Tag: payday loan laws


5000 Payday Lenders Win via U.S. House of Representatives

Payday Loan Lending

By Jer Trihouse. The battle between the CFPB and payday lenders is not yet decided. It appears the members of the  U.S. House of Representatives understand how important access to credit is for consumers throughout America!

It’s refreshing to witness the heroic efforts by our representatives in the House against unelected CFPB bureaucrats and their draconian efforts to place  credit restrictions on consumers for solving their daily financial challenges.

Car title loan company

Start a PDL Business

FISCA represents the thousands of small mom and pop payday loan operators offering short-term, small dollar loans to their  clients.

Having actually visited payday loan stores in California, Nevada and Tennessee recently (unlike any CFPB employee), I can attest to the fact that consumers are scared. They are VERY worried that they will no longer have access to a $300 – $1000 payday loan from thier local loan center when facing a financial emergency.

Payday Lenders Win

Per Ed D’Alessio, FiSCA’s Executive Director, “By passing H.R. 5485 and rejecting the Sewell-Waters Amendment, this bipartisan group of lawmakers took an important step in keeping critical and often lifesaving lines of credit open for hard-working Americans.”

“H.R. 5485 requires the Consumer Financial Protection Bureau (CFPB) to pause the implementation of the proposed federal rules governing small dollar lending in America, an extensive and economically devastating regulation that would deny access to short-term credit options to millions of Americans.”

Financial Service Centers Of America Statement In Response To H.R. 5485 And Sewell-Waters Amendment Votes

WASHINGTON, July 8, 2016 /PRNewswire/ — Financial Service Centers of America (FiSCA), the national trade association representing 5,000-member financial service center locations around the U.S., issued the following statement today in response to the votes on H.R. 5485, the FY 2017 Financial Services and General Government Appropriations Act, and the Sewell-Waters Amendment #17: “We applaud the…Continue Reading..


Payday Loan Laws

Payday Loan Laws

Payday Loan Interest-Rate Caps

The following states have enacted laws that render payday loans void if they exceed the usury limit:

  • Minnesota, which caps interest rates for (a) written loan contracts at 8% absent applicability of another statute, Minn. Stat. § 334.01, subdiv. 1; and (b) consumer short-term loans at 21.75% APR, or the total of 33% a year on the part of the unpaid balance up to $1,125 and 19% a year on the part of the unpaid balance above $1,125. Minn. Stat. §47.59, subdiv. 3(a). Loans that exceed these rates are void and the borrower has no obligation to pay any amounts owing on them. Minn. Stat. §§ 334.03, 47.601, subdiv. 6(b);
  • Arkansas, whose state constitution provides that all contracts with interest in excess of 17% “shall be void as to principal and interest . .. . “
  • New Hampshire, which prohibits annual interest rates above 36% for loans of $1o,ooo or less. N.H. Rev. Stat. § 399-A:12(I). Loans that do not comply with those restrictions are void, and the lender has no right to collect any principal, charges, or recompense. N.H. Rev. Stat.§ 399- A:u(V);
  • New York, which prohibits any person or corporation not licensed by the state of New York from “directly or indirectly charg[ing], tak[ing] 16 Case 1:15-cv-05211-CM Document 6 Filed 07/31/15 Page 17 of 32 or receiv[ing] any interest … at a rate exceeding” annual interest of 16% on covered loans. N.Y. Gen. Oblig. Law§ 5-501; N.Y. Banking Law 14-a(1). Loans that exceed the rate are void. N.Y. Gen. Oblig. Law§ 5-511; see also Szerdahelyi v. Harris, 490 N.E.2d 517, 522-23 (N.Y. 1986) C'[A] usurious transaction is void ab initio … . “);and North Carolina, which imposes a tiered set of interest-rates limits with a maximum of 30% on loans below $15,000 and repayable between 12 and 96 months. N.C. Gen. Stat. § 53-176(a). Loans that violate this provision are void, and the lender has no right to collect, receive, or retain any principal or charges. N.C. Gen. Stat. § 53-166(d).
  • Colorado prohibits annual interest above 12% on unpaid balances for loans other than supervised loans. Colo. Rev. Stat. § 5-2-201(1). For supervised loans, Colorado prohibits a supervised lender from receiving a finance charge exceeding the equivalent of the greater of either of the following: (a) the total of 36% on unpaid balances of $1,000 or less, 21% on unpaid balances between $tooo.o1 and $3,000, and 15% on unpaid balances greater than $3,000, or (b) 21% per year on unpaid balances. Colo. Rev. Stat. § 5-2-201(2). Consumers are relieved of the obligation to pay any charge that exceeds these limits and are entitled to a refund from the lender or assignee for any excess amount that they paid. Colo. Rev. Stat. § 5-5-201(2).
How to start a payday loan business

