Category: Laws

10
Aug

HB 123 Ohio Small Dollar Loan Law

Ohio Payday Loan and Credit Services organization Bill 123 as passed: The bill will require lenders offering certain types of consumer loans and regulated under the Small Loan, General Loan, or Credit Service Organization laws to obtain licensure instead under the Short-Term Loan Law.

Overview
In FY 2018, the Consumer Finance Section of the Division of Financial Institutions within the Department of Commerce (COM) oversaw approximately 1,600 licenses and registrations under the various lender laws covered by the bill. Overall, the changes in the bill will steer lenders who currently offer small-dollar, shorter term loans and wish to continue to do so in the future from licensure under the Small Loan, General Loan, or Credit Services Organization laws instead to licensure under the Short-Term Loan Law.

The modifications to the Short-Term Loan Law in the bill include (1) increasing the maximum loan amount from $500 under current law to $1,000 under the bill, (2) increasing the duration of loans from at least 31 days to a maximum duration of one year, (3) establishing a monthly maintenance fee that is the lesser of 10% of the originally contracted loan amount or $30, and (4) establishing requirements for a borrower’s eligibility for a loan that has a duration less than 91 days. The bill also caps the total amount of fees and charges that can be charged to 60% of the  originally contracted loan amount.

To differentiate between the loans that can be made under the Short-Term Loan Law, the bill requires that loans made under the Small Loan Law and General Loan Law have either a minimum duration of more than one year or a loan amount greater than $1,000. Additionally, the bill prohibits credit services organizations (loan brokering services) from brokering extensions of credit when the amount is less than $5,000 and the repayment term is under one year.

Consumer finance licenses and registrations

The bill will require payday lenders to… here’s the actual Bill 123 as passed and signed by the Ohio Governor:

HB 123 Passed – Effective October 2018
How to Start a Consumer Loan Business: Installment lending, car title loan lending, payday loan lending, personal loan business

Click This Image for Some Light Reading 🙂 Over Your Weekend!

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19
Jul

New Ohio Payday Loan Bill Near Passage

A new Ohio Payday Loan Bill will

  • bill would cap the life of a loan to one year
  • limit the amount to $1,000
  • cap the initial fee on that loan to 2 percent of any amount above $500
  • cap total fees collected at 60 percent of the principal
  • and cap monthly maintenance fees to 10 percent of the outstanding principal or $30, whichever is less.
How to Start a Consumer Loan Business: Installment lending, car title loan lending, payday loan lending, personal loan business

Click This Image for Some Light Reading 🙂 Over Your Weekend!

“Taking one side of the argument in the final version of a complex and far-reaching piece of legislation flouts transparency and is no way to enact legislation that will potentially cut off access to short term loans to Ohio residents and put hundreds of Ohioans out of work,” said Pat Crowley, spokesman for the Ohio Consumer Lenders Association.”

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06
Jul

Texas CAB, Credit Access Business, Credit Services Organization Loan Model

Why Use the Texas CAB/CSO Model to Lend Money to the Masses?

Texas CSO-CAB Lending Model

Texas CSO-CAB Lending Model

In the old n’ times lenders funding payday loans – nowadays often referred to as installment loan lenders –  in states not having specific payday loan “safe-harbor” legislation, lenders like Curo, Enova, Elevate, would partner with a state-chartered FDIC insured bank (Bank of Delaware is one example) in order to charge payday loan borrowers more than the maximum state usury rates allowed.

This was the case in Texas, Arkansas, Pennsylvania, New Jersey…  The payday loan company acted as a “marketer, a servicer and a processor for the bank. This loan model is referred to as the “bank-model.”  The “bank-model” was extremely popular for years and resulted in substantial profits for the companies utilizing it.

As an example, a dated study by the Texas Consumer Credit Commissioner estimated 1.81 million loans were made in Texas using the “bank-model.”  $626 million dollars were loaned.  The average loan was $338 with an average APR of 511%.

The Federal Deposit Insurance Corporation’s Revised Guidelines for Payday Lending, which took effect way back in July of 2005, adversely impacted those payday loan lenders using this “bank model” to export usury rates across state lines.  This edict forbids banks from providing payday loans to people who have had an outstanding payday loan from any lender for more than 3 months in the previous year.  The Revised Guidance limits the frequency of customer usage of payday loans and limits the period a consumer may have a payday loan outstanding from any lender to an aggregate of three months during the previous 12 month period.  Based on an average term of 15 days, this effectively limits the number of payday loans that may be made to any consumer to six during any 12 month period.  All payday loans made from any payday lender would count against this limit.

So in the state of Texas, and Ohio and a few others, the cunning payday loan operators conceived of employing the “Texas Credit Services Organization (CSO) / Texas Credit Access Business (CAB)” loan model.

