ACTION ALERT: Stop the Trump administration from allowing predatory lenders to target low-income families

The federal Consumer Financial Protection Bureau was created to protect people from predatory lending practices. However, under the Trump administration, the CFPB is now proposing to gut important consumer protections from the 2017 Payday Loan Rule, putting the interests of unscrupulous lenders over our families.

Please tell the Trump administration not to repeal regulations that protect low-income borrowers!  

In 2017, after conducting extensive research on storefront loans and payday lending, the CFPB finalized regulations to protect people from some of the worst predatory lending practices. The 2017 Payday Rule, scheduled to go into effect this August, mandates that lenders assess a borrower’s ability to repay a loan as a condition of making high cost title and payday loans.

Trump’s CFPB is proposing to revoke this protection that requires lenders to only provide loans that can be repaid, prioritizing the profits of payday and car title lenders over the consumers the agency was created to protect.

The storefront lending industry is built on making loans that borrowers cannot afford to repay. Payday lenders encourage borrowers to rollover their loans and take on more debt when they cannot make payments.

The debt trap is still common in New Mexico even though the state no longer permits short term loans. Instead, in our state lenders trap families in longer term debt at rates as high as 175% APR. Many payday lenders are national corporations that do business in New Mexico.

The 2017 Payday Rule should be implemented as it was originally written.

Protect the rights of consumers to fair loans by submitting your public comment! 

Information on submitting your comments and suggested content is below. 

Submit your comment here: https://www.federalregister.gov/documents/2019/02/14/2019-01906/payday-vehicle-title-and-certain-high-cost-installment-loans’

The deadline is May 15, 2019. 

To maximize its impact, make sure at least a third of your comment is original text; otherwise, the CFPB might not consider it a valid comment. It is most important to note how high cost loans are harmful in our state, even if your comment is very brief. 

Content to consider in your comment: 

The 2017 CFPB Payday Rule is vital in stopping the debt trap of payday lending.

  • Requiring payday and car title lenders to assess whether customers can afford to pay loans back before entering into a contract is a commonsense foundation of responsible lending.
  • Payday lenders will stop at nothing to prevent this reasonable requirement because they want to perpetuate their business model that is driven by trapping people in longterm debt. 
  • The CFPB says that repealing the Payday Rule will be a “benefit” to payday lenders, but it will directly harm consumers who are stuck with unaffordable loans.
  • Rescinding the 2017 Payday Rule ignores extensive public comment and a wealth of research on the dangers of unregulated payday borrowing conducted by the CFPB itself.
  • The debt burden of payday loans forces families to choose between paying their bills or face ever-growing fees including overdraft fees, closed bank accounts, and even bankruptcy.
  • For car title loan borrowers, there is a huge risk that a family will lose their vehicle – frequently a low-income household’s sole means of getting to work, school, or medical appointments.

The proposal will hurt low-income borrowers.

  • In name, payday loans are not allowed in New Mexico. In reality, longer term installment loan products have taken their place, extracting just as many resources from cash-strapped families regardless of what they can afford.
  • Most storefront lenders in New Mexico operate in multiple states. Allowing the 2017 Final Rule to go into effect as planned will create a norm for the storefront lending industry that will help New Mexicans who take out loans from multi-state lenders and could support the development of similar consumer protections in New Mexico state law.

The CFPB should both implement the 2017 Payday Rule, and also study the impact of similar protections on longer-term loans to protect consumers across the country from predatory debt trap practices.

Bill closing loopholes in small loans law awaits governor’s signature

SANTA FE—The New Mexico Senate passed a bill today cleaning up state law that regulates storefront lenders. House Bill 150, Installment & Small Loan Changes, protects New Mexico borrowers by ensuring accountability and transparency in the storefront lending industry. The bill now awaits Governor Michelle Lujan Grisham’s signature for approval.
 
“Everyone deserves fairness and transparency when taking out a loan,” said Lindsay Cutler, attorney at the New Mexico Center on Law and Poverty. “HB 150 cleans up loopholes in state law by mandating effective data reporting to the state and providing consistency so all New Mexico families can receive fairer loans.”

New Mexico’s first across the board interest rate cap went into effect in January 2018, capping interest rates on storefront loans at 175 percent APR. However, high fees and loan rollovers continue to drain income from New Mexico borrowers. The two laws that regulate storefront lenders, the Small Loan and Bank Installment Loan Acts, still contain inconsistent fee and disclosure provisions, do not require sufficient reporting to the state’s Financial Institutions Division to enforce consumer protections, and do not make clear borrowers’ rights on loan renewals.