Start a PDL Company

For the complete list, invest in our “Payday Loan Bible” described here: “The Bible.” A 400+ page manual guaranteed  to teach you how and where to open a payday loan brick-n-mortar or Internet company. Includes every topic  imaginable… licensing, software, marketing, banking, ACH, collections… see “Table of Contents:”


Payday Loan Arbitration Agreement Enforceable

Payday loan industry wins again! A binding arbitration provision that barred a Wisconsin consumer from pursuing a class-action lawsuit against a payday loan lender is enforceable. Read the article here: Cottonwood Financial Ltd. v. Estes That’s what the District III Wisconsin Court of Appeals concluded; Federal law preempts state law!


Payday Loan Scammers Give Us Another Bad Rap

From the FTC

The Federal Trade Commission charged two men and their companies with unfairly and deceptively billing consumers without their consent, and not providing promised refunds, in violation of federal law. At the FTC’s request, a federal court temporarily halted the defendants’ deceptive practices pending further proceedings, froze their assets, and appointed a receiver to take control of the business and its assets. The FTC seeks to stop their illegal practices and make them give up their ill-gotten gains and provide refunds to consumers.

According to the FTC’s complaint, Michael Bruce Moneymaker, Daniel De La Cruz, and their companies obtained consumers’ personal information from websites that claimed to match consumers with payday lenders, and then enrolled consumers, without their knowledge, in one or more of several worthless “continuity” programs. These programs included an up-front cost of up to $49.99 each, plus additional weekly or monthly recurring fees of up to $19.98. Continuity programs charge recurring fees until a consumer takes affirmative action to cancel.

The complaint alleges that after consumers submitted their personal information online, they encountered a pop-up box titled “Terms and Conditions” that appeared to be a part of their payday loan application. This pop-up box asked consumers to provide an authorization but made no mention of the defendants or their continuity programs. In many instances, consumers believed the pop-up box was part of their payday loan application and provided the requested authorization.

The FTC alleges that the defendants used consumers’ bank account information, obtained through their payday loan applications, to create and deposit “remotely created checks” to pay for the continuity programs. Consumers learned of their enrollment in the defendants’ continuity programs only when they checked their bank account, or when their bank accounts were overdrawn because of the defendants’ unauthorized debits. Frequently when consumers called the defendants’ customer service numbers to cancel or seek a refund, no one would answer the line, the line would go dead, or the consumer would be put on hold for an extended period of time. If consumers actually reached someone in the defendants’ call center, the defendants’ employees attempted to dissuade them from demanding their money back.

The defendants’ call center employees allegedly told consumers they authorized the charges as part of a payday loan application and that they were being charged for a third-party offer with benefits including a free stored-value Visa card, free voicemail, free airline tickets, and a $10,000 secured credit line. Call center employees also promised consumers refunds that consumers never received. In some instances, consumers who had been enrolled in multiple programs were told they had to call separate numbers to discuss each one, even though the call center handled calls for all of the defendants’ programs.

The defendants allegedly told call center employees to limit the number of refunds offered and evaluated employees’ performance based on their ability to keep the refund rate as low as possible. The defendants’ employees often refused refund requests, gave refunds only to the most persistent consumers, or falsely promised refunds until consumers stopped calling. Some consumers were told, falsely, that a manager would call them or their calls would be returned.

The FTC charges that the defendants violated the FTC Act by:

  • obtaining consumers’ bank account information and debiting their accounts without their express informed consent;
  • falsely representing that consumers’ authorizations were part of their payday loan applications;
  • failing to clearly and conspicuously disclose that consumers would be charged for third-party trial offers automatically extended to them;
  • falsely telling consumers that they were not entitled to refunds because they agreed to enroll in the defendants’ programs and pay for them, and had agreed that they could get a refund only if they asked during the initial trial period; and
  • falsely promising refunds to consumers and not providing the refunds.

