New Mexico recently enacted a 36% rate cap on consumer loans. Among the remarks that motivated them to do so was the following:
Thank you Madam Chair, Members of the Committee. My name is Will Hancock and I’m a student at the University of New Mexico School of Law. I had the displeasure of working briefly for a short-term loan company in Albuquerque. I completed the training and left shortly thereafter because I felt I was actively ruining people’s lives through predatory practices.
While I was there I saw countless customers come in seeking to pay off their loans. Customers rarely paid off their loans because it was company policy to heavily suggest they refinance. Of course, we never used the word “refinance,” but rather dangled money in front of the customer’s face and asked them if they wanted to take it. “Well, how about you give me $20 and then I’ll give you $40 back.” Or the classic, “Oh, I see we can give you an extra $50 today, how does that sound?”
Many customers simply did not understand that this was refinancing.
I was trained to look through bank statements for a source of recurring income. I noticed that most of these “recurring incomes” were payments from the social security office.
I support this bill because I support helping the vulnerable. If public social safety nets are not going to help these people, then least we can do is stop private companies from exploiting their vulnerabilities and lack of financial literacy, at least at such extortionate rates.