Hang In There Payday Loan Fans! The Future is Ours!!
Payday Loan, Car Title Lenders, Check Cashers and all the rest of us in the micro-lending niche will survive. In fact, we’ll thrive.
How can I say this? How can I be so certain?
First, let me share with you the catalyst for this rant.
I got into payday loans, car title lending and check cashing in 1997 when I opened my first store in Mission Viejo, Calif. It was the early days and nobody in my world even knew what a payday loan was. I attended my first National Association of Check Cashers Convention (now called FISCA), networked, attended the workshops and left feeling really upbeat about the future of the payday loan industry and micro-lending in particular.
Everything was going great. Sure, there were always rumblings about regulators in a few states getting their feathers ruffled after prodding by The CRL or some other anti-business, anti-capitalist, anti-financial choice group. But I came to realize we enjoy a huge demand by consumers for our products and services. And we have some really smart and creative people in our industry.
Then October 2003 came along. I was at the FISCA Convention (I think it was at The Broadmoor in Colorado) when the FDIC announced all federally chartered banks involved in payday loan lending would have to increase their reserves to 1:1. Additionally, the FDIC advised that banks should ensure that payday loans are not provided to customers who have had payday loans outstanding from any lender for a total of three months in the previous 12-month period. “FDIC-supervised institutions currently engaged in payday lending are instructed to submit plans detailing how they will address the revised guidance.”
This announcement swept like wild fire through the halls of the convention. Shares of publicly traded payday loan lenders and check cashers plummeted that day. Valuations of brick-n-mortars plunged! “There would be no financing available in the future for our industry.” Stephens Investment Bank dutifully reported M & A action in our market segment was “dead” for the foreseeable future. Fully a third or more of the convention attendees freaked out. It was they said, “The end of our industry.”
Many operators bailed. They sold out; some at fire sale prices. (I know that many of these sellers eventually came back to our industry. They couldn’t stay away :o)
And then a funny thing happened; our industry survived. Store revenues increased. Transaction volume increased. The Internet began to play a role. CFSA was formed and eventually the OLA .
I don’t know the date you’re reading this. It doesn’t even matter. Just be aware that the regulatory and legislative issues discussed here are a universal theme, so keep reading. You’ll be glad you did! It’s very optimistic!!
Now don’t get me wrong! There have been more bumps and grinds along the way. The payday loan advocates in Georgia were defeated by GILA . Oregon went down the tubes. Arizona and Ohio were tough battles. Virginia is edgy. And there were others! (By the way, don’t think the residents of these “dark” states are no longer getting their payday loans and car title loans; they most certainly are. They simply aren’t walking into a store in their state. Instead, they’re using the Internet,they’re driving across state lines, they’re calling 800#’s… meanwhile there are fewer jobs in their state. There is more crime in their state. Fewer taxes are being paid in their state. Vacancy rates for commercial buildings are higher in their state. And the fees that licensed payday loan and car title loan businesses were paying to their State are now non-existent. I guess that’s the subject of another rant!)
But it’s not all doom and gloom for us!
Here’s just a few reasons why we will overcome!
It will be 12 to 24 months before anyone in Washington even reads the 2300 page Consumer Financial Regulatory Agency Proposal. It will take months and months to form the committees and boards required to attempt to oversee our industry. There will be massive lobbying by the banks, the credit card companies, the automobile dealers, and our own organizations including OLA, FISCA and CFSA creating a lot of “give-and-take.” Who knows what the ultimate outcome will be. I’m certain we will evolve into whatever it takes. (For more on this read USA Today’s description of past failures of new financial regulatory reform out of Washington.
And there’s technology. Technology is in our favor. Technology knows no boundaries. Pay attention to Internet solutions. Get acquainted with “peer-to-peer” lending. Educate yourself regarding the origination of the Grameen bank and Muhammad Yunus who won the 2006 Nobel Peace prize for micro-lending. Do you know what he’s doing in New York and Pennsylvania today? Take a look at the Kiva Model and Prosper and Lending Club. Here’s a Business Week article offering some further insight into peer-to-peer lending:
Acquaint yourself with installment lending, open-end credit agreements, closed-end credit agreements, the Credit Services Organization (CSO) Model, collateralized and non-collateralized loans… (all of these are discussed in our Training Manual at PaydayLoanIndustry.com .
And don’t forget to learn what you can implement in your specific location/ model regarding setup fees, one time application fees, credit check fees (even if it’s simply Teletrack), referral fees, check cashing fees, connection fees…
MOST IMPORTANTLY, let us not forget about our customers! THEY NEED US JUST LIKE WE NEED THEM. They’re out there by the millions in the USA, the UK, Canada, Australia, New Zealand, Korea, Japan; they’re EVERYWHERE! And our customers DEMAND our product! They WANT our product! They MUST HAVE our product!
We simply have to organize better, support our industry organizations better, join forces with complementary industries, and prod our customers to support us with videos, email, letters and face book accolades. Most importantly, we must EVOLVE into whatever we need to be in order to SERVE OUR CUSTOMERS. No matter what the Regulators do, OUR CUSTOMERS WANT US! CUSTOMERS NEED OUR HELP! AND WE DESERVE TO MAKE A PROFIT SERVING THEM!!
So… with no end to consumer demand for our products and services in conjunction with an industry composed of some of the most intelligent and creative men and women on the planet, I’m 100% certain the payday loan, car title loan, check cashing …the whole micro-lending niche will not only survive but prosper in the coming decades.
Educate yourself! Read this PaydayLoanIndustryBlog.com . Read The Payday Loan Pundit . Read Nick’s stuff at PDLIndustry.com .
Consumer Financial Service Centers are our destiny! Evolve!! Adapt!! Create!!! You’ll prosper!!!!