I am really tired of paying off loan sharks for other people’s debts. Aren’t you?
You’re wondering what I’m talking about? The social cost of predatory lending.
We’ve all heard about this, the payday loans and the car title loans, the astronomical interest rates and the low-income people who take these loans, probably not understanding they’re getting themselves into a tangle of ever-increasing borrowing and perhaps believing they have no choice.
We haven’t heard enough about how much this is costing us as taxpayers, as donors to charities and as residents of a state where poverty depresses the standard of living for all of us.
When a low income person spends $500 to pay off $100 loans, year after year, that affects you and me. When my taxes support that person’s access to Medicaid, I’m paying off the loan shark. When I write a check to Roadrunner Food Bank or put cans of tuna fish in a donation box, I’m paying off the loan shark again.
When that borrower’s children are living on hot dogs and corn chips, their poor health is a future cost I will pay for. When they keep moving from place to place because Mom can’t afford the rent, that’s my investment in their education going down the drain because they’re too unstable to pay attention in school. When Mom loses her job because she can’t afford a car to get to work, she switches from a taxpayer to a welfare recipient.
So if you don’t have any compassion for the borrowers, if you think they’re irresponsible and careless, from your own self-interested point of view their behavior doesn’t matter. You’d be better off if they had a few bucks in their pockets. Probably some of them would spend it on booze and cigarettes, but some would buy their children an apple, or a salad, or a book, or a home.
On its website, loansharkattack.com, the New Mexico Fair Lending Coalition summarizes data from the state Regulation and Licensing Department, showing that in 2013, more than 164,000 loan customers paid an average interest rate of 340 percent. Former state senator Steve Fischmann, a cofounder and activist with that Coalition, says the numbers are probably higher because the reporting is unreliable.
There is no excuse, considering the level of poverty in the state and what this is costing all of us, to allow this to continue. Oh, wait, sorry, I forgot. As I often repeat, New Mexico is the state that couldn’t pass fireworks legislation in a drought. The lending industry is generous with campaign contributions. Legislation to cap interest rates has been tried. If it is tried again, Fischmann thinks it couldn’t pass or would be vetoed.
The coalition is trying other approaches, Fischmann said. Top priority is to create a marketplace for affordable loans for low–income borrowers. For example, many borrowers are employed. The coalition is working with some employers of low-wage workers to link them to lenders who charge interest rates around 20 percent and arrange repayment through a payroll deduction.
A memorial was passed this year through the state senate asking the State Personnel Office to evaluate this service for state employees. Fischmann said as many as 20 percent of New Mexico state employees use payday loans. (Parenthetically, now is not a time to argue for higher wages for government workers.)
This approach through employers, obviously, is no answer for those who don’t have a job.
The industry’s favorite argument is that it makes money available to people who would otherwise have no access to it and that those high interest rates are necessary so the lenders can stay in business.
I don’t believe that. It’s a moral outrage the New Mexico allows its weakest citizens to be victimized in this way. And beyond that, it’s a bad use of my money and my generosity. And yours.
Triple Spaced Again, © New Mexico News Services 2016