New Mexico Gubernatorial Candidate Makes Payday Lending Top Issue

By: Javi Calderon
New Mexico Gubernatorial Candidate Makes Payday Lending Top Issue

Diane Denish, the democratic gubernatorial candidate of New Mexico, has vowed to confront “predatory” payday lending practices if elected governor. She promises to lobby the state legislature to make it a crime to offer loans of under $3,000 that carry high interest rates.

However, in contrast to Denish’s claims, a law was passed in 2007 that delineates specific guidelines for the state payday loan industry. The law clearly states that lenders can only offer loans with a term limit of 14-35 days and that interest rates are capped at $15.50 per $100 loaned. A consumer can only take out cash advance loans equivalent to %25 of their gross monthly income. The law also established a 130-day payment plan that is extended to any borrower who is unable to pay back their loan. This payment plan has no extra fees or interest, and the borrower must pay back the loan in full before they can take out another. A statewide database ensures that no loan that would violate these regulations be extended to a New Mexico resident.

The payday loan industry in New Mexico is thriving, and though these reasonable safeguards are in place to protect the citizens, Denish still feels the need for further regulation.

A survey conducted by the Federal Deposit Insurance Corporation shows that about a 1/3rd of the population of New Mexico are either “under-banked” or “unbanked”, which means that they have no relationship with a bank whatsoever. These people turn to non-traditional money lending services in times of need, and if Danish were to outlaw payday lending they would have nowhere to go.

Payday loans and payday lenders serve a very specific and very necessary purpose. They give people with bad credit or without collateral an option for money in times of an unexpected crisis. Unfortunately, banks don’t offer loans small enough to meet their needs, or they would refuse them a loan all together. Without payday loans these people might have to forego necessary home repairs, or worse, medical treatment. The payday loan industry exists because there is a market and a need for it.

The people in power, and the critics of the payday loan industry, will never be in a position to need a payday loan. They have good credit, collateral, and good jobs. They don’t have to live paycheck-to-paycheck. Unfortunately for those who do, these people make the decisions. Outlawing payday loans could leave the people in New Mexico who already struggle for money stranded when it comes to unexpected medical expenses or home repairs. In a country where we are taught to think for ourselves these people deserve the option to decide if payday loans are right for them.