Whataburger and many more.*(New Mexico Department of Regulation & Licensing)