Criticized for charging exorbitant interest rates that take
advantage of vulnerable, low income populations, so-called
pay day lenders face growing attempts to regulate or
prohibit their business in the United States. But the $28
billion a year industry may be able to compensate for any
business restrictions at home by expanding abroad to Latin
America, where a vast market of cash-needy borrowers
exists.
In Mexico, both the pawn shop market and payday lending
markets are emerging as promising sectors for companies
that offer high-interest loans to customers with little or
no credit history. "Mexico has a largely unexploited pawn
market," commented Rich Duprey, an Internet blogger who
specializes in financial issues.
Since Mexico liberalized the pawn shop market in 1996, the
number of Mexican and foreign-owned hock shops has
exploded. At least 3,500 branches of 50 privately-owned
businesses give loans in return for deposits of jewelry,
electronics equipment, musical instruments, homes, and
automobiles. Some businesses now even offer collateral-
free, two-week payday loans in advance of the borrower's
next paycheck.
Big names in the new industry include, among others,
Mulitprestamos, Grupo Adalfi, Sepremex, Oportuno,
Soluciones de Nuevo Laredo, Servicios Financieros del
Golfo, Soluciones de Puerto Vallarta, Soluciones del Norte,
and Soluciones de Monterrey. Two Texas-based companies are
leaders in the US expansion into the Mexican pawn and
payday industries. The Arlington-based First Cash Financial
Services counts 150 Mexican pawn shops in its portfolio,
while the Austin-based EZCorp has plans to open more EZPawn
shops in Mexico during 2007.
US pawn and payday lenders expanding into Mexico and other
parts of Latin America will be operating on familiar turf.
In the US Southwest, payday lenders are familiar sights in
Spanish-speaking immigrant and Latino communities. A 2003
study of payday loans in Tucson's Pima County by the
Southwest Center for Economic Integrity found that 37
percent of payday loan storefronts were situated within one-
quarter mile of Latino neighborhoods.
According to one estimate, Mexican pawn companies and
payday lenders could have a potential market of 40 million
customers. Certain seasons of the year, especially after
the Holy Week and Christmas holidays, are considered prime
business times as many people find themselves in need a
quick infusion of cash to pay off vacation spending.
Sources: El Universal, April 9, 2007. Article by Jose Luis
Ruiz. Fool.com, January 31 and April 13, 2007. Articles by
Rich Duprey. Montgomeryadvertiser.com, February 24, 2007.
Article by Michelle Singletary. Austin Business Journal,
January 24, 2007. Consumerfed.org
Frontera NorteSur (FNS): on-line, U.S.-Mexico border news
Center for Latin American and Border Studies
New Mexico State University
Las Cruces, New MexicoDave - 4-23-2007 at 10:07 AM
These bottom feeders will succeed because mainstream Mexican financial institutions rarely lend.
I don't blame them. It's the Mexican legal (tort/contract/property) system that's at fault. If you can't secure a loan...what's the point?Dave - 4-23-2007 at 11:07 AM
Quote:
Originally posted by lencho
Care to elucidate?
Sure.
No punitive damage awards, parties must pay for their own attorney's fees and costs, and the litigation process is very lengthy.
The judge controls the discovery process. judgments are difficult to enforce and can be contested in a separate amparo proceedings, which can drag on
for years.
Parties can file intermediate appeal on evidentiary and other issues at virtually any time.
Little settled case law. Virtually no precedent.
<I could go on>
Ever sued in Mexican court?
Received a judgement?
Collected? bajajazz - 4-23-2007 at 11:48 AM
Another reason to dislike the expansion of pawn shops is that they serve as fences for goods stolen in auto and home robberies. I personally have had
the experience of finding jewelry stolen from my home in pawn shops in La Paz. This was in addition to the stereo rack system that the police
"recovered" that required 11 trips to the Ministerio Publico to reclaim.
Even though I had the original sales receipt from Macys in my possession -- listing brand names, model numbers and sales prices -- it was deemed
inadequate as proof of ownership and wouldn't even be considered until it [the receipt] was "translated" by an official (and expensive) translator.
Just how or why one has to "translate" brand names, model numbers and sales prices is something that is beyond my cognitive ability to comprehend, as
they are the same irrespective of the language used.
The lesson I drew from the whole sorry experience is that the original robbery is just the beginning -- and not the end -- of the victimization
process. What the thieves don't do to you, the police and the Ministerio Publico will. When the number of trips I had to make to the office on
Colosio to reclaim my property entered the double digits, it became obvious to me that the minions of the law regarded themselves as the new owners of
my property -- and they simply didn't want to give it back.
What griped me more than the loss of my property (many things were stolen besides the stereo that were never recovered, or if recovered not returned)
was the self-congratulatory attitude of the police who arrested the thief at the pawn shop as he was in the process of selling the stolen goods. They
seemed to think they deserved some kind of commendation for efficient police work, even though 90 percent of the stolen items were probably dispersed
among themselves and other pawn shops around town.
When I called Mike Houston in Cabo to complain and seek advice, his response was, "That's the way they do it." At first I thought, wow, how cavalier
of Mike to say such a thing. But after thinking it over I realized there is an important lesson within those few words, "that's the way they do it."
Mexicans do have their own way of doing things, it's sometimes vastly different from what we're used to, but it is the way it is and there's little or
no point in fighting it. It is our new reality, those of us who live here, and we either have to get used to it and accept it, or leave.
But I still hate pawn shops and crooked cops.Cypress - 4-23-2007 at 11:53 AM
Pawn shops/Payday lenders. Careful! In the USA pawnshops are subject to the RICO laws, rackateering etc. You don't want to go there!
Guys
Baja Bernie - 4-23-2007 at 11:54 AM
I think it might help to separate the two sides of 'justice'---criminal and civil.
Even then one would find the US system most lacking in the civil side and the Mexican in both.
I will say that the US is catching up to the badness of Mexico on the criminal side........and very rapidly.
Just my two cents,
Bajajazz---you got it right with pawn shops.
The cops in far too many cases'are' just part of the Mexican system.Dave - 4-23-2007 at 12:24 PM
Quote:
Originally posted by lencho
Here in Mexico I see references to what I assume are criminal prosecution cases for fraud. This is different from tort law, right? Where is the line
of demarkation and what does tort law cover that criminal law does not?
--Larry
First...I'm not a lawyer, but have employed several.
Traditionally, a tort is normally not governed by criminal statute. Here's a good overview:
Mexico's tort law is not as clearly defined. Fraud is most always a criminal offence, and until just recently, so was defamation.
Of course there is always another side to the coin. Criminal liability carries a higher burden of proof (even in Mexico) and while some would consider
jail as justice, others would prefer the money.
[Edited on 4-23-2007 by Dave]
Addendum
Dave - 4-23-2007 at 12:50 PM
Quote:
Originally posted by Dave
while some would consider jail as justice, others would prefer the money.
One thing I find interesting about Mexican justice is the liberal use of victim compensation. A blend of tort and criminal law. It's common to
mitigate a criminal sentence using compensation. The U.S. is playing catch-up.
You don't want to go there!