Payday lenders deemed 'essential' during coronavirus - Albuquerque Journal

Payday lenders deemed ‘essential’ during coronavirus

Copyright © 2020 Albuquerque Journal

Right now, in New Mexico, you can’t go to a hair salon, public gym or bookstore.

But you can walk into a building and take out a large loan with interest rates as high as 175%.

That’s because payday loan companies are considered “essential businesses” in New Mexico and many other states during the COVID-19 outbreak.

Christopher Moya, director of the Regulation and Licensing Department’s Financial Institutions Division, wrote in a March 24 letter that he had received guidance on what businesses were technically “essential,” which included non-depository financial institutions, including payday loan companies.

The letter came one day after Gov. Michelle Lujan Grisham declared a statewide stay-home order in an effort to slow the spread of the novel coronavirus.

Since then, payday loan companies have remained open to the public, while maintaining social distancing rules of no more than five people in a store at once.

Critics of payday lenders argue the companies charge consumers extremely high rates on loans they have no hope of paying back, even when those loans are for only a few hundred dollars.

Ona Porter, founder of the nonprofit Prosperity Works, said that the economic fallout from the outbreak has made a bad situation worse and that many desperate families might begin taking out high-interest loans.

“This is a predatory industry to begin with, and in a crisis like this, that predation increases dramatically,” she said.

Thousands in New Mexico have had work hours reduced or have been laid off since the COVID-19 outbreak began.

And with many bills due in a matter of days, Guadalupe Credit Union President Winona Nava said she expects more people will apply for loans to make ends meet.

“A lot of rents and other things are due at the first of the month, so we’re expecting a rather large increase to start soon,” she said.

Multiple payday loan stores in Santa Fe were also contacted, and all declined to comment.

Rep. Susan Herrera, D-Embudo, has previously fought for payday lending reform in the state Legislature and said she would call Lujan Grisham to ask for the closing of payday lenders during the crisis.

Herrera said that she will try to introduce legislation on the matter if a special legislative session is held but that any session would probably be limited to budgetary issues.

Porter said that even if the state budget is the primary focus, payday lending must be addressed.

“We need to think about family budgets as well,” she said.

Nora Meyers Sackett, a spokeswoman for the governor, wrote Monday that designating payday loan companies as essential was not the intent and that those struggling financially should apply for unemployment insurance benefits.

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