If signed into law, HB 150 would:

Require lenders to provide effective data on small loans, enabling the FID to verify storefront lenders are adhering to small loans law and for the state to evaluate how the law is impacting New Mexicans;

  • Allow borrowers 24 hours to rescind a high-interest loan;
  • Align fee provisions and disclosure requirements so consumer protections are consistent for all borrowers;
  • Protect New Mexican borrowers from potential loopholes when they renew or rollover loans by clarifying the definition of new loans; and
  • Align the penalties for violating the small loan laws and the language around the Unfair Practice Act to ensure that companies are held accountable for unfair and deceptive and unconscionable practices.

“The small loan industry makes hundreds of millions of dollars from hardworking New Mexico families,” said Cutler. “ We need our laws to be clear of ambiguities and provide meaningful consumer protections that hold small loan companies accountable. We’re optimistic that the governor will sign the bill. Small loan reform is absolutely necessary if we hope to stop predatory lending practices.”

House passes bill closing loopholes in small loans law

SANTA FE—The New Mexico House of Representatives passed a bill today cleaning up state law that regulates storefront lenders. HB 150 protects New Mexico borrowers and ensures accountability and transparency in the storefront lending industry.
 
“All New Mexicans deserve access to fair and transparent loans under reasonable terms, but unfortunately, the current law has loopholes that fail to carry out the legislature’s intent to protect borrowers,” said Lindsay Cutler, attorney at the New Mexico Center on Law and Poverty. “HB 150 proposes effective data reporting requirements and consistency in consumer protections for all borrowers, ensuring New Mexico families receive fairer loans and that the state can better monitor storefront lenders.”

New Mexico’s first across-the-board interest rate cap went into effect in January 2018, capping interest rates on storefront loans at 175 percent APR. Yet high fees and loan rollovers continue to drain income from New Mexico borrowers. The two laws that regulate storefront lenders, the Small Loan and Bank Installment Loan Acts, still contain inconsistent fee and language provisions, do not require sufficient reporting to the Financial Institutions Division to enforce consumer protections, and do not make clear borrowers’ rights on loan renewals.

If passed by the Senate and signed into law, HB 150 would:

  • Require lenders to provide effective data on small loans, enabling the FID to verify storefront lenders are adhering to small loans law and evaluate how the law is impacting New Mexicans;
  • Allow borrowers 24 hours to rescind a high-interest loan;
  • Align fee provisions, disclosure requirements, and penalty provisions so consumer protections are consistent for all borrowers; and
  • Define what it means to make a new loan to protect New Mexican borrowers from potential loopholes in loan rollovers and renewals.

“The small loan industry makes hundreds of millions of dollars from hardworking New Mexico families,” said Cutler. “The House has taken an important step in passing HB 150 and we are optimistic that the Senate will follow suit. We cannot allow lenders to continue to circumvent protections put in place two legislative sessions ago. Small loan reforms are absolutely necessary if we hope to meaningfully stop predatory lending practices.”

Regulations on small loans law do not adequately protect borrowers

ALBUQUERQUE— The Financial Institutions Division issued regulations today implementing a state law that caps interest rates on storefront loans. The FID made almost no changes to the minimal regulations it proposed earlier this year, even though New Mexicans overwhelmingly asked the state to improve enforcement by collecting data on the industry, closing loan renewal loopholes, and requiring lenders to disclose the true costs of loans to borrowers and to make those disclosures in the language a borrower understands.

“All New Mexicans deserve access to fair and transparent loans under reasonable terms, but unfortunately, these regulations completely fail to fulfill the legislature’s  primary intent to protect borrowers,” said Lindsay Cutler, attorney at the New Mexico Center on Law and Poverty. “In fact, they are so lacking in teeth that New Mexico families have no guarantees that the terms of their loans will be clearly explained to them. Worse still, the regulations are completely bare of mandatory data reporting requirements, which will make it impossible to verify that storefront lenders are actually following the law.”

Before passage of HB 347 in the 2017 legislative session, many small loans were unregulated and borrowers were frequently charged interest rates of 300 percent APR or more. Reforms to the Small Loan Act went into effect January 1, 2018, capping interest rates at 175 percent APR and eliminating traditional short-term payday and title loans.  All storefront and online loans made in 2018 must have a minimum loan term of 120 days, and require a minimum of four payments.

However, the FID did not issue regulations to reflect the new standards until today, a full eight months after the law went into effect. The regulations the division did issue do not require lenders to provide borrowers with meaningful information about the costs of their loans and the consumer protections required by the new law. The regulations also fail to address the need to make disclosures and financial information available in a language that the borrower understands.

“It’s unfortunate that New Mexico FID did not take the opportunity to include language assistance as part of the new regulations, knowing that a majority of border town small loans are from Navajo consumers. It is important that we continue to advocate for legal contracts to be explained in the Navajo language or any other language in which consumers are able to fully comprehend the contracts they are signing,” said Leonard Gorman, executive director of the Navajo Nation Human Rights Commission.

