Assault is a crime in every state, but strangely enough, financial assault is an accepted way of doing business.
Wait, is this a real financial attack?
Unfortunately, it’s legal in New Mexico. You may know it by other names – robbery loans or payday loans.
Robbery lenders are one of the worst forms of destructive capitalism, charging desperate people exorbitant interest rates on small loans. In most states, predatory loans are merely abusive and require a maximum annual interest rate of 36 percent.
In New Mexico, the interest rate cap on robbery loans is 175 percent, which is shameful even in the financial world. It goes beyond financial abuse and is a financial attack.
One hundred and seventy-five percent interest rates are so bad that the U.S. military puts a 36 percent cap on the predatory lenders that can charge our troops in any state. Otherwise, it will affect the combat readiness of our armed forces. Highly indebted service staff is both distracted and a security risk.
Here’s how a financial attack works: Navajo Nation’s Mary Shay needed firewood for the winter, so she took out a small loan worth a few hundred dollars. But when the loan was due, she couldn’t repay it all, so she took out another loan to pay off the first loan the predatory lenders wanted and expected.
That is their business model.
Of course, Shay was in the same position when the next loan came due and the next. A decade later, Shay owed $ 600 a month on half a dozen loans.
Our interest laws also create a poverty trap that draws hundreds of millions of dollars out of our state every year. In 2019, the New Mexico Regulation and Licensing Department reported that New Mexicans paid $ 220 million in fees and interest on predatory loans, 80 percent of which went to non-governmental corporations.
These national companies are like sharks in a feeding frenzy, which is why we have ten times more predatory lenders than McDonald’s restaurants per capita, the worst ratio of any nation.
And these practices are also racist. Nearly 60 percent of small lenders in New Mexico are located within 10 miles of a pueblo or tribal reservation, according to the New Mexico Center on Law and Poverty.
We must end the cycle of financial attacks being inflicted on our community by predatory loans.
Why does this problem persist?
Between 2006 and 2020, lawmakers from both parties introduced nearly two dozen bills to lower the cap on short-term interest rates – but all of them died. Why? Because predatory lenders donate to contracting states and elected officials and employ teams of professional lobbyists.
In contrast, the poor people harmed by predatory loans have no money to fill politicians’ pockets.
The individuals of both parties who accept political contributions from predatory lenders are like the temple money changers whom Jesus threw on their backs.
Yes, I know I’m melodramatic, but as a former monk whose monastery went bankrupt because of predatory lending, I earned my indignation.
Fortunately, we can fix this problem quickly. Senator William Soules, D-Las Cruces, deserves praise for introducing Senate Law 66 into this legislature. SB 66 would align New Mexico with most states and US military rules to limit pirated loans to 36 percent interest.
And Think New Mexico, the nonprofit, impartial think tank, has helped secure support for SB 66 from many key lawmakers, including Governor Michelle Lujan Grisham.
Route 66 brought economic life to New Mexico, and Senate Bill 66 can help do the same.
Any legislator who speaks out against SB 66 in this legislative period will have a stain on his soul that voters should never forgive or forget.
But will you do your little part in helping the poor and downtrodden?
How about a short email to your legislator in support of SB 66?
You can find your legislature’s name and contact information by entering your address at openstates.org.
And remember, your income comes from someone else’s expenses. Rise your neighbor and you rise.
Doug Lynam is a partner at LongView Asset Management in Santa Fe and a former monk. He is the author of From Monk to Money Manager: A Former Monk’s Financial Guide to Getting A Little Rich – and Why That’s OK. Contact him at [email protected].