The New Mexico Subprime Marketplace: Title and Payday Loans in New Mexico
With an increase in income, New Mexico’s poverty rate has decreased, but the state still falls compared to the rest of the country in economic growth. Because of this, New Mexico remains one of just two states where more than 1 in 5 residents live in poverty with a rate of 20.4 percent (the U.S. is 15.5%).1 In fact, New Mexico’s poverty rate is second only to Mississippi.1
Knowing New Mexico is only second only to Mississippi in terms of poverty rate, chances are residents will be searching for ways to make ends meet.1 That often means reaching out to payday and title lenders—an option you will want to avoid. Payday loans and title loans in New Mexico might seem like the easiest solution for combating money issues, but they are not intended to help you out. Instead, these loan options have been created to entrap you in an endless cycle of debt—and you don’t want or need that in this economy.
An Analysis of Payday Loans in New Mexico
Like most states, New Mexico has more payday loan companies than McDonald’s restaurants. Payday loan companies sit at 760 total, while there are only 80 McDonald’s restaurants in New Mexico—that’s more than nine times as many payday loan companies.3
While laws are in place to regulate payday lenders in Mexico, there are loopholes that allow them get around some of those rules In New Mexico, payday lenders offer installment products to evade even the minimal regulatory requirements for single-payment payday loans.4 This allows payday lenders to operate in an environment with few or no regulatory restrictions.4
On average, a loan of $100 given for a period of two weeks, can lead to an APR of 416%.7
The History of Payday Loans in New Mexico
Payday lending companies are very common in poorer neighborhoods (seen more than McDonalds or Burger King). With 22 percent of New Mexico residents having taken out a payday loan, lenders make it seem easy to take out a quick loan for a couple hundred dollars—it helps bridge the gap to the next payday.
In 2007, New Mexico enacted the Payday Loan Reform Law, which allowed payday lenders to provide loans that could carry up to a 416 percent annual interest rate. Addition provisions of the Payday Loan Reform Law of 2007 included a variety of regulations, including a database, loan amount limits, and a right to rescind.6 Despite the law, the provisions have proven ineffective in practice in preventing short-term loans from developing into long-term debt that catches consumers in an endless cycle of debt.6
To curb the predatory lending practices of loan sharks in the early twentieth century, many states adopted a form of the Uniform Small Loan Laws of 1916 that capped interest rates for small loans at 2% or 3% per month.6 However, New Mexico had its own agenda—it enacted small loan legislation in 1939 that did not conform to the Uniform Small Loan Laws.6 Instead, New Mexico developed an interest rate cap of 12% per year on unsecured loans.6
The 1978 Supreme Court decision, Marquette National Bank of Minneapolis v. First of Omaha Service Corp. held that banks can charge the interest rate of their home state regardless of where the loan was made.6
As a result of the 1978 Supreme Court decision, states began to repeal interest rate caps to keep banks headquartered within their borders.6 Between 1981 and 1991, the New Mexico legislature abolished the limits on interest rates in response to the federal deregulation of financial institutions.6 This caused an increase in payday loans and lenders in New Mexico during the 1990s.6
- Maximum loan amount:$2,500
- Loan Term:35 days
- Rollovers Permitted:None allowed
- Fees and finance charges:$15.50 per $100 and a $0.50 verification fee per $100.
- Finance charge on a 14-day $100 loan:$16
- APR on a 14-day $100 loan:416%
- Maximum Number of Outstanding Loans at a Time:Total loans and fees are capped at 25% of your gross monthly income.
- Repayment Plan:Yes, equal installments over a 130-day period with no additional fees.
- Cooling-off Period:10 days after completion of a payment plan. 7
Unfortunately, although these rules and regulations are in place protect consumers in New Mexico, many high-interest lenders have changed the terms and structure of their loans so that the loans no longer fall under the definition of “payday loans” in New Mexico. As a result, lenders can continue to charge interest rates well over 400 percent.9
416% New Mexico Payday Loan APR9
760 New Mexico Payday Loan Stores9
459% California Payday Loan APR9
2,451 California Payday Loan Stores9
Final Notes on Payday Loans in New Mexico
Payday loans in New Mexico are far from helpful for residents in need. Lenders have found ways around consumer protection legislation in order to provide high interest loans. On top of that, payday lenders in New Mexico are even moving to the Internet to provide even higher interest loans. Instead of allowing these loopholes and high interest rates, New Mexico legislature needs to move toward improved rules and regulations to better protect consumers from predatory lending.