The new regulations also fail to close loopholes in loan renewals, which may extend old loan terms, leaving borrowers vulnerable to interest rates and fees that are now illegal under the law. In addition, the regulations do not require lenders to provide data on small loans, making it impossible to tell if storefront lenders are adhering to the law and how the law is impacting New Mexicans. The FID failed to explain why it elected to ignore the dozens of comments submitted by New Mexicans asking the division to enact meaningful consumer protections.

Without meaningful regulations and reporting requirements, the FID and legislators cannot verify that the consumer protections intended by the new law are reaching New Mexico families. This means that the small loan industry, which makes hundreds of millions of dollars from New Mexico families, will continue to operate without transparency.

“We’re pleased that the FID has, at long last, finalized and posted regulations to implement the 2017 law. However, these regulations do very little to address our concerns and lack the substantive consumer protections we have been advocating for,” said Michael Barrio, director of advocacy at Prosperity Works. “An appropriate regulatory framework that adequately addresses areas that allow lenders to continue to circumvent limitations and protections that have been put in place by the 2018 small loan reforms is absolutely necessary if we hope to honestly protect hard working New Mexicans from predatory lending practices.”

The finalized FID regulations can be found here: http://164.64.110.134/nmac/nmregister/adoptedxxix16

A factsheet on regulations the FID should enact to enforce the small loans act can be found here: http://nmpovertylaw.org/fact-sheet-fid-must-enact-regulations-to-enforce-the-small-loans-act-2018-07/

Hearing on proposed small loan regulations Monday

CHAMA—The New Mexico Legislative Indian Affairs Committee will hold an interim legislative hearing in Chama on Monday regarding the Financial Institutions Division’s proposed regulations on HB 347, which imposes a 175 percent APR interest rate cap on small loans. The New Mexico Center on Law and Poverty and Prosperity Works will ask the committee to pass a resolution requesting the FID provide information about how it is enforcing this new law and present that report to the committee later this fall.

Before passage of HB 347 in the 2017 legislative session, most small loans were unregulated and interest rates were even higher. HB 347 ensures that borrowers have the right to clear information about total loan costs, allows borrowers to develop a credit history when they make payments on small-dollar loans, and sets minimum contract terms for small loans including at least four payments and 120 days to pay off most loans. Refund anticipation loans are exempt from those requirements.

While the law and proposed regulations signal progress for fair loan terms, much more work remains to be done to ensure fair access to credit for all New Mexicans. Storefront lenders with predatory business practices that trap people in a cycle of unaffordable debt have deep roots in the state and have aggressively targeted generations of low-income families and Native communities, pushing loans with high-interest rates or arbitrary fees with no regard for an individual’s ability to repay.

The FID’s proposed regulations can be found here: www.rld.state.nm.us/financialinstitutions/

The Center’s comments on the proposed regulations can be found here: https://wp.me/a7pqlk-10H

The Center’s suggested changes to the proposed regulations can be found here: https://wp.me/a7pqlk-10I

WHAT: 
Indian Affairs Committee interim legislative hearing on proposed HB 347 regulations, which impose a 175 percent interest rate cap on small loans.

WHEN:
Monday, July 2, 2018 at 12:30 p.m.

WHERE:     
Lodge and Ranch at Chama
16253 S Chama Highway 84, Chama, NM 87520
Chama, NM 87520

WHO:
Indian Affairs Committee
New Mexico Center on Law and Poverty
Prosperity Works
FID
Member of the public

Hearing on proposed small loan regulations Tuesday in Gallup

GALLUP—The New Mexico Financial Institutions Division will hear public comment in Gallup on Tuesday regarding its proposed regulations on HB 347, which imposes a 175 percent APR interest rate cap on small loans. Before passage of this law, most small loans were unregulated and interest rates were even higher.

The law also ensures that borrowers have the right to clear information about loan total costs, allows borrowers to develop credit history via payments made on small-dollar loans, and stipulates that all such loans, except refund anticipation loans, have an initial maturity of 120 days and cannot be subject to a repayment plan smaller than four payments of loan principal and interest.

While the law and proposed regulations signal progress for fair loan terms, much more work remains to be done to ensure a more inclusive economy for all New Mexicans. Storefront lenders have long aggressively targeted low-income families and Native communities in the state, pushing loans with high-interest rates or arbitrary fees and no regard for an individual’s ability to repay. Gallup has the highest concentration of storefront lenders in the state with nearly 50 licensed lenders for a population of less than 23,000.

Among other recommendations at the Tuesday hearing, the New Mexico Center on Law and Poverty will urge the FID to improve the regulations to close loopholes around loan renewals and increase transparency in how the division regulates small loan companies.

