Payday Loans vs Bank NSF and Overdraft Fees: Reported by CFPB

By | Jul 7, 2017

You think payday loan, installment loan and car title loan APR’s are high?

You want to know why banks, credit unions and so-called consumer advocates hate small dollar lenders?

Did you know the folks who initially funded the Center for Responsible Lending [CRL] launched a credit union – an entity treated as a non-profit?

Follow the money…

Payday Loan, Installment Loan, Title Loan APR's vs Banks

Payday Loan, Installment Loan, Title Loan APR’s vs Banks

Check this out! The USA’s 628 biggest banks reported – after being forced to by the FFIEC – $11.2 BILLION dollars in NSF and overdraft fees in 2015. [2015 is the first year banks having assets exceeding $1B were required to report this number!]

$11.2 BILLION is 8% of these bank’s net income.

The median bank fee was $34.00. However, because of the way bank algorithms work, 25% of bank customers paid $90 per instance [2013].

Average payday loan APR? Just under 400%

The average bank NSF fee? 1400%

Now, realize that these banks have virtually ZERO RISK! They are at the front of the line. Their account holder; their customer – must pay the bank/credit union or they put their customer in the ChexSystem data base and close their customer’s bank account.

And, let’s not forget that the banks borrow their money from the FED’s for approximately 1%. THIS IS NUTS!

[Note: If you would like a copy of the original CFPB Report in PDF format, email: Jer@PaydayLoanUniversity.com ]

60 of the reporting banks derived 20% of their net revenue from overdraft and NSF fees!

  • So… installment, car title and payday lenders must raise capital at average rates of 1.5% to 3%+ per month; typically with personal guarantees.
  • Assume the risks associated with launching a new business.
  • Overcome the challenges the search engines place on them.
  • Face the continued negative pummeling brought down on them by their competition: banks and non-profit credit unions.
  • Approve loans for consumers with zero collateral.
  • Face-off the FED’s regarding Operation Choke Point – we did get a nice victory on this matter recently :-)
  • Keep their loan portfolios on their books [balance sheet lending] vs securitization by the big boys.
  • And a host of additional B.S. that comes with the territory.
  • Banks and credit unions HATE US because we are cheaper!!

Now mind you, we are not whining! Just asking for a level playing field – never going to happen – AND the realization by all parties that payday loan, car title and installment loans make a GREAT DEAL of sense for millions of consumers EVERY YEAR!

 

 

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Payday Loan Operation Choke Point-Update

By | Jun 10, 2017

Operation Choke Point Lawsuit Update via Judge in District of Columbia.

Judge Kessler in the District of Columbia, denied a group of payday lenders allegedly affected by the Department of Justice’s (DOJ) controversial Operation Choke Point.

Banks for payday loan lenders.

Payday loan industry fails to demonstrate harm due to an inability to secure bank relationships.

“For example, the payday lender told the court that it received termination notices from 21 banks since 2013. But the company did not indicate how many banks it continues to have accounts or business relationships with leaving the court unable to conclude that they have been “cut off” from the system. ‘In sum, the fairest reading of Plaintiffs’ submissions is that, presently, they do have a right to hold bank accounts and otherwise access the banking system,’ the court wrote.”

Car title loan company

Start a PDL Business

The CFSA and additional payday loan plaintiffs requested the U.S. Court of Appeals for the D.C. Circuit to review their case.

Here’s a link to the “Opinion.”

Here’s a link to the original discussion appearing in JD Supra.

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Startup Opportunity with Experienced Tribe Lender

By | May 25, 2017

Opportunity: Synopsis of a proposed capital raise for a De Novo Tribe portfolio by an experienced payday loan/installment lender.

Proposal for Trihouse to Connect Operators and Capital Providers 2017

Goal:

Experienced Lender with capital is re-entering the small dollar subprime lending space and seeks additional capital to partner with in order to grow and scale the portfolio.

Lender is launching a new Tribal Lending Portfolio having a minimum starting capital of $4-$6M. Lender will contribute 10-20% of the capital into this deal depending on the final deal structure.