The FTC complaint names Michael Bruce Moneymaker, also known as Bruce Moneymaker, Mike Smith, and Michael Bruce Millerd, and also doing business as Fortress Secured; Daniel De La Cruz; Belfort Capital Ventures, Inc.; Dynamic Online Solutions, LLC; HSC Labs, Inc.; Red Dust Studios, Inc.; and Seaside Ventures Trust and its trustee.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Nevada.

To help consumers avoid the hidden costs in some “free trial” programs, the FTC is releasing a new video. Free Trial Offers tells how to check out a free trial before you sign up, and what to do if you find yourself enrolled in a free trial offer without your permission: in short, getting charged for merchandise you don’t want and didn’t order. Watch the video here or at youtube.com/ftcvideos. For more on free trials, click here.

The FTC would like to thank the Financial Crimes Enforcement Network of the Department of the Treasury, the North Carolina Attorney General’s Office, and the Las Vegas Metropolitan Police Department’s Enterprise Area Command for their help in bringing this case.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  “Like” the FTC on Facebook and “follow” us on Twitter.

Frank Dorman,
Office of Public Affairs
Robin Moore,
Bureau of Consumer Protection

(FTC File No. 1023165)


Payday Loan Violations and Compliance

In violation of the law!photo © 2008 Dewet | more info (via: Wylio)“Good morning! My name is Edwin Brown and I’m from the California Department of Corporations. I’m here to examine your payday loan records for compliance. I’ll be looking for exceptions and proposing enforcement actions against you and your payday loan company. I’ll be with you for the day…”

Did I get your attention? Leave here now if payday loan regulations and compliance is boring!!

Alright! It’s time to step back from our previous reflections on “Sovereign Nation – Tribal Models,” “Offshore Payday Loan” approaches and some of the other esoteric stuff and get back to basics.

Now payday loan compliance and enforcement might not appear to be a particularly exciting subject for you, but for those of us who have been greeted at the door to our business in the early AM by a state regulator, it can be the beginning of a NIGHTMARE! And don’t you Internet guys think you’re immune from this because you’re not.

Some of this will be pretty basic to more than a few of you. But these mistakes are being made every day by members of our industry – NOT A GOOD THING!

And obviously, the payday loan licensing model you’re operating under will dictate much of this including definitions such as “consumer credit” to include payday loans, vehicle or title loans, and tax refund anticipation loans (loans); “covered borrower” to include military members or their dependents; “Creditor” as any person engaged in the business of extending credit (lender), “domicile” where does the loan take place, and much more.

SO… check YOUR state/province and federal laws!


A) Military Lending
All our readers are aware that federal law regarding members of the military and their families requires lenders to:

  • Limit military annual percentage rates of loans to no more than 36%
  • Disclose rates and payment obligations
  • Identify whether loan applicants are covered borrowers (Military members or their dependents)

Where many of us are missing the boat is in not realizing this military identification process must be performed on ALL SUBSEQUENT LOANS; not just the first loan! The status of your borrower may change so don’t blow this! A “standard covered borrower identification statement” (military member declaration) MUST be provided to the loan applicant PRIOR to becoming obligated on the transaction, must be signed by the loan applicant indicating she is not a covered borrower and must be substantially similar to the following statement:

“Federal law provides important protections to active duty members of the Armed Forces and their dependents. To ensure that these protections are provided to eligible applicants, we require you to sign… “I AM a regular or reserve member of the Army… OR, I AM a dependent of a member of the Armed Forces… OR I AM NOT a regular or reserve member of the Army…”

This “covered borrower identification statement” must be completed and signed by the loan applicant FOR EVERY LOAN!

B) Depositing of Checks
In many states and provinces, your payday loan written agreement must describe the manner in which your customer’s check will be deposited and the specific date of deposit.

Your agreement should specify if you may elect to deposit your customer’s check by electronic means, including ACH transactions. As a general guideline, per your agreement, you may deposit a customer’s check one time for the full amount after your bank dishonors the initial deposit of your customer’s check.