The FID’s proposed regulations can be found here: www.rld.state.nm.us/financialinstitutions/

The Center’s comments on the proposed regulations can be found here: https://wp.me/a7pqlk-10H

The Center’s suggested changes to the proposed regulations can be found here: https://wp.me/a7pqlk-10I

WHAT:    
FID Hearing on proposed HB 347 regulations

WHEN:
Tuesday, May 15, 2018 at 11:00 a.m.
 
WHERE:

Rehoboth McKinley Christian Health Care Services Building
Solarium Room, 3rd Floor
1901 Red Rock Drive
Gallup, New Mexico 8730

Hearing on proposed small loan regulations today

SANTA FE, NM—The New Mexico Financial Institutions Division will hear public comment in Santa Fe today on its proposed regulations for HB 347, which imposes a 175% interest rate cap on small loans. The law, passed during the 2017 New Mexico legislative session, also ensures that borrowers have the right to clear information about loan total costs, allows borrowers to develop credit history via payments made on small-dollar loans, and stipulates that all such loans have an initial maturity of 120 days and cannot be subject to a repayment plan smaller than four payments of loan principal and interest.

While the law and proposed regulations signal progress for fair loan terms, much more work remains to be done to ensure a more inclusive economy for all New Mexicans. The New Mexico Center on Law and Poverty will urge the FID to revise the proposed regulations to improve disclosures and language regarding loan renewals so that all borrowers can understand the terms of their loans. The Center will also suggest the regulations include improved methods of data collection, expanded language accessibility, and greater protections for borrowers of refund anticipation loans.

The FID’s proposed regulations can be found here: www.rld.state.nm.us/financialinstitutions/

The Center’s comments on the proposed regulations can be found here: https://wp.me/a7pqlk-10H

The Center’s suggested changes to the proposed regulations can be found here: https://wp.me/a7pqlk-10I

WHAT:    
FID Hearing on proposed HB 347 regulations

WHEN:
Tuesday, April 3, 2018 at 1:30 p.m.

WHERE:  
New Mexico Regulation and Licensing Department
Toney Anaya Building
Rio Grande Room on the 2nd Floor
2550 Cerrillos Road
Santa Fe, NM 87504

WHO:
New Mexico Center on Law and Poverty
Prosperity Works
FID
Members of the public

NM Financial Institutions Division releases small loans law regulations

ALBUQUERQUE, NM – This week, the New Mexico Financial Institutions Division (FID) released highly anticipated regulations on a law which imposed a 175% interest rate cap on small loans. In addition to capping small-dollar loan APR, the law (HB 347) which passed during the 2017 New Mexico legislative session, ensures that borrowers have the right to clear information about loan total costs, allows borrowers to develop credit history via payments made on small-dollar loans, and stipulates that all such loans have an initial maturity of 120 days and cannot be subject to a repayment plan smaller than four payments of loan principal and interest.

HB 347 and the proposed regulations signal progress for fair loan terms and a more inclusive economy for all New Mexicans by eliminating short term payday loans and enacting the first statutory rate cap on installment loans. But, while HB 347 is progress towards ensuring that all New Mexicans have access to fair credit, regardless of income level, the 175% APR cap required by HB 347 remains unfair, unnecessarily high, and will result in serious financial hardship to countless New Mexicans.

“The proposed regulations are a first step in giving all New Mexicans access to fair credit, but we still have a long way to go. In the past, storefront lending in the state was largely unregulated, and hardworking people were forced to borrow at interest rates as high as 1500% APR, forcing them into in a never-ending cycle of high-cost debt,” said Christopher Sanchez, supervising attorney for Fair Lending at the New Mexico Center on Law and Poverty. “All New Mexicans deserve a chance to more fully participate in our state’s economy. We hope to see additional regulations that would improve disclosures and language regarding loan renewals so that all borrowers can understand the terms of their loans.”

Storefront loans have aggressively targeted low-income families and individuals, with sometimes quadruple-digit interest rates or arbitrary fees and no regard for a family or individual’s ability to repay.

“Coupled with high interest rates and unaffordable payments, predatory loans prevent New Mexican families from building assets and saving for a strong financial future. These kind of unscrupulous lending practices only serve to trap people, rather than liberate them from cycles of poverty and debt,” said Ona Porter, President & CEO of Prosperity Works. “Enforcing regulation and compliance is a critical step in protecting our families.”

The implementation and enforcement of HB 347, via regulation and compliance examinations by the FID, aims to finally allow all New Mexicans to more fully and fairly participate in New Mexico’s economy. The momentum surrounding this issue was recently accelerated when New Mexico Senators Tom Udall and Martin Heinrich cosponsored the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act to crack down on some of the worst abuses of the payday lending industry and protect consumers from deceptive and predatory lending practices.

The regulations released early this week are the first round of proposed regulations. Before FID releases the second round, the department will be accepting public comment, including at a public rule hearing on April 3 in Santa Fe.