Texas CAB-CSO-Credit Access Business

The Texas CAB/CSO Model Explained

By implementing this CSO Model, we payday loan/installment loan lenders can service the continuing, unabated consumer demand for our loan products while remaining profitable enough to earn a fair return on our investments, pay our employees a fair wage, pay our taxes and support our communities.

The bottom-line is demand for the payday loan/installment loan product has been clearly established.  The CAB/CSO model is on a firm foundation with specific case law to support it; it has already survived a federal court case.  Additionally, the CAB/CSO model can yield higher transaction fees and margins than the bank model or, as in the state of Texas, the “Regulated Lender” licensing model.

The multi-million dollar payday loan companies have spent millions of dollars in legal fees to research and refine the CSO/CAB model; follow their example.

Texas: Do you know just enough to be dangerous? Do you need an in-depth understanding of how the Texas CAB/CSO consumer loan model works? Are you wondering how the 3rd Party Lender fits into all this? Why it appears you must pay to lend your own money? How do you get licensed to offer loans in Texas? Do you need a 3rd Party Lender?

We’ve got you covered! Our newest Training Manual is our 88 page:

Texas CSO-CAB Lending Model

Texas CSO-CAB Lending Model

“Texas CSO/CAB Model & Analysis: the Credit Services Organization Ver. 10.0.”

Table of Contents

What is a CAB/CSO

How a CAB/CSO Works

Nuts & Bolts of 3rd Party Lender

Key CAB/CSO Characteristics

Why Use the CAB/CSO Model

Pros & Cons Regarding the CSO Model

Strategies for implementing the CAB/CSO Model

CSO/CAB Software Solutions

Advance America & the CSO Model

Payday Lenders Strike Back

Key Legal Authority

Typical CSO Documentation

Resources

A Typical Consumer Loan Agreement

Introduction

Key Characteristics

Key references

Basic Program Documents and Materials

10% loans under Texas Finance Code Chapter 302

Texas Credit Services Organization Act (Tex. Fin. Code Chapter 393) 

79th Texas Legislature, Regular Session

Texas Finance Commission Review

Texas Attorney General Review

Other Background Information

Developments in Other States

CREDIT SERVICES ORGANIZATION: TYPICAL AGREEMENT

TEXAS FINANCE CODE

Lovick versus RiteMoney LTD

You can get a PDF copy now! Immediate download available.


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11
Apr

California Payday Loan Law: Deferred Presentment-CDDTL California Deferred Deposit Transaction Law

CALIFORNIA PAYDAY LOAN LAWS – LEGISLATION FINANCIAL CODE – FIN

DIVISION 10. CALIFORNIA DEFERRED DEPOSIT TRANSACTION LAW [23000 – 23106]

  ( Division 10 added by Stats. 2002, Ch. 777, Sec. 10. )

CHAPTER 2. Deferred Deposit Transactions [23035 – 23038]

( Chapter 2 added by Stats. 2002, Ch. 777, Sec. 10. )

23035.

California Payday Loans  

(a) A California Payday Loans licensee may defer the deposit of a customer’s personal check for up to 31 days, pursuant to the provisions of this section. The face amount of the check shall not exceed three hundred dollars ($300). Each deferred deposit transaction shall be made pursuant to a written agreement as described in subdivision (e) that has been signed by the customer and by the licensee or an authorized representative of the licensee.

(b) A customer who enters into a California Payday Loans deferred deposit transaction and offers a personal check to a licensee pursuant to an agreement shall not be subject to any criminal penalty for the failure to comply with the terms of that agreement.

(c) Before entering into a deferred deposit transaction, licensees shall distribute to customers a notice that shall include, but not be limited to, the following:

(1) Information about charges for California Payday Loans deferred deposit transactions.

[How to Start a Payday Loan Business.”]

(2) That if the customer’s check is returned unpaid, the customer may be charged an additional fee of up to fifteen dollars ($15).

(3) That the customer cannot be prosecuted in a criminal action in conjunction with a deferred deposit transaction for a returned check or be threatened with prosecution.

(4) The department’s toll-free telephone number for receiving calls regarding customer complaints and concerns.

(5) That the California Payday Loans licensee may not accept any collateral in conjunction with a deferred deposit transaction.

(6) That the check is being negotiated as part of a deferred deposit transaction made pursuant to Section 23035 of the Financial Code and is not subject to the provisions of Section 1719 of the Civil Code. No customer may be required to pay treble damages if this check does not clear.

(d) The following notices shall be clearly and conspicuously posted in the unobstructed view of the public by all licensees in each location of a business providing California Payday Loans deferred deposit transactions in letters not less than one-half inch in height:

(1) The California Payday Loans licensee cannot use the criminal process against a consumer to collect any deferred deposit transaction.

