Loan put couple in financial bind
Interest, penalties keep piling up

Quick loan businesses dot Santa Fe Ave. in Grants some within a stone's throw of one another. Both Grants and Galllup are seeing an influx of payday loan and title loan places that lend money at costly interest rates. (Photo by John A. Bowersmith/Independent)

By Tom Purdom
Staff Writer

GRANTS — Like an alarmingly increasing number of New Mexicans hit with hard times these days, Dorothy and Paul Eversole went to a payday loan store in Gallup to get money.

She admits now it was an act of desperation. She's 71 years old and he's a bit older. Paul got out of the teaching profession and then got sick. Dorothy was a teacher's aide at school, but now her only job is to take care of Paul she said. "Besides, I have diabetes and arthritis, so I couldn't work if I wanted to work," she said. Paul is bed-ridden because of his health. They are trying to get by on Social Security. Their problem is, between the two of them they make $1,851 a month and with a huge chunk of money taken out for medical supplies and bills, other payments, sometimes there isn't enough left over for food.

The bottom line is, they make too much to qualify for certain government programs and not enough to make ends meet.

Faced with overwhelming bills and too little money for food, on Feb. 7, they drove to Gallup and went into one of the many payday loan places.

McKinley County has its share of the loan businesses, but so does Grants and Milan in Cibola County. Between Milan and Grants there are about 13 payday loan companies. A year ago there were about four, but as times get more difficult and the purse strings tighten, more of them seem to materialize. Many are franchise operations, which gives an indication of just how serious the financial health of America's working poor is.

"It seems like we had no other place to turn," Dorothy said.

Dorothy said they went into a payday loan business on Feb. 7, and borrowed $950. The monthly finance charge on that $950 loan is $221 per month. Realistically, they could pay $2,652 a year in interest payments alone and still not have paid one penny toward the original $950 loan.

"We knew the interest payments were going to be high, but we needed the money to buy medicines," Dorothy said.

This month they had to make the first interest payment of $221. Dorothy said they scraped together every penny they could find and had the $221, but virtually nothing else. "We had to borrow money from our son to buy a stamp to send the interest payment to the loan company," Dorothy said. As she spoke, her voice became very low several times. She was not proud of her situation.

She said the payment was sent and then about two weeks later they got a call from an employee at the payday loan company saying they owed a $63 late payment because their interest payment did not arrive on the due date.

Dorothy said the loan company employee said if they did not make the $63 payment, there would also be a $15 per day fee added for every day the $63 was not paid. Dorothy said the loan company employee said the envelope in which she sent the payment did not have a postmark on it from the post office. "I called the postmaster and she said mail to Gallup usually takes two or three days, and she makes sure she always puts a postmark on every letter sent out of the post office."

Dorothy eventually was directed to Theresa Martinez with the New Mexico Attorney General's Office. "She is trying to help us with the loan company," Dorothy said.

Dorothy said she and Paul were not trying to avoid paying back the $950 loan. "We owe that money, we know that, but we can't keep up with all these other charges."

For Dorothy and Paul, the lesson learned is a hard one. "I'll never do it again," she said. "Never, never, never borrow a penny from one of those places."

New Mexico Attorney General Patricia Madrid's office wanted to see one piece of legislation passed this past session dealing with the car title and payday loan companies. That legislation would have put an interest cap on any loan. That legislation also died primarily because of a very strong lobbying effort made by payday loan and car title loan interests, according to information supplied by the attorney general's office.

Sam Thompson, a public information officer with the attorney general's office said the Eversole's story is one heard time and time again. "When you see a place that doesn't even do a credit check, be careful," Thompson said. "We've seen instances where people making $400 a month were loaned $400. There's no way they can pay that back."

Martinez said some payday loan companies will piggyback a new loan just to pay the interest payment, which drags the unsuspecting borrower even deeper into financial quicksand.

Thompson, meanwhile, said Madrid's next step is to sit down with consumer groups and lenders from the payday and car title loan industry to see what room there is for legislation. "We'll then write a bill from that," Thompson said.

Madrid created an internet website about the payday loan industry as an educational tool. The site even has a letter from the Defense Department strongly suggesting that the New Mexico Legislature curb the industry.

"We're not saying these lenders do not deserve some interest, but not like what they have been charging," Thompson said.

Attempts were made to contact representatives from the payday loan and car title loan industry telephone calls were not returned.

At the same time, Paul Milan, from Grants State Bank, did want to say something. The bank is a full service financial institution and not one of the payday loan or car title loan companies.

Milan said the payday loan and car title loan companies fill a niche in the lending industry. "They do serve a purpose for people who can't get credit through a bank, but the banking industry does have a problem with the tremendous interest rates charged by these companies," Milan said. "The banking industry supports legislation which would put a cap on the interest rates."

Milan pointed out another danger of the payday loan and car title loan industry consumers. "There are a lot of people who get a loan, and then go to another place to get another loan to pay off the first one," Milan said. "Usually, it just snowballs on them."

Milan had one last word on the situation. "People getting those loans think they are buying time, but they are not," he said.