THE BLOG

25
May

Pennsylvania Payday Loan Laws

Pennsylvania State Rep. Chris Ross, a Harvard graduate, actually gets it! Embrace payday loans, regulate them, let consumers make their own financial decisions, create jobs, increase Pa state tax revenues, stop forcing residents of PA to get their payday loans via the Internet…

23
May

Tribe and Sovereign Nation Payday Loan Strategies

If the tribe payday loan model is of interest to you, check out Allen Parkers’ latest Sovereign Nation Post.

21
May

Payday Loan Industry – Thoughts and Status

  That Used to Be Us? NO! We’re Still Here – PDL Industry

The past 5 months I’ve been in payday loan workshops and conferences in 3 countries and 5 states. I’ve been lucky enough to attend meetings with operators, hedge funds, software providers, sub-prime consumer data reporters, 300+ seat call center operators, ACH providers and investors representing the full spectrum of major Internet and “bricks-n-sticks” lenders funding 1000’s of loans each week to small mom-and-pops funding less than 100 loans each month.

I’ve had personal conversations with industry leaders at FISCA, OLA, CFSA. And, thanks to The California Financial Service Providers,  I’ve had the good fortune to put direct questions to regulators such as Edwin Chow, West Regional Director at The CFPB, regarding his outlook for tribe and offshore lenders.

My visceral reaction after digesting all this input?

More than a few of us “old timers” are just plain tired. Tired of the constant attacks by the media and the so-called consumer protectionists. Tired of the prospect of navigating through all the State and Federal regulatory hoops. Tired of our legal counsel bringing the newest threat to our attention. And tired of trying to figure out a strategy for the Internet, what role the smart phone apps will play in our future, is the death of the “brick-n-mortar” a certainty. And on and on…

I can’t tell you how many times this year I’ve listened to an experienced lender in our industry lament about “the good old times.”

Well, B.S! I’ve been a lender since 1997. I began consulting in 2003. The payday loan space has ALWAYS been a regulatory roller coaster. We’ve been called loan sharks (hell, I use this term myself), scum bags, predators and much, much worse.

And yet, HERE WE ARE :o) Making money and serving our customers by the millions all over the world!

So… what do I think? This business of loaning small sums of $$ to the middle-class has gotten a bit more complicated. But bottom-line, consumers all over the world cannot wean themselves off small-dollar cash advances. Eventually, they run out of friends and family to help them fix the car, keep on the lights, pay for their prescription, or buy that iPhone before their next payday. And I haven’t met a “consumer protectionist” yet willing to reach into their own pocket and build a money lending business that can survive charging 36% APR’s. Sure, they’re happy to reach into the taxpayer’s pocket to “lend a helping hand.”

The reality is that payday loan products, and this includes line-of-credit, installment loans, car title loans; literally micro-loans, will not subside!

What to do? I don’t have to be particularly smart to comprehend what’s happening in our space. And, although I was educated in California, I can read. (Of course, my punctuation is a little edgy :o)

When Mexican billionaire Ricardo Salinas, the fourth richest man in the world, bought payday lender Advance America Cash Advance Centers Inc. for $655 million   – a man with serious lending experience in South America  –  who reached out of nowhere and grabbed Advance America by the throat, we have to step back from the edge of this perceived abyss and examine this event from a macro-viewpoint.

In spite of all the PR and bluster from The CFPB, the State AG’s and their politicos, the competition from bank and credit union payday loan styled products, the perceived impact on store-fronts by the Internet… how can we fail to conclude that WE OFFER A PRODUCT CONSUMERS DEMAND ACCESS TO!

If you’ve hung in this long, READ THIS! These are REAL STORIES!

Dan XXX opened a single store in a second floor location, lacking visibility and surrounded by competitors in a highly regulated state. After 6 months, he’s funding just shy of 150 payday loans per month at $17.56/$100. Defaults are <2%. The average loan is $300. Last month he began offering car title loans as well. He completed 5 in total. One of which was a $3000 loan on a 2011 Toyota truck at 8%/month. In plain English, he became the official lien holder on a $22K truck for $3K; not much risk I’d say! He’ll receive $240/month until the truck owner pays Dan back the $3K. Be aware, he’s in the early stages of developing his “secret sauce” and he is NOT aggressively marketing his services YET!

Hedge Fund XXX approached me several months ago. Their plan was to build a payday loan Internet enterprise, put $1M – $2M “on the street” over the next 12 – 18 months,  learn the ropes, and eventually add additional capital by allowing their investors to participate in their new business. To make a long story short, this hedge fund “did the work,” built a Team, partnered with the vendors and suppliers who they thought offered the best solutions and pulled the trigger. A few weeks ago, they reported to me they had everything in place. That day they bought 40 leads and funded 8. They were jazzed! You would think they had just made $10M on Facebook. These are sophisticated guys with a huge appetite for risk and EXCITED to have entered the payday loan space in what us “old timers” perceive to be troubled times!