An Analysis of Title Loans in New Mexico
Title loans are well-established in New Mexico with more than 194 companies total. In one year alone, consumers took out 12,607 title loans, which equates to 66 loans per store on average.8 Repossession of vehicles is not an uncommon occurrence.9 In 2008 about 60% of car-title borrowers lost their cars to repossession. In 2014, about 10,000 vehicles were repossessed.11
Any way you look at it, title loans are taking advantage of low income families who need the money the most. While consumers think they will be able to pay back their title loan in New Mexico and not lose their car, lenders appear to set them up for failure in terms of repayment.
The History of Title Loans in New Mexico
In 2014, 10,000 vehicles were repossessed by title loan lenders, leaving many New Mexico residents without a means for transportation to and from work.11 Since title loans in New Mexico are codified in law, it means there isn’t much you can do if they follow the rules.
New Mexico title loan fees totaled $29.86 million compared to $3.7 million in payday loan fees.10
194 New Mexico title loan stores12
7,941 State residents per New Mexico title loan store12
672 Alabama title loan stores12
5,427 State residents per Alabama title loan store12
375 Georgia title loan stores12
19,190 State residents per Georgia title loan store12
On June 26, 2014, the New Mexico Supreme Court stood on the side of the consumer in its decision in State of New Mexico vs B&B Investment Group Inc.14 The Attorney General Office’s consumer division brought the case against two small loan companies for predatory lending practices such as charging interest rates exceeding 1,400% per year.13
The New Mexico Supreme Court Ruled against the lenders and determined the high interest rates to be unreasonable and unlawful. While New Mexico has no usury statute, the court supplied a legal basis for future courts to find interest charges as “unreasonable.”14
New Mexico Title Loan Restrictions
There is no cap or term limit on title loans in New Mexico, which means lenders can charge any amount they wish for costs and term limits. In addition to no cap on fees or term limits, the maximum amount allowed for a loan is $2,500.15 Car title borrowers typically have low or moderate incomes, which makes it easier for title lenders in New Mexico to prey on them.
The average title loan amount in New Mexico is $855. At an average rate of 272%, you will end up paying at least $2,325.60 in fees alone—that’s $3,180.60 total for $855.16
Final Notes on Title Loans in New Mexico
New Mexico has made strides for improvement to protect consumers from New Mexico title lenders through case law, but work still needs to be done to improve the rules and regulations of title loans.
Regulating Payday and Title Lenders in New Mexico
It’s unfortunate when you hit a wall, or a “rough patch” when it comes to paying your bills, affording an emergency, or any other unexpected obstacle. So, when this occurs and you need money, where do you turn to? There are options for you, but what you don’t want to do is jump onboard the New Mexico payday loan and title loan train—it will trap you in an endless cycle of debt. But, if you’re already onboard the train, it is important to know what to lookout for. If a lender harasses you or isn’t following the laws of New Mexico, it is your obligation to reach out and report them. With more complaints and reports, the better legislation can fight for consumers like you.
How to Report a Lender in New Mexico
From 1999 to 2014 there were 269 complaints filed with the New Mexico Financial Institutions Division of the Regulation and Licensing Department against small loan companies. 13 However, from 2010 to 2014, over 1,400 complaints were filed with the New Mexico Attorney General’s Office against various payday and title loan companies (accounting for about 22.5%).13
If you have been harassed, or experience a payday or title lender that does not follow the New Mexico laws, it is important to report them. By filing a complaint with the New Mexico Financial Institutions Division, you can help take steps toward improving rules and regulations in New Mexico against predatory lending.
Top file a complaint, download the complaint form and email it to the proper industry manager below:
- State Chartered Banks and Trust Companies – Rebecca.email@example.com
- State Chartered Credit Unions and Endowed Cemeteries – firstname.lastname@example.org
- Small Loan Companies, Collection Agencies, Motor Vehicle Sale Finance Companies and Repossessors – email@example.com
- Mortgage and Escrow – firstname.lastname@example.org
You can also find the contact information for the New Mexico Financial Institutions Division to the right of this page.
