Operation Choke Point-Payday Loans-H.R. 4986

By | Jul 22, 2014

Watch Rep. Blaine Luetkemeyer discuss H.R. 4986, the End Operation Choke Point Act. The bill is designed to put an end to government attempts to shut down entire portions of the private sector based on what it deems to be unacceptable. This includes payday loans, small dollar loans, guns, debt collectors, MLM industries, car title lending

Rep. Leutkemeyer makes a great deal of sense by defending legal businesses and their continued access to banking. Banks should not be put in a position of determining which industries fail and which ones survive. Additionally, digital technologies are disrupting traditional banking in ways we cannot comprehend.
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“ACE used false threats, intimidation, and harassing calls to bully payday borrowers into a cycle of debt,” said CFPB Director Richard Cordray.

By | Jul 10, 2014
Ace Payday Loan Training Manual

Ace Payday Loan Training Manual

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) took enforcement action against ACE Cash Express, one of the largest payday lenders in the United States, for pushing payday borrowers into a cycle of debt. The CFPB found that ACE used illegal debt collection tactics – including harassment and false threats of lawsuits or criminal prosecution – to pressure overdue borrowers into taking out additional loans they could not afford. ACE will provide $5 million in refunds and pay a $5 million penalty for these violations.

“ACE used false threats, intimidation, and harassing calls to bully payday borrowers into a cycle of debt,” said CFPB Director Richard Cordray. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back. The CFPB was created to stand up for consumers and today we are taking action to put an end to this illegal, predatory behavior.”

ACE is a financial services company headquartered in Irving, Texas. The company offers payday loans, check-cashing services, title loans, installment loans, and other consumer financial products and services. ACE offers the loans online and at many of its 1,500 retail storefronts. The storefronts are located in 36 states and the District of Columbia.

Payday loans are often described as a way for consumers to bridge a cash-flow shortage between paychecks or other income. They are usually expensive, small-dollar loans that must be repaid in full in a short period of time. A March 2014 CFPB study found that four out of five payday loans are rolled over or renewed within 14 days. It also found that the majority of all payday loans are made to borrowers who renew their loans so many times that they end up paying more in fees than the amount of money they originally borrowed.

The CFPB has authority to oversee the payday loan market and began supervising payday lenders in January 2012. Today’s action resulted from a CFPB examination, which the Bureau conducted in coordination with the Texas Office of Consumer Credit Commissioner, and subsequent enforcement investigation.

Illegal Debt Collection Threats and Harassment

The CFPB found that ACE used unfair, deceptive, and abusive practices to collect consumer debts, both when collecting its own debt and when using third-party debt collectors to collect its debts. The Bureau found that ACE collectors engaged in a number of aggressive and unlawful collections practices, including:

· Threatening to sue or criminally prosecute: ACE debt collectors led consumers to believe that they would be sued or subject to criminal prosecution if they did not make payments. Collectors would use legal jargon in calls to consumers, such as telling a consumer he could be subject to “immediate proceedings based on the law” even though ACE did not actually sue consumers or attempt to bring criminal charges against them for non-payment of debts.

· Threatening to charge extra fees and report consumers to credit reporting agencies: As a matter of corporate policy, ACE’s debt collectors, whether in-house or third-party, cannot charge collection fees and cannot report non-payment to credit reporting agencies. The collectors, however, told consumers all of these would occur or were possible.

· Harassing consumers with collection calls: Some ACE in-house and third-party collectors abused and harassed consumers by making an excessive number of collection calls. In some of these cases, ACE repeatedly called the consumers’ employers and relatives and shared the details of the debt.

Pressured into Payday Cycle of Debt

The Bureau found that ACE used these illegal debt collection tactics to create a false sense of urgency to lure overdue borrowers into payday debt traps. ACE would encourage overdue borrowers to temporarily pay off their loans and then quickly re-borrow from ACE. Even after consumers explained to ACE that they could not afford to repay the loan, ACE would continue to pressure them into taking on more debt. Borrowers would pay new fees each time they took out another payday loan from ACE. The Bureau found that ACE’s creation of the false sense of urgency to get delinquent borrowers to take out more payday loans is abusive.

ACE’s 2011 training manual has a graphic illustrating this cycle of debt. According to the graphic, consumers begin by applying to ACE for a loan, which ACE approves. Next, if the consumer “exhausts the cash and does not have the ability to pay,” ACE “contacts the customer for payment or offers the option to refinance or extend the loan.” Then, when the consumer “does not make a payment and the account enters collections,” the cycle starts all over again—with the formerly overdue borrower applying for another payday loan.

The ACE cycle-of-debt training manual graphic is available at: http://files.consumerfinance.gov/f/201407_cfpb_graphic_ace-cash-express-loan-process.pdf

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. The CFPB’s order requires ACE to take the following actions:

· Pay $5 million in consumer refunds: ACE must provide $5 million in refunds to the overdue borrowers harmed by the illegal debt collection tactics during the period covered by the order. These borrowers will receive a refund of their payments to ACE, including fees and finance charges. ACE consumers will be contacted by a third-party settlement administrator about how to make a claim for a refund.

