Tribe Payday Loans & Arbitration Agreements

By | Feb 8, 2016

It’s been legally established that federally recognized Native American Indian Tribes funding payday loans are entitled to their own laws and legal systems and generally don’t necessarily have to follow state or even federal laws. [There are exceptions such as TILA…]

The payday loan lender Cheyenne River Sioux stipulate in their loan contract:

“According to the contract, any dispute connected to loan collection would have to be submitted to an arbitration conducted by the tribe or an authorized representative in accordance with the tribe’s consumer dispute rules.”  Another provision said that, “At the borrower’s choice, the American Arbitration Association or Judicial Arbitration and Mediation Services could administer the arbitration.”

However, some courts have determined that the Cheyenne River Sioux did not create, nor employ, a consumer arbitration process nor have anyone assigned to perform these arbitrations.

BIG MISTAKE!

Fourth District Judge Harvie Wilkinson reversed a previous court’s decision regarding Western Sky and Martin Webb. Payday loan lenders DO NOT WANT TO BE SUED in a class action. Typically, payday loan lenders insist payday loan borrowers to sign a contract that basically states they can’t bring one. Over the years, the Supreme Court has upheld such clauses. Legal opinions recognize that this agreement can result in “effectively vindicating” federal rights. So long as some remedy exists for a borrower, the courts have upheld this view.

Per Wilkinson’s, it would appear that any contract that rejects the application of federal law can’t be enforced. I take this to mean this decision maylikely reduce federally recognized Native Amenrican Indian tribes’ sovereignty rights.

We shall see. Here’s a link to the Court’s decision: Martin Webb-Delbert Services-Western Sky

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Bank Accounts: Lenders, Check Cashers

By | Feb 3, 2016

Bank Accounts for Payday Loan, Installment Loans, Small Dollar Loans, Consumers…

The CFPB issued a “policy directive” suggesting banks and credit unions do more for consumers lacking bank accounts. This is a laudatory action. Those of us offering payday loans, installment loans, car title loans, line-of-credit, check cashing… know well how difficult this negative situation makes a consumer’s life.

BUT WHAT ABOUT SMALL BUSINESSES! How about bank accounts for lenders, check cashers, gun shops…? Who the hell creates ALL the jobs for these consumers in need of a bank account?

By now, we’re all aware of the devastation the small dollar loan industry has experienced as a result of “Operation Choke Point.” [Here’s a list of ALL the industries attacked by Operation Choke Point.] And everyone knows it wasn’t us who nearly brought down the financial system and then asked for bailouts from taxpayers.

So what’s up with Richard Cordray, head of the CFPB. Why not help consumers by helping all the small businesses who experienced “bank discontinuance?”

Senseless!

Here’s the CFPB’s opening salvo letter to banks and credit unions with a link to the entire letter from Richard Cordray:

February 3, 2016
[Address of financial institution]
Dear [CEO of financial institution]:

I am writing to you and your peers, as leading executives in the banking industry, to bring an important matter to your attention. This letter is not being sent in reference to any sort of regulatory requirement, but instead is simply a suggestion that I urge you to consider in serving your customers.

As you know, each year millions of Americans open new checking accounts, making them one of our most widespread financial products. Right now, much of the industry presents consumers with a binary result – either an applicant passes a standard screening process to obtain an account after identifying any credit risks posed by the applicant’s history of misuse or mishandling of some prior account, or the applicant is blocked from accessing the banking system altogether.

payday loan car title loan banks and consultingThere is, however, a third possibility, which is to offer all applicants a lower-risk account (whether a checking account or a prepaid account) whereby the applicant cannot pose the same level of risk to the institution. Accordingly, the same applicant need not be screened out of the banking system by applying the same risk thresholds that are used to determine eligibility for a standard checking account. Millennials, in particular, seem to be expressing great interest in the availability of such lower-risk products.

This is important because an estimated ten million American households are currently “unbanked.” You know very well that having a checking account or a reloadable prepaid account enables… Here’s the link.

Need help starting or improving your lending business? Reach out to Trihouse Consulting. We’re lenders, operators, consultants and more. Selling your business? Buying a small dollar loan business? Want to learn more? Jer@TrihouseConsulting.com 702-208-6736

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FinTech, Elevate and Loan Depot IPO’s, Gas prices, Pawn Destruction?

