New Mexico: Payday Lenders Bypassed Regulations by Calling Their Loans Installment or Signature Loans

After A 2007 New Mexico Payday Loan Law Passed, Lenders Moved To Installment Loans.

“In New Mexico, a 2007 law triggered the same rapid shift. QC Holdings’ payday loan stores dot that state, but just a year after the law, the president of the company told analysts that installment loans had “taken the place of payday loans” there.” [Cincinnati Enquirer, 8/11/13]

Installment Loans In New Mexico Are Widely Available Despite Payday Law And Charge Rates Of Between 520%-780%. “Despite the attorney general’s victories, similar types of loans are still widely available in New Mexico. The Cash Store, which has over 280 locations in seven states, offers an installment loan there with annual rates ranging from 520 percent to 780 percent. A 2012 QC loan in New Mexico reviewed by ProPublica carried a 425 percent annual rate.” [Cincinnati Enquirer, 8/11/13]

After Payday Loan APR Cap Was Enacted In New Mexico, Payday Lenders Changed The Loan Descriptions From “Payday” To “Installment”, “Title”, Or “Signature” To Get Around The Law. “In 2007, New Mexico enacted a law capping interest rates on “payday” loans at 400 percent. Many of the lenders quickly changed the loan descriptions from “payday” to “installment,” “title” or “signature” to get around the law.” [Albuquerque Journal, 11/28/14]

Payday Lenders In New Mexico Avoided The Payday Loan Restrictions In The 2007 Payday Law By Switching To Unregulated “Signature Loans.” “Lawmakers have tried to get a handle on small lenders since at least 1999, but we haven’t seen much impact. In 2007, the Legislature cracked down by limiting payday loans to 35 days, prohibiting indefinite loan rollovers, and capping interest rates at 400 percent. The small lenders just found ways around it. Cash Loans Now and American Cash Loans (with offices in Abuquerque, Farmington and Hobbs) avoided the net by shifting from payday lending to signature loans, which require no collateral.”

In 2009, The State Supreme Court Ruled In Favor Of Borrowers Who Received “Signature Loans” With Interest Rates As High As 1400% Which The Court Called “Unconscionable.” “In 2009 the Attorney General sued the two companies for predatory lending and for an interest rate in excess of 1,400 percent a year. On June 26 the state Supreme Court ruled in favor of borrowers. The interest rate, said both courts, was “unconscionable.” One borrower earned $9 an hour at a grocery store; the $100 loan had a finance charge of $1,000. Another, earning $10.71 at a hospital, got a $200 loan with a finance charge of $2,160. The AG argued that the companies pitched signature loans to poor and unsophisticated people who didn’t entirely understand the terms of their loans. Consumer advocates say these borrowers have lower incomes and less education than the population as a whole, and are often people of color.” [Carlsbad Current-Argus, 9/13/14]