Endless Debt: Native Americans Plagued by High-Interest Loans

Part of the In Plain Sight NBC News series, this feature finds Native Americans in New Mexico, South Dakota and elsewhere are targeted for predatory loans.

Feature (Arizona, New Mexico, RURAL, South Dakota)

Seth Freed Wessler
NBC News
October 31, 2014
Link to story

Tags: Consumer Protection, Minorities: Racial/Ethnic

Organizations mentioned/involved: Human Rights Watch, DNA People’s Legal Services (Southwest US)


Hundreds of thousands of small-dollar loans are issued each year in Gallup and other New Mexico towns that border Native American reservations, according to New Mexico state lending data obtained by NBC. Most come with sky-high interest rates that can trap borrowers in an endless cycle of debt. Advocates including Human Rights Watch say that Native American communities appear to be more saddled with predatory loans than any other community in the United States.

“These lenders are circling the reservations,” said Arvind Ganesan, director of Human Rights Watch’s business and human rights division, who has researched lending practices on reservations in multiple states. “Their business model is to look for the most vulnerable, poorest people and set up shop.”

Ganesan’s research, which surveyed nearly 400 Native Americans in New Mexico and South Dakota reservations, found that half had used small-dollar, usually high-interest loans—the kind of financial products advocates call predatory. It’s a rate far above the national average for small-dollar loan usage. According to research by the Pew Charitable Trust, 6 percent of Americans use payday loans, which are heavily regulated in New Mexico but which have been replaced there by similar installment and title loan products. Most borrowers take out multiple loans, and the majority do so because they lack the financial cushion to afford even modest unexpected costs, the Human Rights Watch research found.

On Zuni and Navajo land near Gallup, tribal laws prohibit high-interest lending on reservations. But those laws have little effect, experts say, because lenders don’t operate on tribal lands, forcing residents to travel to border towns for loans.

Jean Philips, an attorney at New Mexico Legal Aid in Gallup, says the consequences of small-dollar lending reaches far beyond debt and can deeply impact a borrower’s life. Her clients regularly lose their cars and mobile homes to repossession. “I’ve had clients who’ve gone hungry because they are paying back their loans,” she said