Category: Texas

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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09
Mar

Texas CAB’s, CSO’s and 3rd Party Lender FAQ’s

Texas CAB – Texas CSO- Texas 3rd Party Lender

Texas Credit Access Businesses obtain credit for a consumer from an independent third-party lender in the form of a deferred presentment transaction or a motor vehicle title loan, more commonly referred to as “payday loans” or “title loans.”

In Texas, the actual third-party lender is not licensed, rather the credit access business that serves as the broker is the licensee in this regulated industry. The credit access business charges a fee to the consumer for obtaining the third-party loan; this fee is usually calculated as a percentage of the loan amount.

Third-party lenders typically earn an initial 10% interest and often participate in consumer NSF and late fees; 12% – 14% APR’s are not uncommon.

The borrower will sign a promissory note with the lender for the actual loan and a separate credit service agreement with the credit access business. Generally, all documents are signed at the credit access business location and payments are made directly to the credit access business.

For more Texas CAB – CSO – Third Party Lender informaion: Texas CAB

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28
Dec

Texas OCCC Payday Loan License Expires?

Texas OCCC Regulated Lender Licenses Expire at Midnight on 12/31/16.

tx-occc-logoFor those of us offering loans in Texas, here is a copy of the alert we received from the Texas OCCC:

Good afternoon,
This is a final reminder that regulated lender license renewal is now open online via ALECS and must be renewed by December 31st.
Licenses will expire at midnight on the 31st. The fee to reinstate a canceled license is an additional $1000.

To renew the license online , you can follow the steps below:
1. Log in to ALECS and from the left hand menu click on “Manage My Business.”
2. Under the License heading, click “Renew License” then from the drop down menu at the top, select Regulated Lender.
3. Select the licenses you would like to renew by checking the box next to the license number, or click the box under “Select All” to choose all licenses.
4. Check the box at the bottom of the page to confirm renewal, then click “License Renewal”
5. Select payment type, enter payment information and follow the prompts.
The fee to renew an ACTIVE license if $510. The fee to renew an INACTIVE license is $250. Volume fees are based on 2014 Annual Report data.
To verify that your license has been renewed you can go to your Dashboard and click the “My Recent Activity” tab.

After following these steps, if you continue to have questions or problems, feel free to call us at 512-936-7605.
PLEASE HAVE YOUR MASTER FILE OR LICENSE NUMBER AVAILABLE.
Licenses expire at midnight on December 31st.
Thank you and have a good day!
Licensing Department
Office of the Consumer Credit Commissioner
512-936-7605
https://alecs.occc.texas.gov
www.occc.texas.gov

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