Should a capital provider prefer to employ a “state-by-state” licensing model, this Lender is “open” to this strategy. However, the capital required is at least 2x to be viable.

Additionally, this experienced Lender is open to managing a portfolio for a sovereign Native American Indian Tribe.

Background:

  • Lender has seven+ years of experience in underwriting, origination, and servicing loans focused on the underbanked, sub-prime consumer segments.
  • Lender manages the complete personal loan lending cycle from acquisition through payoff or collections.
  • Lender will manage all the day to day operations of this new portfolio.

Lender previously launched a $1M+ small dollar/sub-prime/installment portfolio and successfully exited by selling the portfolio to a larger group.

  • Lender has launched and serviced multiple online lending products (Merchant Cash Advance, Pre-Settlement Funding)
  • Lender worked on a team in the Prime Consumer Online Lending Space (Lending Club)
  • Previous Lender entrepreneurial ventures:
    • Started an online marketing company that specialized in online lead generation with in-house call center.
    • Lender’s first entrepreneurial venture was starting, and successfully merging, an accounting outsourcing company into a larger competitor
    • Lender started his career on Wall Street (Bear Stearns & others) as an institutional sales/trader.

Infrastructure in Place:

  • Lender to manage the entire operation
  • Director of Operations (who worked with Lender on previous portfolios
  • All Operations to be done in house (no outsourcing of call center)
  • Data analyst
  • LOI in place with a specific Tribe having a 5 year Term and a Pre-Negotiated 5 Year Renewal Option.

What Lender requires of a Partner:

  • Financial Partner who brings capital to the table. The capital will remain in the business for a 3-4 year period.
  • It is imperative the capital partner understands the lending business
  • Preferred method of capital monetization is a straight debt deal
  • Lender is open to a debt/Equity Hybrid

IF THIS OPPORTUNITY IS OF INTEREST TO YOU, EMAIL: TrihouseConsulting@gmail.com your complete contact info and interest. I will arrange a private introduction and then get out of the way. No cost to you!

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Fewer Companies Settle with CFPB

By | May 8, 2017

The Business of Lending is the Oldest Pofession.

The Wall Street Journal [which I have appeared in on several occassions] ran an interesting piece on the CFPB. The fact is, fewer companies are willing to settle with the CFPB today. This is huge. 

Fewer lenders willing to settle with CFPB = more investors/capital scrambling to enter the B2C and B2B alternative lending space. In spite of the competition from the balance sheet and off-balance sheet lenders, my phone is ringing. On the other end of the call? Entrepreneurs, capital groups, technologists… contemplating entrance into the business of lending. Lenders find it hard to ignore the 30%+ net returns available. The banks simply cannot service the demand for small dollar loans. Lenders continue to salivate due to the low cost of money coupled with ease of entry, mobile technology, tribe sovereignty, a more stable and defined state regulatory environment…

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Installment Loans vs Payday Loans. What’s the Difference?

By | Apr 28, 2017

Installment Loans vs Payday Loans. What’s the Difference?

I get at least one call every day along the lines of, “What’s the difference between a payday loan and an installment loan.”

They say a picture is worth a thousand words so here you go.

Typical Installment Loan Breakout from Page 248 of our “How to Start a Personal Loan Business:”

Consumers borrow between $300 and $1,200.

The standard repayment schedule for installment loans offered is 20 payments over the course of 10 months, with one payment made every two weeks.

For each installment payment, a consumer must pay a “service fee” (often $30 for every $100 of principal outstanding) and five percent of the original principal.

As a result, lenders typically offer loans with annual percentage rates of between approximately 440% and 950%.

For an $800 loan, a typical loan contract requires the consumer to repay a total of approximately $3,320 over the course of ten months.

The following excerpt is from a typical loan document prepared for an installment loan in the amount of $800 originated by a lender and made to a borrower:

NOTE: For an in depth discussion and sample docs and contracts, visit PaydayLoanUniversity

Installment Loan vs Payday Loan

Installment Loan vs Payday Loan from “How to Start a Payday Loan/Installment Biz.”

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