So… what do I say? Demand for our products is undeniable and will not cease! But, we must evolve, be flexible, refuse to lose our optimism, build Teams and enter the fray. Or, you can just keep on “kicking the tires” and watch the rest us us! WE aren’t going away!

Jer – Trihouse
Your thoughts? Jer@TrihouseConsulting.com
702-208-6736
http://www.PaydayManual.com

18
May

Delaware Payday Loan Laws

The payday loan debate continues in Delaware:

The bill aims to limit the number of short-term loans a borrower can obtain to five $1,000 loans in a 12-month period. It also would establish a database to track the number of payday loans issued annually, the total amount of interest and fees paid to satisfy the loans and the number of borrowers who ultimately default. More…

17
May

CheckSmart is Using Bank-Issued Prepaid Cards to Evade State Payday Laws

Personally, I think it’s BRILLIANT!  It’s a PR piece but revealing…

Bank Regulator Urged to Stop Community Choice Financial Inc., Going Public May 8, From Using Prepaid Card Payday Loans to Evade State Law

Washington, DC?The payday lender CheckSmart is using bank-issued prepaid cards to evade state payday laws and today a coalition of consumer groups urged the national bank regulator, the Office of the Comptroller of the Currency (OCC), to stop the practice, citing potential legal hurdles and conflicts with the national bank charter. Community Choice Financial, Inc., (CCFI) which owns CheckSmart ( www.checksmartstores.com) and also uses the Buckeye name, has an initial public offering (IPO) of stock scheduled for May 8. For a full list of CCFI subsidiaries, visit  www.ccfi.comand click on “our brands.”

 

In  a letter sent to the OCC today,more than two dozen national and state civil rights, consumer, and community groups urged the national banking regulator to stop Florida-based Urban Trust Bank from issuing prepaid cards sold by the payday lender CheckSmart in Arizona, Ohio, and other states where CheckSmart cannot legally make the loans directly. “Prepaid cards and payday loans just don’t mix,” said Lauren Saunders, managing attorney at the National Consumer Law Center. “Prepaid cards should be safe alternatives to bank accounts, not vehicles for evading state law with predatory loans that trap people, often those with the least means, in a spiral of debt.”

 

When Arizona’s 36% rate cap took effect in 2010, CheckSmart started offering payday loans on prepaid cards at an annual rate of more than 390%. The cards are issued by Urban Trust Bank, and the card program is managed by Insight LLC, which CheckSmart partly owns.

 

“Arizona voters refused to let payday lenders continue to operate in the state,” said Kelly Griffith, co-executive director at the Center for Economic Integrity in Arizona, “but CheckSmart will hide under the covers with help from Urban Trust Bank.”

 

CheckSmart has also started offering prepaid card payday loans in Ohio, where voters approved a 28% rate cap in 2008. “Ohio voters soundly endorsed our 28% rate cap, yet CheckSmart has been persistent in finding ways to violate it, and these prepaid cards are a blatant evasion of the rate cap,” said David Rothstein, project director at Policy Matters Ohio.

 

Loans on prepaid cards may seem to be a contradiction in terms, but CheckSmart’s Insight Cards have two different loan features. Consumers who have their public benefits or wages directly deposited onto the cards can enroll in overdraft “protection” at a cost of $15 per $100 overdraft, or they can take an advance of their income at a rate of $14 per $100 plus 35.9% interest. The loans are repaid immediately upon the next direct deposit, resulting in an annual rate of 390% to 401% for a two-week loan.

 

“Banks simply should not be in the business of facilitating payday lending, which just leads cash-strapped consumers into a cycle of debt,” added Jean Ann Fox, director of financial services at the Consumer Federation of America.

 

“We urge the OCC to crack down on Urban Trust Bank for facilitating this deceit, which is an abuse of the national bank charter,” concluded NCLC’s Saunders.

 

The  coalition letter to the OCC; a  legal analysisand  related exhibitsto the OCC from the National Consumer Law Center, the Center for Responsible Lending, and the Consumer Federation of America; and an  Issue Briefon prepaid card payday loans are available at www.nclc.org.

 

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Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.

 

The Center for Economic Integrity engages in research, education and advocacy to strengthen local economies by mobilizing and protecting marginalized people, holding corporations and industries accountable to communities and cultivating support for good business practices.

 

The Consumer Federation of America (CFA) is an association of nearly 300 non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

 

Policy Matters Ohio is a non-profit, nonpartisan policy research organization founded in January 2000 to broaden the debate about economic policy in Ohio. Our mission is to create a more prosperous, equitable, sustainable and inclusive Ohio, through research, media work and policy advocacy.