By | Jan 28, 2016

By: Jer Trihouse. Alternative Financial Lenders (AFS) which includes payday loans, installment loans, pawn, title loans… and the new variation of FinTech lenders such as Lendup, Prosper, Lending Club, Avant, Enova, Elastic, OnDeck… are getting “creamed” of late! In light of the devestation of stock prices and their immediate expectations, and the fact that gasoline prices are well under $2/gal in many of our demographic markets,  it’s no surprise Elevate Credit (NYSE:ELVT) and LoanDepot decided to pull their IPO, nor for CSH to drop their unsecured payday loan products like a hot potato – other than in Ohio. QC has applied for delisting by the NASDAQ. (Low gasoline prices is killing the pawn industry as well.)

Jer Trihouse Consulting

Jer Trihouse

The CFPB represents a HUGE hammer that is about to smash these online business models  to bits. City ordinaces are not helping brick-n-mortars either. None of us know how bad this will be. Of course, the FED take’s delight in this. I only wish I had been at the after party when they announced a $1.2 BILLION DOLLAR fine against Scott Tucker!

Folks, in today’s economic environment and in combination with the unknown devestation the CFPB COULD level on all of us, your focus must be on cutting costs while developing new products with lower margins. It’s back to funamentals; onboarding new customers at a CAC that makes sense for your financial metrics and nurturing that customer over their lifetime.

Collaboration is another area offering unique opportunities. Witness Uber and their drivers access to loans.

Finally, my sources tell me the tribes and the mono-line pawn shop owners are salivating over the potential refercussions of the CFPB. Time will tell. But, it’s a certainty that fewer consumer loan options will drive consumers into the hands of tribe lenders and pawn shops.

Here’s an interesting article by Carter Dougherty 

Elevate Credit – Innovative Financial Services Or Online Loan Sharks? Jury’s Out

Elevate Credit – Innovative Financial Services Or Online Loan Sharks? Jury’s Out Depending on how you feel about borrowing and lending, Texas-based Elevate Credit could be the first hot new tech stock of 2016 — or an ignoble, consumer-exploiting failure. The company, backed by Silicon Valley venture capital heavyweights, set out to reinvent small-dollar lending over… Continue Reading >>

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QC Holdings, Inc. Announces Voluntary NASDAQ Delisting and SEC Deregistration

By | Jan 22, 2016

I’ve been watching QC Holdings shares CRASH for months! Finally, here it is:

QC Holdings, Inc. Announces Voluntary NASDAQ Delisting and SEC Deregistration

Title: QC Holdings, Inc. Announces Voluntary NASDAQ Delisting and SEC Deregistration

OVERLAND PARK, Kan., Jan. 22, 2016 (GLOBE NEWSWIRE) — QC Holdings, Inc. (NASDAQ:QCCO) announced today that it has notified the NASDAQ Stock Market (“NASDAQ”) of its intention to voluntarily delist its common stock from the NASDAQ Capital Market. The Company intends to cease trading on NASDAQ at the close of business on February 11, 2016. The Company’s obligation to file current and periodic reports with the Securities and Exchange Commission (“SEC”) will be terminated the same day upon the filing of the requisite notification with the SEC. The Company is eligible to deregister its common stock because it has fewer than 300 stockholders of record.

Following delisting and deregistering, the Company presently intends to provide annual information regarding its performance upon stockholder request. The Company’s shares may be quoted in the “Pink Sheets” (www.pinksheets.com), an electronic quotation service for over-the-counter securities. However, there can be no assurance that any market maker or broker will continue to make a market in the Company’s shares.

The Company’s board of directors determined, after careful consideration, that voluntarily delisting and deregistering is in the overall best interests of the Company and its stockholders. Factors that the board of directors considered include the cost savings that will occur as a result of the elimination of the Company’s obligation to file reports with the SEC, the avoidance of additional accounting, audit, legal and other costs and management’s attention devoted to compliance with the requirements of the Sarbanes-Oxley Act of 2002, the historically low daily trading volume in the Company’s shares, and the benefit of allowing management to focus on the long-term development of our core business.

