The Credit Services Organization, often referred to as a CSO, is becoming popular in states like Texas for offering payday loans and car title loans. The reason? The state of Texas simply requires a “registration” of a business as a CSO rather than applying for a payday loan or car title loan license.
Additionally, the rates one can charge are not prescribed by Texas statute, unlike a payday loan or car title loan. CSO’s are not subject to the state’s small loan laws or regulation by the Office of Consumer Credit Commissioner! Typical rates for these “loans” are currently in the $20 to $30 per $100 loaned.
What is a CSO or Credit Services Organization? It’s simply a broker that, after reviewing a consumer’s ability to pay, issues a letter of credit on behalf of the consumer to a third party “lender.” The CSO or Credit Services Organization services the “loan”, markets the “loan”, and helps the consumer improve their credit by reporting their payment history to a sub-prime credit reporting agency.
For a thorough description of the step-by-step procedures for setting up a Credit Services Organization – CSO Model including sample contracts, click here to review our 50 page CSO Report.