Report from The Attorney General of New Mexico
Friday, October 5, 2012
It is not an exaggeration to say the recent win in my lawsuit against FastBucks, LLC, is a major victory for New Mexico consumers who have ever fallen victim to predatory small loan practices. In short, the judge in our case ruled that FastBucks must now pay restitution to consumers; stop making illegal loans; and will be unable to enforce certain current loans that are not in compliance with state law. The judge agreed with our contention that FastBucks’ installment loans and associated lending practices were unconscionable as a matter of New Mexico law. New Mexico law expressly prohibits the kinds of business practices and exorbitant interest rates by which FastBucks has been victimizing consumers for years.
Some of the victims in this case reached out to borrow money to buy food and pay for medical care. Others were desperately trying to keep a roof over their heads, put food on the table for their children, and pay their bills. The temporary infusion of borrowed cash did, in fact, help them keep their heads above water for a short time…then the reality of what they had done set in. Unconscionably high interest rates, some with APRs of 520 to 650 percent, led some to seek additional loans compounding the long term cost of the loans and keeping the borrower in perpetual debt to the company. The goal of the company was to keep borrowers on the hook; re-borrowing and paying ever increasing debt. It did not take long for some people to get so far behind in their inflated loan payments that they could no longer make any payback effort at all. In other words, while originally treading water financially and hoping a short term small loan would keep them afloat..they were tossed an anvil that represented an endless cycle of debt that dragged them down into the depths of despair.
The judge in our case was moved to say, “Defendants (FastBucks) took advantage of borrowers’ lack of knowledge, ability, experience or capacity to a grossly unfair degree…Defendants’ loan practices have resulted in some borrowers paying back more than twice the amount they borrowed.”
In his opinion, District Judge Michael Vigil found that FastBucks crafted their installment loan products to circumvent the New Mexico Legislature’s efforts to rein in payday loan abuses in 2007. He flatly rejected FastBucks’s claim that, in the wake of these legislative reforms, it promoted its unregulated installment loan product over its regulated payday loan product for borrower convenience.
The court ordered FastBucks to immediately stop writing their installment loans, and also awarded New Mexico consumers restitution measured by the amount of money FastBucks’ borrowers paid on their installment loans over and above what they would have paid had they been given a state-regulated payday loan. Based on the evidence presented at trial, we now expect restitution to consumers to exceed $17 million.
The victims here are familiar to any of us who acknowledge just how deeply the current economy is adversely affecting some New Mexicans. These are our neighbors, friends, employees, relatives,…perhaps some of you reading these words have been forced to take out a payday loan at some point in your life. What really matters now is that predatory lenders have been put on notice…we as a society will not sit back and allow those who are most vulnerable to be victimized by unfair, unconscionable, and illegal lending practices.
Gary K. King
New Mexico Attorney General