About QC Holdings, Inc.
Headquartered in Overland Park, Kansas, QC Holdings, Inc. is a leading provider of consumer loans in the United States and Canada. In the United States, QC offers various products, including single-pay, installment and title loans, check cashing, debit cards and money transfer services, through 394 branches in 22 states at December 31, 2015. In Canada, the company, through its subsidiary Direct Credit Holdings Inc., is engaged in short-term, consumer Internet lending in various provinces. During fiscal 2014, the company advanced nearly $750 million to customers and reported total revenues of $153 million.

Website: QC Holdings

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Title Loan Lies: GPS Devices & Forced Repair Warranties

By | Jan 21, 2016

Title Lenders Doing Stupid Stuff: Again

CFPB TAKES ACTION AGAINST HERBIES AUTO FOR UNLAWFUL LENDING PRACTICES
Subprime “Buy Here Pay Here” Dealer Hid Finance Charges, Deceived Consumers

Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) took action against Herbies Auto Sales, a buy-here pay-here used car dealer, for abusive financing schemes, hiding auto finance charges and misleading consumers. Herbies will pay $700,000 in restitution to harmed consumers, with a suspended civil penalty of $100,000.

Stupid things payday lenders do“Buying a car is often one of the most important purchases a consumer makes, so the experience needs to be fair and above-board,” said CFPB Director Richard Cordray. “But concealing finance charges and the real cost of credit, as Herbies did here, is unlawful and unacceptable.”

Y King S Corp., which does business as Herbies Auto Sales, is located in Greeley, Colo. Herbies operates as a subprime, buy-here, pay-here dealer, which is a dealer that both sells the car and originates the auto loan without selling that loan to a third party. From at least 2012 through May 2014, the company offered financing to about one thousand people each year.

Herbies unlawfully advertised a misleadingly low 9.99 percent annual percentage rate (APR), without disclosing a required warranty, a payment reminder device and other credit costs as finance charges. This ruse helped Herbies convince consumers that they would get the 9.99 percent APR instead of the much higher rate actually charged. Also, Herbies engaged in abusive practices.

Herbies violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. Specifically, the company:

  • Hid finance charges and advertised a far lower APR than consumers received: Herbies lied to consumers about finance charges and APRs in marketing materials, including on showroom window displays, and in Truth-in-Lending Act disclosures. Hidden finance charges included $1,650 for a required repair warranty and $100 for a required GPS payment reminder device.
  • Hid finance charges that stemmed from a refusal to negotiate car prices: Herbies refused to negotiate prices with credit customers, but did negotiate with cash customers. The resulting finance charge should have been included in the disclosed cost of credit.
  • Used abusive practices: Herbies’ financing scheme lured consumers with misleading advertising and then kept them in the dark about the true cost of financing the cars they were buying. This took advantage of consumers’ inability to protect their interests in selecting or using Herbies’ financing, among other things.

Enforcement Action
Under the Consumer Financial Protection Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive or abusive acts or practices, or that otherwise violate federal consumer financial laws. Under the consent order, Herbies is required to:

  • Provide $700,000 in redress to harmed consumers: Herbies must provide $700,000 in restitution for consumers who financed cars with Herbies after January 1, 2012, except those whose accounts were charged off due to default. Herbies must submit a timeline to the Bureau for making restitution to consumers. Herbies is also subject to a civil penalty of $100,000, which is suspended as long as redress is paid.
  • Stop deceiving consumers during financing process: Herbies must not misrepresent interest rates, finance charges, or amounts financed, or any other fact material to consumers concerning the financing of any motor vehicle.
  • Post automobile prices: Herbies must clearly and prominently post the purchase price on all automobiles for sale when offering auto financing.
  • Provide certain financing information in advance: Herbies must give consumers certain information about the financing offer, including the actual APR, price of the car, and all finance charges, and get a signed acknowledgment from consumers that they received the required information before or at the time financing is offered.

The full text of the CFPB’s Consent Order is available at: http://files.consumerfinance.gov/f/201601_cfpb_consent-order_y-kings-corp-also-doing-business-as-herbies-auto-sales.pdf

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