(2) The schedule of all charges and fees to be charged on those deferred deposit transactions with an example of all charges and fees that would be charged on at least a one-hundred-dollar ($100) and a two-hundred-dollar ($200) deferred deposit transaction, payable in 14 days and 30 days, respectively, giving the corresponding annual percentage rate. The information may be provided in a chart as follows:

Amount
Provided
Fee Amount of Check 14-day APR 30-day APR
$100 XX XXX XXX XXX
$200 XX XXX XXX XXX

(e) An agreement to enter into a deferred deposit transaction shall be in writing and shall be provided by the licensee to the customer. The written agreement shall authorize the licensee to defer deposit of the personal check, shall be signed by the customer, and shall include all of the following:

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How to Loan Money to the Masses!

(1) A full disclosure of the total amount of any fees charged for the California Payday Loans deferred deposit transaction, expressed both in United States currency and as an APR as required under the Federal Truth In Lending Act and its regulations.

(2) A clear description of the customer’s payment obligations as required under the Federal Truth In Lending Act and its regulations.

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(3) The name, address, and telephone number of the California Payday Loans licensee.

(4) The customer’s name and address.

(5) The date to which deposit of check has been deferred (due date).

(6) The payment plan, or extension, if applicable as allowed under subdivision (c) of Section 23036.

(7) An itemization of the amount financed as required under the Federal Truth In Lending Act and its regulations.

(8) Disclosure of any returned check charges.

(9) That the customer cannot be prosecuted or threatened with prosecution to collect.

(10) That the California Payday Loans licensee cannot accept collateral in connection with the transaction.

(11) That the California Payday Loans licensee cannot make a deferred deposit transaction contingent on the purchase of another product or service.

(12) Signature space for the customer and signature of the licensee or authorized representative of the licensee and date of the transaction.

(13) Any other information that the commissioner shall deem necessary by regulation.

(f) The notice required by subdivision (c) shall be written and available in the same language principally used in any oral discussions or negotiations leading to execution of the deferred deposit agreement and shall be in at least 10-point type.

(g) The written agreement required by subdivision (e) shall be written in the same language principally used in any oral discussions or negotiations leading to execution of the deferred deposit agreement; shall not be vague, unclear, or misleading and shall be in at least 10-point type.

(h) Under no circumstances shall a California Payday Loans deferred deposit transaction agreement include any of the following:

(1) A hold harmless clause.

(2) A confession of judgment clause or power of attorney.

(3) Any assignment of or order for payment of wages or other compensation for services.

(4) Any acceleration provision.

(5) Any unconscionable provision.

(i) If the California Payday Loans licensee sells or otherwise transfers the debt at a later date, the licensee shall clearly disclose in a written agreement that any debt or checks held or transferred pursuant to a deferred deposit transaction made pursuant to Section 23035 are not subject to the provisions of Section 1719 of the Civil Code and that no customer may be required to pay treble damages if the check or checks are dishonored.

(Added by Stats. 2002, Ch. 777, Sec. 10. Effective January 1, 2003. Section operative on December 31, 2004, or sooner, pursuant to Section 23104.)

23036.

(a) A fee for a California Payday Loans deferred deposit transaction shall not exceed 15 percent of the face amount of the check.

(b) A California Payday Loans licensee may allow an extension of time, or a payment plan, for repayment of an existing deferred deposit transaction but may not charge any additional fee or charge of any kind in conjunction with the extension or payment plan. A licensee that complies with the provisions of this subdivision shall not be deemed to be in violation of subdivision (g) of Section 23037.

(c) A California Payday Loans licensee shall not enter into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect.

(d) A California Payday Loans licensee who enters into a deferred deposit transaction agreement, or any assignee of that licensee, shall not be entitled to recover damages for that transaction in any action brought pursuant to, or governed by, Section 1719 of the Civil Code.

(e) A fee not to exceed fifteen dollars ($15) may be charged for the return of a dishonored check by a depositary institution in a deferred deposit transaction. A single fee charged pursuant to this subdivision is the exclusive charge for a dishonored check. No fee may be added for late payment.

(f) No amount in excess of the amounts authorized by this section shall be directly or indirectly charged by a licensee pursuant to a deferred deposit transaction.

(g) A licensee shall be subject to the provisions of Title 1.6C (commencing with Section 1788) of Part 4 of Division 3 of the Civil Code.

(Added by Stats. 2002, Ch. 777, Sec. 10. Effective January 1, 2003. Section operative on December 31, 2004, or sooner, pursuant to Section 23104.)

23037.

In no case shall a California Payday Loans licensee do any of the following:

(a) Accept or use the same check for a subsequent transaction, or permit a customer to pay off all or a portion of one deferred deposit transaction with the proceeds of another.

