Payday, Mayday! Payday and Title Lender Compliance to Signage and Brochure Regulations Series on Predatory Lending

Executive Summary

The New Mexico Public Interest Research Group (NMPIRG), the Consumer  Federation of America (CFA), and other consumer protection groups have  documented the effect of financial deregulation on American consumers  throughout the 1990's.  One consequence of deregulation of interest rates, high  credit card interest rates and high bank fees has been the rapid growth of the socalled predatory lending industry, which includes check cashing outlets, payday  loan companies, rent-to-own stores, high cost second mortgage companies, subprime auto lenders, traditional pawn shops and the growing business of auto title  loans. This report examines the regulatory environment of payday and title loan  companies in New Mexico.   

Payday and title loans, by definition, are marketed towards cash-strapped  consumers that are struggling between paychecks.  Although they provide rapid  access to cash for many borrowers, their lofty rates are often unsustainable and  trap consumers in a cycle of debt.  Nowhere is this more troublesome than New  Mexico.   

According to a recent study by the U.S. Census Bureau, 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 and,  unfortunately, New Mexico lags in the regulation to protect consumers of these  predatory practices.  

New Mexico is one of only six states with no small loan, or “usury”, cap that  would regulate licensed payday and title lenders. 3  There are 19 states that  prohibit these loans and 25 others that have specific laws that regulate, but  permit payday lending. 4  In New Mexico, only the New Mexico Small Loan Act  currently regulates these lenders.  This merely requires licensing and review of  firms that offer loans of $2,500 or less.