Payday, Heyday! Measuring Growth In New Mexico’s Small Loan Industry

Executive Summary

Financial deregulation has led to explosive growth of the so-called predatory lending  industry, which includes check cashing outlets, payday loan companies, rent-to-own  stores, high cost second mortgage companies, sub-prime auto lenders, traditional pawn  shops and the growing business of auto title loans. This report, the second in a series on  predatory lending, examines the rapid growth of the payday and title loan industry in  New Mexico in the 1990s. 

Payday and title loans, by definition, are marketed towards cash-strapped consumers who are struggling between paychecks. Although these predatory loans may provide rapid  access to cash for many borrowers, their triple-digit interest rates and other industry  practices are designed to trap consumers in a cycle of debt. Predatory lending is a serious  national problem, but nowhere is it more troublesome than in New Mexico.   

New Mexico has the highest percent of its citizens living in poverty (19.6%). Additionally, New Mexico is one of two states with more than a quarter of its children  living below the poverty line. These citizens are most vulnerable to predatory lenders.    

NMPIRG Education Fund examined the growth of the predatory payday lending and title  loan industry since 1990, based on the data available. As the previous report in this series,  "Payday, Mayday!," shows, the new disclosure regulations are modest first step, yet there is  still much to be done. Payday, Heyday! seeks to answer some of these serious questions  and further examine the rapid growth of this fast loan industry.    

This report examines growth in the small loan industry in New Mexico, with an emphasis  on payday loan and auto-title pawn companies over the past decade.  This report explores  the impact of these services on consumers and includes data on the distribution and  ownership of these firms, while making recommendations to consumers and  policymakers.