(b) Accept any collateral for a deferred deposit transaction.

(c) Make any deferred deposit transaction contingent on the purchase of insurance or any other goods or services.

(d) Enter into a deferred deposit transaction with a person lacking the capacity to contract.

(e) Alter the date or any other information on a check.

(f) Engage in any unfair, unlawful, or deceptive conduct, or make any statement that is likely to mislead in connection with the business of deferred deposit transactions.

(g) Accept more than one check for a single deferred deposit transaction.

(h) Take any check, instrument, or form in which blanks are left to be filled in after execution.

(i) Offer, arrange, act as an agent for, or assist a deferred deposit originator in any way in the making of a deferred deposit transaction unless the deferred deposit originator complies with all applicable federal and state laws and regulations, including the provisions of this division.

(1) The prohibition specified in this subdivision does not apply to the arranger, agent, or assistant to a state or federally chartered bank, thrift, savings association, or industrial loan company where the state or federally chartered bank, thrift, savings association, or industrial loan company satisfies all of the following:

(A)  It initially advances the loan proceeds to the customer.

(B) It does not sell, assign, or transfer a preponderant economic interest in the deferred deposit transaction to the arranger, agent, or assistant, or an affiliate or subsidiary of the state or federally chartered bank, thrift, savings association, or industrial loan company, unless selling, assigning, or transferring a preponderant economic interest is expressly permitted by the primary regulator of the state or federally chartered bank, thrift, savings association, or industrial loan company.

(C) It develops the deferred deposit transaction product or products on its own.

(2) If a licensee offers, arranges, acts as an agent for, or assists a state or federally chartered bank, thrift, savings association, or industrial loan company in any way in the making of a deferred deposit transaction and the state or federally chartered bank, thrift, savings association, or industrial loan company meets the standards set forth in paragraph (1), the licensee shall comply with all other provisions in this division to the extent they are not preempted by other state and federal laws.

(Added by Stats. 2002, Ch. 777, Sec. 10. Effective January 1, 2003. Section operative on December 31, 2004, or sooner, pursuant to Section 23104.)

23038.

(a) Any person who violates any provision of Section 987 of Title 10 of the United States Code, as amended by 126 Stat. 1785 (Public Law 112-239), or any provision of Part 232 (commencing with Section 232.1) of Subchapter M of Chapter I of Subtitle A of Title 32 of the Code of Federal Regulations, as published on July 22, 2015, on page 43560 in Number 140 of Volume 80 of the Federal Register, violates this division.

(b) A person that does not market deferred deposit transactions to, or does not enter into those transactions with, covered borrowers, as that term is defined under Part 232 (commencing with Section 232.1) of Subchapter M of Chapter I of Subtitle A of Title 32 of the Code of Federal Regulations, as amended on the date described in subdivision (a), shall not be in violation of Section 394 of the Military and Veterans Code.

Again, to open your own payday loan business, CLICK HERE to get started.

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How to Loan Money to the Masses!

(Amended by Stats. 2017, Ch. 514, Sec. 4. (SB 266) Effective January 1, 2018.)

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10
Apr

Florida Payday Loan Law Update SB 920

CS/CS/CS/SB 920 — Florida Deferred Presentment Transactions [Payday Loan Laws]

by Rules Committee; Appropriations Committee; Commerce and Tourism Committee; and Senators Bradley and Braynon

This summary is provided for information only and does not represent the opinion of any Senator, Senate Officer, or Senate Office.

The bill authorizes deferred presentment installment transactions under Florida law. A deferred presentment installment transaction must be fully amortizing and repayable in consecutive installments, which must be as equal as mathematically practicable. The term of a deferred presentment installment transaction may not be less than 60 days or more than 90 days and the time between installment payments must be at least 13 days but not greater than 1 calendar month.

How to Start a Loan BusinessThe maximum face amount of a check taken for a deferred presentment installment transaction may not exceed $1,000, exclusive of fees. The maximum fees that may be charged on a deferred presentment installment transaction are 8 percent of the outstanding transaction balance on a biweekly basis. Fees for a deferred presentment installment transaction are calculated using simple interest. Prepayment penalties are prohibited. The bill retains current law in prohibiting a provider from entering into a deferred presentment transaction with any person who has an outstanding deferred presentment transaction or whose previous transaction has been terminated for less than 24 hours. If a drawer timely informs the provider in writing or in person that they cannot redeem or pay in full in cash the amount due and owing, the provider must provide a grace period for payment of a scheduled installment.

If approved by the Governor, these provisions take effect July 1, 2019.

Vote: Senate 31-5; House 106-9

The Florida Governor signed this Bill 03-21-2018

SB 920

Florida SB 920 Payday Loan Law-04-10-2018

 

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