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You may not currently operate in California BUT this strategy by State regulators will eventually bite you in the ass as well! No payday loan ACH transactions allowed. Image Cash Letters (ICL) to replace ACH?
No ACH transactions to be allowed in Calif.
A data base to be enforced in California.
Proposed Regulations under the California Deferred Deposit Transaction Law
The DBO (California Department of Oversite) recently issued an invitation for comments on a revised draft of changes to its payday lending regulations. The DBO supervises payday lending under the California Deferred Deposit Transaction Law (CDDTL). The deadline for submitting comments is June 24.
Two components of the draft rules have generated significant debate.
- One would limit transactions to paper checks only – no ACH, debit cards, prepaid cards or credit cards.
- The second provision would establish a common database under DBO’s management. Payday lenders would have to record all loans in the database, and check the database prior to the transaction to determine whether the borrower already had an outstanding payday loan.
The Invitation for Comments notice and proposed text are available at this link: http://www.dbo.ca.gov/Licensees/Payday_Lenders/Regulations.asp.
Please submit comments to email@example.com.
What’s this mean? (Visit EChecksystem.com for an ACH alternative now.)
- If ACH for payday loans is not available in California, it can happen in your state.
- Payday and other small dollar credit lenders who fail to add Image Cash Letters to their money delivery options will not survive.
- Valuations for payday loan, small dollar credit and car title lenders will increase.
- Your Number One priority is to insist your associates, customers, staff, peers, and the industry respond to the Calif. Department of Oversight immediately!
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Six People Accused of Conspiring to Commit Loan-Sharking Involving Car Title Loans
How Not to Start a Car Title Loan Company
A multi-agency investigation has resulted in charges against six people for allegedly conspiring in an extensive car title loan scheme that allegedly defrauded unsuspecting consumers out of thousands of dollars each. Many affected consumers also lost their vehicles.
The Los Angeles County District Attorney’s Office charged the six defendants with one felony count each of conspiracy to commit loan sharking. If convicted, each defendant faces up to five years in prison. Those charged are: Alex Loxley, 39, of Santa Monica; Micayel Simonyan , 31, of North Hollywood; Walter Reyes, 28, of Los Angeles; David Watkins, 34, of Beaumont; Daniel Cool Star, 33, of Los Angeles; and Gustavo Aguirre, 33, of Glendale. All six defendants have been ordered to appear in court to answer to the charges.
The defendants are accused of making illegal loans to consumers that were guaranteed by their car titles. The charges alleged that the defendants did not have the required license to make such loans. The defendants are accused of illegally charging consumers interest rates as high as 150 percent.
Some loans were negotiated in Spanish, but consumers were not given contracts in their language as required by law.
The defendants allegedly operated several illegal car title lending locations throughout Southern California. The County of Los Angeles Department of Consumer Affairs (DCA) received complaints from consumers complaining that the defendants allegedly demanded more money than originally agreed upon, repossessed their cars unlawfully, and denied them the opportunity to reclaim their cars and/or personal belongings.
“When taking out a loan, it’s important for consumers to shop around for the best rates,” said DCA Director Brian J. Stiger. “All lenders including car title lenders must make loan terms clear so consumers can make informed decisions.”
Several other agencies participated in the investigation, including the Los Angeles District Attorney’s Office Bureau of Investigations, Los Angeles Police Department, the Department of Motor Vehicles, the California Department of Business Oversight, and the U.S. Department of Homeland Security.
DCA Investigation Leads to Loan-Sharking Charges
A car title loan, or pink-slip loan, is a small, short-term, high-rate loan that uses the title of your vehicle to guarantee the loan. These loans typically are for 30 days and have a triple-digit annual percentage rate (APR). In California, car title lenders must be licensed by the California Department of Business Oversight. You can check whether a lender has a valid license here: www.dbo.ca.gov/FSD/Licenses.
If you apply for a car title loan, it’s important to:
- Review the loan terms: Car title lenders must give you the terms of the loan in writing before you sign for the loan. Specifically, lenders must give you the finance charge (a dollar amount), the APR (the cost of credit on a yearly basis), and the total amount the loan will cost you. The contract has to be in the language you use to negotiate the loan.
- Beware of the interest rate and other fees. Lenders often charge an average of 25 percent per month to finance the loan. Lenders might also charge late fees, processing fees, and title charges.
- Know the due date: Most car title loans are due in 30 days. If you can’t pay off the loan in the typical 30-day period, the lender may offer to “roll over” the loan into a new loan. In many cases, the roll over process adds fees and interest to
the amount you originally borrowed.
