I am writing this on Martin Luther King Day. This is a day that inspires dreams big and small, big and small. My dream begins with a touch of nightmare: interest on store loans. Then it will be better.
Store loans, payday loans, etc. deserve a long look at the current short session of the New Mexico Legislature. Over the years we have known Santa Fe’s new Mexican has skillfully shed some light on this problem of store credit and exorbitant interest – despite efforts by the industry and others to keep New Mexicans in the dark.
Milan Simonich has written extensively on the problems of window and payday loans (and there have been others), and he remains an outspoken opponent of the idea that cutting loan rates from 175 percent to 36 percent was incredibly “a bad idea.” ‘ for New Mexico and New Mexicans. So does Think New Mexico and others.
The payday loan/summer loan industry is rising to speak through diverse voices as well.
Recently, The new mexican ran an article by former lawmaker Richard Martinez (“Installment Loans Can Be Good for Consumers,” My View, January 9).
He argued that store loans in New Mexico are a “good idea” at interest rates of 175 percent because store lenders fill a need no one else can meet — and — the industry must charge rates of up to 175 percent to survive. Credit unions and other lenders or credit alternatives and analysts in the state may take offense at this claim.
Also, Martinez argues that people who support the idea that a 36 percent interest rate cap is a good idea “don’t understand” how “interest rates work.” (I assume he was speaking to or about me, among many others in New Mexico. And, respectfully, I state that I know, for my part, that there is a difference between 36 percent and 175 percent interest over any “term” to be expressed – means time.)
Martinez further illustrated “how interest rates work” in his article by giving an example: one where a person “borrows $100 today” and is charged “$1 in interest.” He continued, “If repaid in one year, the APR is 1%.” Therefore, Mr. Martinez assumes a one-year term by referring to “APR,” which means “Annual Percentage Rate.” He added that if the loan was repaid in “a month, the rate (presumably he meant APR) is 12 percent.” And he summarized: “If the loan was “repaid one day after the loan was made, the APR is 365 percent.”
Mr. Martinez may take me as a pumpkin truck driver among other readers; but with all due respect, his argument has a flat tire and consequently wobbles and wobbles in clarity and truth. In my opinion.
He assumed a “one-year term” when referring to the APR.
So he was right that the interest paid after a year was a dollar. But he was wrong when he claimed that a one-day loan with an interest rate of 1 percent on $100 would be converted into a loan with an APR of 365 percent. No it is not. The interest that the borrower would pay on a loan, assuming an annual interest rate of $1, is either “$1 (if such minimum interest payment was agreed upon) or 1/365 of a dollar, if practicable. The APR remains, respectfully, 1 percent.
I think it’s hard to defend an industry or an individual or an institution or public body that lies and deceives (even through misdirection, omission or neglect) people who are vulnerable to lying and deception. Martinez is caught in an industry’s gossamer, gooey web.
Yet we see this across America today, not just in New Mexico. There is no “progressive” defense for policies and practices that harm people – while protecting predators that target people and their vital interests.
New Mexico House Speaker Brian Egolf claimed during the 2021 session in connection with a bill aimed at reducing the interest rate from 175 percent to 36 percent to protect New Mexicans and gradually improve the economic security of vulnerable people, but essential to protect: “My involvement in it is zero at this point.”
This kind of public eye is actually a toxic neglect of the public interest. In my opinion. Neglect is not an active, vocal defense of the people, an excuse for a public trustee’s lack of courage or neglect of duty. But the speaker spoke as if he could wash away the stain of his indolence on the subject with words alone. The bill he was referring to there isn’t the only problem — the problem is: Are he and his progressive-view colleagues willing to come up with little more than excuses to defend New Mexico and New Mexicans against predatory lenders , neglect, words of neglect and turn a blind eye?
If historic “red states” (e.g., Nevada and Nebraska) and their populace can hold their own against window lenders, why not a supposedly “blue,” “progressive” state like New Mexico? Are people really the problem on the road to progress?
Fortunately, the New Mexico governor seems more than able and willing to speak up for the health, welfare, and economic security of New Mexicans — though some issues are really, really hard to comment on.
Gov. Michelle Lujan Grisham knows many things, but most importantly, she knows that in these times — which are awash with public funds (e.g., oil and gas revenues and government aid and infrastructure funds) — there is no time to look away from the Averting the most vulnerable is our center in New Mexico as we look and dream of a brighter future in New Mexico. When the Legislature introduces a bill that includes a 36 percent interest rate cap, this governor will know what he has to do for the people of New Mexico.
The relief provided in such a bill, which caps the store loan ceiling at 36 percent, is for everyone in this state and for the safety of this state going forward. The relief not only affects individual borrowers who have been neglected for far too long; as if they weren’t reason enough.
Alexis H. Johnson, Esq., lives in Santa Fe. A longer version of this article is available online.