· End illegal debt collection threats and harassment: The order requires ACE to ensure that it will not engage in unfair and deceptive collections practices. Those practices include, but are not limited to, disclosing debts to unauthorized third parties; directly contacting consumers who are represented by an attorney; and falsely threatening to sue consumers, report to credit bureaus, or add collection fees.

· Stop pressuring consumers into cycles of debt: ACE’s collectors will no longer pressure delinquent borrowers to pay off a loan and then quickly take out a new loan from ACE. The Consent Order explicitly states that ACE may not use any abusive tactics.

· Pay a $5 million fine: ACE will make a $5 million penalty payment to the CFPB’s Civil Penalty Fund.

The full text of the Bureau’s Consent Order is available at: http://files.consumerfinance.gov/f/201407_cfpb_consent-order_ace-cash-express.pdf

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San Diego Payday Loan Store for Sale

By | Jul 8, 2014

Here’s a good opportunity for an internet lender to establish a brick-n-mortar, an existing lender to add the beautiful city of San Diego to their portfolio or for a new small dollar loan entrepreneur to buy an established business.

  • Located in San Diego, California.
  • Monthly rent is $3500. Seller willing to subsidize rent down to $3000/mo with 4% increase per year.
  • The space is approximately 1850 square feet. The lease terms can be 3 years plus with options.
  • Seller invested $70K in improvements
  • Zoned for payday/check cashing/pawn/tax/insurance
  • Owner is motivated; wants out today.
  • Price? $35K – $40K range
  • Want more info? Shoot an email to Jer@TrihouseConsulting.com INCLUDE YOUR CONTACT INFO with Subject: San Diego
San Diego Payday Loan Store for Sale

San Diego Payday Loan Store for Sale



Interior of San Diego Payday Loan Store

Interior of San Diego Payday Loan Store

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Operation Choke Point Takes Another Hit

By | Jun 30, 2014

Operation Choke Point: It appears more legislators are recognizing the overreaching, draconian attempts by the Obama administration to shut down legal businesses they dislike. U.S. Congressman Luetkemeyer filed a bill, that “creates a new safe-harbor for financial institutions, including banks and credit unions, to promote nondiscriminatory access to financial products and services provided the merchant is licensed, registered as a money services business, or have obtained a reasoned legal opinion demonstrating the legality of the merchant’s business. The safe-harbor does not require a financial institution to do business with any merchant and does not place the burden of determining the legality of business with the financial institution.”

Visit the Congressman’s official website for details: Luetkemeyer Files Bill to End Operation Choke Point-Style Attacks on Private Sector


B.S. PEW Report, PDL Consumer Demand & Aljazeera Hack Job

By | Jun 25, 2014

The latest salvo attacking the payday loan industry refers to the PEW Report as the ultimate authority. In fact, this PEW Report is used as ammunition against the industry on a recurring basis. However, as Tim Ranney the CEO of sub-prime consumer credit bureau Clarity Services wrote several months ago in a NY Times Op-Ed, this “report” has major flaws.

“Clarity processes more than half a million report requests per day for consumers seeking many different types of credit. We have data in our systems on about 35 million non-prime consumers. The data tells us a story significantly different than Pew’s results. Pew’s data says that the “typical” payday loan consumer has an income of about $30,000. Our research tells us the number is slightly over $50,000. Pew’s research says that only 49% of the population using payday loans are employed, and our research indicates the number is about 82%. Pew’s results are based on such limited data [Pew based their results and conclusions on survey responses from about 450 consumers nationwide.], yet all of the results they claim are skewed in a direction that perpetuates the view that the consumer is always a victim. The data we see leads us to different conclusions.”

Clarity Services is NOT a lender. Do they have a dog in this hunt? Sure. Do I? Certainly. But, I still have to ask, why isn’t hard data gathered by resources having significant insight into lending and consumer demand referenced rather than academic reseachers and media whores with an axe to grind and an unquenchable desire to sway opinion?

Stupid me! This B.S they spout sells newspapers. Whoops! Sorry!! I mean page views and clicks and advertising and political donations and funds PEW and the Center for Irresponsible Lending (sorry for mis-spelling) and on and on. It’s simply safer to attack us. And, it’s more profitable.

Look, we all know the traditional payday loan product is dead. But that doesn’t mean our customer is dead as well. Here’s a screen capture of a cool tool I use called Goggle Trends. You’ll note that the search terms “payday loans” and “cash advance” are trending higher today than they ever have.

Payday loan consumer demand increasing

Payday loan consumer demand increasing

So, what’s my point? Same theme: demand for small dollar loan products are at record highs. Smart operators having significant talent and exquisite customer service will continue to prosper nicely. As I’ve written so many times over the years, “The future is ours!” So all you “old timers” who played in this game in the good ol’ days can either evolve or remain a crocodile and scurry about in the swamps.

1) In all fairness, Tim wrote his Op-ed piece in March of 2013. Here’s a link to his original piece: Tim Ranney  & to Clarity Services
2) Aljazeera, in their latest attack, labels Allen Parker Allen@Consultants4Tribes.com as “The Sovereign Matchmaker, the middleman payday lenders need to find Native American Tribes.” Here’s the link: Aljazeera
3) The Pew “Report” I referred to is here: PEW Report
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