- Avoid repossession: If you don’t pay what you owe, the lender may repossess your vehicle. This can be devastating if you rely on your vehicle to commute to and from work. Some lenders require installation of Global Positioning System (GPS) or starter interrupt devices on the vehicles so they can find them for repossession. Car title lenders must tell you if they are going to install a tracking device.
Alternatives to Car Title Loans
Before you decide to take out a car title loan, consider some other choices:
- Take out a small loan. Consider a small loan from your bank or credit union. Some banks may offer short-term loans for small amounts of money at competitive rates. A cash advance on a credit card also may be possible, but at higher interest rates.
- Shop for credit. Whether you’re looking for a car title loan or another form of credit, always shop for the best offer. Compare the APR and the finance charge, which includes the loan fees, interest and other credit costs. Make sure you know the total amount the loan will cost you.
- Contact your lender if you fall behind on your payments. If you’re considering a car title loan because you’re having trouble paying bills, contact your creditors and ask for more time. Many may work with you if they see you’re acting in good faith.
If you believe you are a victim of this group or any car title lender, contact DCA for help:
DCA Investigation Leads to Loan-Sharking Charges
A web based portal that will allow for the following:
1) Collection of payments in as early as 1 day
2) Verification of the account prior to deposit to minimize return items and fees (option to push payment regardless)
3) The ability to collect payments by batch, single payments and recurring payments
4) The ability to use the system for scheduled and unscheduled collection payments
5) The ability to use account verification independent of payment processing
6) The ability to push money to customers
7) The ability to collect from persons or businesses.
There are no reserves or extensive underwriting like ACH as the company does not hold your funds or provide you credit. All funds flow directly from your customers account to your account. If an item is returned, it is returned into your account. We do not charge return fees.
The first service is defined as E Check Draft. An Electronic image is printed out and submitted to your bank for payment. If you bank with Chase, BBT, SunTrust, 5th 3rd or PNC. Payment is credited next day. This is RDC but we create and scan all the items. If you bank at any other bank, payment would not be removed from your customer’s account for 3-5 days and credited to your account.
The preferred solution is ICL (image cash letter) which is also built into the system. This will allow for an electronic file to be set up directly with the bank. This is not check 21 and no image is required to be printed out. This can work with any bank and generally takes 2 weeks to set up. We can guide you on the steps necessary to request this product from your bank so that we may set up ICL. In that case, regardless of where you bank, the money would post out of your customers account next day.
Differences from RCC
ICL creates an electronic file and not a check image like RDC or RCC. RCC takes at least 1 day or more whereas ICL funds enter your account same day if before cut off.
It’s a much faster delivery. Quicker by at least a day over RCC.
Its posts direct to fed same time as bank.
The bank is hands off so they are happier with little involvement on their side once it is set up.
For example with chase, if you were to send 10,000 items now by 8pm, they would post SAME DAY unless bank has special holding rules.
We pre scrub each item (included in fee) so you know if it’s bad before you send it which will greatly assist you in your decision process.
This SERVICE can greatly reduce returns and help in the collection process.
If you would like to discuss this service in greater detail, and how it can benefit you, schedule a call here to determine if you are qualified. Click to “Schedule a Call.”
TEXAS CREDIT ACCESS BUSINESS PAYDAY LOANS & CAR TITLE LOANS
Filing Criminal Charges Against Consumers
Under Section 393.201(c)(3) of the Texas Finance Code, a contract between a consumer and a credit access business (CAB) offering payday or car title loans must state that “a person may not threaten or pursue criminal charges against a consumer related to a check or other debit authorization provided by the consumer as security for a transaction in the absence of forgery, fraud, theft, or other criminal conduct.”
This means that a CAB may not pursue criminal charges against a consumer unless it has specific evidence of criminal conduct, sufficient to support one of the specified exceptions. For example, if a consumer postdates a check to pay for a payday loan, and that check later bounces, this is not sufficient evidence to show that the consumer committed criminal conduct. A CAB should not pursue criminal charges in this situation unless it has additional evidence showing that the consumer intended to commit a criminal act.
Along the same lines, a CAB should not use a district attorney’s hot-check division simply as a means for collecting on delinquent loans. Generally, the hot-check provisions of the Texas Penal Code apply to dishonored checks bearing the date they are issued, where the writer of the check represents that funds are available even though they are not. Postdated checks are generally not subject to these provisions.
When a CAB accepts a postdated check or ACH transfer authorization, the CAB should understand that there might not be available funds at the time of the transaction. Before threatening or pursuing a criminal charge, a CAB should have specific evidence that the state could use to prove—beyond a reasonable doubt—that a consumer knowingly or intentionally violated a criminal law when entering the transaction. Otherwise, the CAB risks violating Chapter 393 of the Finance Code, as well as the Texas Debt Collection Act (Chapter 392 of the Finance Code).