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Repos in 1 in 4 Payday Loans

Repos in 1 in 4 Payday Loans

'It means that probably about 40 percent of the borrowers in 2014 lost their automobiles' - payday lending reform advocate

BY DENNIS DOMRZALSKI

If you don’t want to have your car repossessed in New Mexico, here’s some advice: don’t take out a car title loan. Title loan companies repossessed 9,891 vehicles in the state in 2014, according to report from the New Mexico Financial Institutions Division.

That comes out to a repossession in nearly 25 percent of all loans made. But, because 69 percent of those title loans were renewed, it means that about 40 percent of all people who took out title loans lost their cars, said Steve Fischmann, Co-Chair of the New Mexico Fair Lending Coalition.

Title loan companies made 41,402 loans in the state last year with an average interest rate of 272 percent. The average loan amount was $763 dollars, the FID’s annual report on installment loan products said. Sixty-nine percent of those loans were renewed, meaning there were 20,000 to 25,000 customers, Fischmann said.

“It means that probably about 40 percent of the borrowers in 2014 lost their automobiles,” Fischamnn said. Those loans are typically one-month loans of between $500 and $2,000. They are expected to be repaid with 25 percent monthly interest rates in 30 days. Usually when a borrower goes back to repay, they are pitched to renew the loans. Typically what we see is that a borower may spend hundreds, or thousands of dollars in interest and lose the car anyway. If that isn’t a dangerous, deceptive and fraudulent product, I don’t know what is.”

In all, New Mexicans took out 274,453 high-interest loans in 2014 for a total amount of $174.7 million. They paid $92.1 million in interest and fees on those loans.

Title loans are one of many types of short-term, high-interest loans that are lumped into the category of payday lending. But there are differences in the products, and payday loans are typically very short-term unsecured loans.

Here’s a look at high-interest loan products in New Mexico n 2014:

Title loans

No. of loans: 41,402
Value amount: $35.9 million
Principal repaid: $24.1 million
Average principal: $762
Average interest rate: 271.76 percent
Maximum interest rate: 654 percent
Interest paid: $20.9 million
Fees paid: $598,893

Payday loans

No. of loans: 63,837
Value amount: $24.3 million
Principal repaid: NA
Average principal: $369
Average interest rate: 307.89 percent
Maximum interest rate: NA
Interest paid: $3.7 million
Fees paid: NA

Unsecured installment loans

No. of loans: 97,738
Value amount: $72.6 million
Principal repaid: $53.1 million
Average principal: $916
Average interest rate: 371 percent
Maximum interest rate: 699 percent
Interest paid: $45.6 million
Fees paid: $3.8 million

Installment loans secured by vehicle title

No. of loans: 16,603
Value amount: $15.4 million
Principal repaid: $10.3 million
Average principal: $1,371
Average interest rate: 221.34 percent
Maximum interest rate: 409.57
Interest paid: $8.3 million
Fees paid: $140,342

Secured installment loans

No. of loans: 27,861
Value amount: $9.2 million
Principal repaid: $6.6 million
Average principal: $1,351
Average interest rate: 352.96 percent
Maximum interest rate: 547.50 percent
Interest paid: $5.8 million
Fees paid: $430,101

Tax refund anticipation loans

No. of loans: 27,012
Value amount: $17.3 million
Principal repaid: $15.2 million
Average principal: $1,199
Average interest rate: 316 percent
Maximum interest rate: 2,738 percent
Interest paid: $2.6 million
Fees paid: $210,886

Fischmann and others tried unsuccessfully to get legislation passed in the 2015 Legislature to cap payday loan interest rates a 36 percent. He said New Mexico’s lawmakers are allowing loan companies to prey on state residents.

“New Mexico has some of the loosest loan regulation in the country. There re 29 states that ban title loans altogether,” Fischmann said. “The New Mexico Regulation and Licensing Department has full legal authority to withhold licenses from irresponsible operators, but these licenses get renewed every year. There are nearly 700 loan companies and since 2007, they’ve only withheld one or two licenses. It doesn’t matter how much these companies are ripping off the public, there are never any licenses pulled.”

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Dennis Domrzalski is managing editor of ABQ Free Press. Reach him at dennis@freeabq.com.

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  • rriverstone
    December 19, 2015, 3:39 pm

    There’s some hidden agenda here. Yes, these lenders charge crazy interest; LOTS of people exploit the poor & that’s nothing new.
    Who are these "activists" who pretend they’re fighting for the "rights" of the poor? What is their real agenda?
    They’re certainly not standing up to the bullies who make programs like food stamps, etc. a nightmare, nor standing up to the blatant propaganda & vilification of the poor.
    Yet, they’re pushing hard to take down these predatory lenders. Why? What’s in it for them? Why only and specifically predatory lending?
    See, I live in really awful poverty. I mean, I don’t have running water or a flush toilet.
    Once in a rare while, i need a few hundred dollars in an emergency. I pay back right away and the fees are low. ANd that’s because there are ALREADY protections in place for consumers in New Mexico!
    Now, i never asked for some do gooder to come to my "rescue" and "protect" me from predatory lenders. No poor people did. There’s no organizing activism among the poor. And that’s usually because middle class people have a vested interest in colonizing poverty issues, silencing actual poor people, writing grants for band aid therapy. They don’t want things to change. They don’t WANT us to speak up about our own needs.
    They want to control the discussion for their own agendas.
    Here’s what’s tipping me off that these predatory lending warriors are not legit: IF they really gave a damn about people in poverty, they’d be AT LEAST as vocal about setting up microloan opportunities for poor people.
    I can’t walk into a bank for a loan of $100 to $1000 for moving expenses, car repairs, etc. And they won’t lend me more than that. While my credit score is perfect, THEY decided my income is too low to that the risk i’ll pay it back.
    My only OPTION is predatory lenders.
    But these predatory loan warriors don’t give a damn about me, my emergencies, my needs.
    Otherwise, they’d propose a just, equitable, legal alternative, such as microlending.
    And they don’t. So, I smell a rat.

    REPLY
    • steve fischmann@rriverstone
      January 1, 2016, 11:57 am

      RRiverstone,
      Try joining Rio Grande Credit Union, or Guadeloupe Credit Union they have affordable loan products when you are in a bind.

      Also, we "do gooders" are working on many fronts with cities, counties and the state, as well as with various financial institutions to make affordable loans more broadly available to low income borrowers.

      The rat you smell is not us, it’s the predatory lenders that are currently ripping you off.

      REPLY
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