C) Internet Businesses
More and more states and provinces are insisting payday loan Internet businesses be licensed in order to serve their residents. I’ve discussed state licensing models, choice-of-law models, Sovereign Nation and Offshore Models, CSO Models, zero-licensing approaches MANY times in the past so we won’t go there now. Suffice it to say, state and provincial Attorney Generals are “dialing for dollars.” So… get up to date on this topic!

D) Prepaid Debit cards
This is a really HOT topic! Pre-paid debit cards will play a significant future in the payday loan industry. Again, I’ve written on this topic many times. For now, be aware that in many locales, a payday loan licensee CANNOT REQUIRE a customer to purchase a prepaid debit card as a condition for qualifying for a payday loan. Charging fees for the initial purchase or use of a prepaid card is frowned upon as well (California for example).

e) Small Claims
In many locales, other than court costs and filing fees, the recovery of fees in excess of amounts prescribed by your payday loan regulations cannot be had. Treble damages for NSF customer checks is typically not allowed as well.

7) Simultaneous Loans
You’ve deposited your customer’s check to close out a previous payday loan and you issue another. The following day you’re notified by your bank that your customer’s check is NSF. You now have two loans outstanding with the same customer. In California, you’ll be fined! What about your state?

8) Third Party Collections
It’s typical for a payday loan licensee to be responsible for ensuring that third party collection agencies NOT collect any amounts from borrowers that exceed what is permitted by the licensees state/province payday loan regulations. THIS IS SCARY! On top of this, licensees must maintain complete records disclosing payday loans transferred to third parties and the amounts those third parties collected from the borrowers!! Or, did you sell your bad debt? Who to?? What does this mean to you??? There are several offshore payday loan collection companies calling me every day to purchase/work bad debt…

9) Rescission and Cooling-off Periods
Do not attempt to collect your fees when your payday loan customer rescinds their loan during the time frame specified by law for rescission or cooling-off periods! It’s a violation!

10) Excess Loan Amounts Collected

Typical scenario:
A borrower pays off a loan in cash AFTER the borrower’s check has been deposited in the bank. Then, the borrower informs you that the bank will return their check NSF. The borrower then pays you an NSF fee of $15 in cash. BUT, the borrower’s check DOES INDEED clear their bank after all. You’ve just collected double the amount of the loan and an NSF fee of $15; not kosher and a violation if discovered!

Another example:
A borrower makes partial payments pursuant to a payment plan and fails to pay off the loan or fails to comply with the terms of the payment plan. You deposit your borrower’s original check for the full amount of the payday loan. Once this check clears, you’ve collected dollar amounts in excess of the loan equaling the total of the partial payments – A VIOLATION!


You allow a borrower to pay a loan off by credit card and charge your customer additional fees for the privilege.

You charge your borrower for postage, labor costs, certified mail fees, telephone calls… for collection activities.

You elect to cash your borrower’s check at their bank and you’re charged for this. You cannot collect these fees from your borrower.

You elect NOT to deposit your borrower’s check due to verification that the borrower’s bank account does not have sufficient funds to cover their check. You cannot charge an NSF fee anyway.

Failure to conspicuously post your license in your place of business.

Failure to conduct your payday loan business under the name contained in your license

Failure to maintain sufficient books and records that allow the licensing department to determine if you’re in compliance with all rules, regulations and maintaining Agreements and evidence of customer checks.

Filing a false Annual Report.

Failure to disclose in advertising that you’re licensed.

Making payday loans for time periods in excess of prescribed law

Failure to disclose all fees in view of the public or in letters not at least 1/2 inch in height.

Understating APR.

Debiting a borrower’s bank account electronically multiple times for less than the full amount in order to recover the outstanding loan balance.

Exceeding maximum fee prescribed by law.

Charging additional fees for entering into payment plans.

Allowing a borrower to enter into multiple payday loans.

Charging a borrower ACH stop payment fees.

Leaving blanks in Agreements to be “filled out later.”

How much will these types of violations cost you? In California, $2500 per violation per incident! So… if you made just one of these errors 10 times since your last audit, $25,000! That’s a lot of payday loans at $15 per $100 loaned.

Bottom line? KNOW YOUR STATE/PROVINCE PAYDAY LOAN LAWS!And if you’re using the Offshore, Internet or Sovereign Nation Model, May peace be with you!

Comments? Ideas? Attacks? Rants? Tell me!

Trihouse Consulting