Credit Unions Remake Themselves as Payday Loan Companies

A very interesting post appeared in the “The Cutting Edge” regarding credit unions and the payday loan industry. We’ve written before about credit union companies – “Payday Loans and the Hypocrisy of Their Competitors” . Under the guise of helping their credit union members, credit unions have been tip toeing around payday loan type products for years.

WE DON’T HAVE A PROBLEM WITH THIS. Our only complaint is the hypocrisy surrounding their products.

From The Cutting Edge:

But encouraged by federal regulators, an increasing number of credit unions are competing directly with traditional payday lenders, selling small loans at prices far higher than they are permitted to charge for any other product.

Last September, the National Credit Union Administration raised the annual interest rate cap to 28 percent from 18 percent for credit unions that offer payday loans that follow certain guidelines.

Under this voluntary program, credit unions must allow at least one month to repay, and cannot make more than three of these loans to a single borrower in a six-month period. Credit unions are not allowed to roll over the loans, a practice that typical payday lenders use to make big profits.

But because these firms can charge a $20 application fee for each new loan, the cost to borrow $200 for two months often translates into an annual interest rate of more than 100 percent.

What’s more, many credit unions prefer to sell loans outside the federal program, allowing them to charge significantly more in fees.

At Mountain America Federal Credit Union in Utah, a five-day $100 “MyInstaCash” loan costs $12, which works out to an 876 percent annual interest rate. That rate rivals traditional storefront payday lenders.

An investigation found 15 credit unions like Mountain America that continue to offer high-cost loans that closely resemble the payday loans they are meant to replace.

“They are promoting these loans as payday alternatives, but they are not really alternatives, they are egregious payday products,” said Linda Hilton, a community activist in Salt Lake City. “We look at it as a moral lapse of credit unions.”

All told, more than 500 credit unions are making payday loans with widely varying interest rates—from a modest 12 percent with no fees at State Employees’ Credit Union in North Carolina to the high triple-digits loans sold by Mountain America. It has become a fast-growing trend in an industry struggling to remake itself after the financial crisis.

Read the entire “Cutting Edge” article here.



Texas Payday Loan Bills-Legislation HB 2592

Senate approves payday lending regulations

We have a “ton” of readers in the Texas payday loan industry and they’ve all been concerned about the new House and Senate Bills that were introduced.

The impact on the payday loan industry? Zip! No biggie! We already do these things! Of course, our costs will go up. So, payday loan consumers will pay more. And stock prices for some of the publicly traded guys will drop (already reflected in stock prices).

Here’s the latest…

The Texas Senate approved rule changes for the payday loan industry.

HB 2592, passed by the Senate increases the disclosure requirements for payday loan companies. It requires Texas payday loan companies to make clear to consumers that payday loans are intended to meet short-term rather than long-term financial needs. It will also require companies to clearly disclose the fees and interest charged to the consumer. The companies would also have to post the contact information for the state consumer credit commissioner.

The other bill, HB 2594, will require payday loan operators to obtain licenses from the Office of Consumer Credit. Carona emphasized on the floor that each payday storefront, not merely each payday company, would have to obtain the license. The bill would allow the Office of Consumer Credit Commissioner to charge fees for licenses and assess penalties for violations.

(OK, so instead of paying $100/year for a CSO Registration in Texas, the State is going to increase implement license fees for payday loan companies. Ah… “violations”? They mean audits!)

The bill would also establish the Texas Financial Education Endowment. The bill would require each payday lender or license holder to pay an annual assessment of up to $200 to improve consumer credit, financial education and asset-building opportunities in the state.

(Why don’t credit card companies, credit unions, banks, mortgage companies… have to do this?)

Consumer  “protection” groups and industry lobbyists negotiated the bill and agreed to it on the condition that it would remain completely unchanged when it came to the floor.

(Ultimately, it will increase our costs. Better said, it will increase the costs consumers must pay to get a quick, no-hassle, non-collateralized loan in Texas. But then there’s always the Internet :o)

Jer – Trihouse



Payday Loan Western States Conference and Trade Show

Several of us will be at the payday loan conference in Rancho Mirage, Calif. May 4-7, 2013.

Text Jer at 702-208-6736 to meetup while you’re there. Email: Jer


MicroBilt Corp. & CL Verify, LLC File For Chapter 11 Protection in New Jersey

Payday Loan Sub-Prime Consumer Reporting Company News:

MicroBilt Corporation and CL Verify, LLC, filed chapter 11 petitions in a bankruptcy court in New Jersey (MicroBilt on March 18, 2011 and CL Verify six days later). The companies, headquartered in Princeton, New Jersey, describe themselves as “leader[s] in risk management information for small and medium-sized businesses and leading provider[s] of alternative data for non-traditional lenders.” Specifically, MicroBilt offers small and medium sized businesses with “online access to consumer and commercial credit bureau data with automated decisioning and collection services,” as well as “proprietary comparative private-company financial information with its ‘Integra Data’ on more than 4.5 million privately held companies collected from 32 governmental and non-governmental sources along with analytic tools.”

The companies employ approximately 77 people in six states and generated 2010 revenues of approximately $20 million. Court filings state that the companies, which have approximately $8.4 million in unsecured debt and no secured debt, believe that they have an enterprise value of $150-180 million. They also have a number of additional subsidiaries and affiliated companies, but no other legal entities were included in the bankruptcy filings.

The companies state in court filings that the chapter 11 cases were filed in response to recent developments in their long-running dispute with Fidelity National Information Services, Inc., d/b/a Chex Systems, Inc. The dispute began in 2008 when Chex Systems “unilaterally terminated its contract with MicroBilt” as a result of a dispute. That dispute was resolved through arbitration and resulted in a June 2009 memorandum of understanding and an August 2009 resale agreement (which was subsequently amended in January 2010). However, when MicroBilt acquired CL Verify, new disputes between the companies and Chex arose resulting in new litigation in federal district court in Florida and, after Chex attempted to “wrongfully terminate” (quoting MicroBilt’s bankruptcy court filings; obviously, Chex would have a very different perspective on the grounds for termination) the 2009 resale agreement, in state and federal courts in New Jersey. MicroBilt sought a temporary restraining order in New Jersey federal court, but the request was denied. Chex then informed MicroBilt that it intended to terminate the resale agreement effective March 20, 2011. After receiving notice of the pending termination on March 18th, MicroBilt filed the initial chapter 11 case to prevent Chex from terminating the contract.

Read more: Bankruptcy News & Analysis: MicroBilt Corp. & CL Verify, LLC File For Chapter 11 Protection in New Jersey

Bankruptcy News & Analysis
Consulting, training and more…


Upcoming Payday Loan Conventions and Conferences

Sorry this is coming a bit tardy. We’re swamped here. The payday loan industry is cranking!

Payday Loan Upcoming Conventions and Conferences

Online Lenders Alliance
May 11-13, 2011
Liason Capitol Hill Hotel
Washington, DC
Lisa Meller (9490 429-0020

California Financial Service Providers
May 15-17, 2011
Western States Conference and Trade Show
Rancho Las Palmas Resort and Spa
Rancho Mirage, Calif.

Financial Service Centers of America
Oct. 28-31, 2011
Grande Lakes Orlando, Fl.
JW Marriott/Ritz Carlton