- Address:P.O. Box 25101 Santa Fe, NM 87504
- Phone:(505) 476-4885
Outside Help for Payday and Title Loans in New Mexico
Aside from the New Mexico Financial Institutions Division, you can find help and guidance with the Treinen Law Office. As a team, Treinen Law Office strives to protect consumers from rip off businesses and wrongful credit reporting. Treinen Law Office believes the interest rates on payday and title loans are grossly unfair and too high in New Mexico. While these fees are common in New Mexico, Treinen Law Office works with consumers to help them find a way out.
Consumer Protection in New Mexico
The payday loan and title loan industry isn’t making it easy on lawmakers in New Mexico. With every court case against predatory lending, payday and title lenders continue to fight back, and win.
To help New Mexico fight a battle against predatory lending and to better protect you against the vicious cycle of debt, reach out. By understanding warning signs, New Mexico laws, and where to report a lender or seek outside help against payday and title loans, you can help set new laws and legislations in place. Change might not happen overnight (especially with the fight lenders put up), it is a fight worth fighting for residents of New Mexico. Take a stand.
This page is available to provide you with the resources you need to learn more about title loans and payday loans in New Mexico—it has all the information you need, and then some.
Guides to Payday and Title Loans in New Mexico Cities
You know payday and title loans in New Mexico are a problem. But what about at the city level?
Check out these payday and title loan guides for the following cities in New Mexico…
1 “N.M. pverty rate down, but is still among worst in the U.S.”
2 “State Debt” Ballotpedia. Accessed February 13, 2017. https://ballotpedia.org/State_debt
3 “McDonald’s vs. Payday Lenders” California State University Northridge. Accessed March 6, 2017. http://www.csun.edu/~sg4002/research/mcdonalds_by_state.htm
4 “Payday Lending Abuses and Predatory Practices” Center for Responsible Lending. Accessed March 15, 2017. http://www.responsiblelending.org/state-of-lending/reports/10-Payday-Loans.pdf
5 “Grossly Unfair High-Interest Loans are Common in New Mexico” Treinen Law Office. Accessed March 15, 2017. http://treinenlawoffice.com/paydayloans/
6 “Consumer Lending Practices in New Mexico” Legislative Finance Committee. Accessed March 15, 2017. https://www.nmlegis.gov/Entity/LFC/Documents/General_Government/Consumer%20Lending%20Practices%20in%20New%20Mexico.pdf
7 “New Mexico State Information” Payday Loan Consumer Information. Accessed March 6, 2017. http://www.paydayloaninfo.org/state-information/39
8 “Car-Title Lending” Center for Responsible Lending. Accessed February 13, 2017. https://www.tml.org/p/Center%20For%20Responsible%20Lending%20Car%20Title%20Loans%20Report.pdf
9 “It’s time to stop the grand theft auto of title loan companies” Ona Porter and Steve Fischmann. Accessed March 15, 2017. http://nmpolitics.net/index/2015/12/its-time-to-stop-the-grand-theft-auto-of-title-loan-companies/
10 “Payday and Car Title Lenders Drain $8 Billion in Fees Every Year” Center for Responsible Lending. Accessed February 15, 2017. http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf
11 “It’s time to stop the grand theft auto of title loan companies” Ona Porter and Steve Fischmann. Accessed March 15, 2017. http://nmpolitics.net/index/2015/12/its-time-to-stop-the-grand-theft-auto-of-title-loan-companies/
12 “Driven to Disaster: Car-Title Lending and Its Impact on Consumers” CFA. Accessed February 15, 2017. http://www.responsiblelending.org/other-consumer-loans/car-title-loans/research-analysis/CRL-Car-Title-Report-FINAL.pdf
13 “Consumer Lending Practices in New Mexico” Legislative Finance Committee. Accessed March 15, 2017. https://www.nmlegis.gov/Entity/LFC/Documents/General_Government/Consumer%20Lending%20Practices%20in%20New%20Mexico.pdf
14 “Justices crack down on high-interest usury” T&C Management. Accessed March 16, 2017. https://www.abqjournal.com/455047/justices-crack-down-on-highinterest-usury.html
15 “Car Title Loan Law Chart” Loans.org. Accessed March 16, 2017. http://loans.org/auto/studies/car-title-state-laws
16 “Driven to Disaster: Car-Title Lending and Its Impact on Consumers” CFA. Accessed February 15, 2017. http://www.responsiblelending.org/other-consumer-loans/car-title-loans/research-analysis/CRL-Car-Title-Report-FINAL.pdf