Lack of Capital Not the Problem in Small Dollar Lending Space

Be aware! A lack of “capital” is not the challenge in our industry today. There is a “ton” of money looking for opportunities. What is lacking is specific expertise!

What “capital” desires is tech savvy, specialized knowledge, a strong Team having the ability to mitigate risk and avoid catastrophic failure at launch and the ability to innovate and implement new “twists” on the small dollar lending space. Please don’t think I’m referring solely to the Internet lenders. B & M’s offer many possibilities as well. Blended solutions make a lot of sense. The goal is simply to make it as easy as possible to enable our small dollar loan customers to gain access to our financial solutions.

Operations professionals having “in the trenches” experience in lead gen, scrubbing, call centers, LMS, collections, operations, branding, SEO/SEM/PPC/Organic, direct mail, offline marketing, legal counsel, portfolio management, mobile, strategies, tactics and on and on… are highly desirable and sought after today.

On those rare occasions when the “capital” also has expertise in one or more “slices” of this small dollar loan pie, it’s MAGIC!!

Few of us have the luxury of investing endless hours with Google searches, Linked In, Google+  and Facebook accounts, networking at yearly conventions, and searching for “experts” having hidden agendas. Want to explore? 702-208-6736 My agenda? Putting people and solutions together to make money!

“It’s a long season and a small clubhouse.” Yogi Berra?


Payday Loan Software

We’ve been using and evaluating payday loan software (LMS) since 1997. A lot of companies have come and gone. Still, there are probably 40 or more still in the “game” today. Prices vary from sub-$1000 to $10K and more for “off-the-shelf” payday loan solutions. You’ll spend much more on proprietary LMS.

I’m asked every day, “Jer, who has the best payday loan software?” I wish I could tell you but then, “You’d have to kill me.”

We have an entire chapter devoted to this subject in our “Payday Loan Bible.” Obviously, we want to sell our “Bible” in order to keep publishing this Payday Loan Industry Blog and to crack open the door for bigger consulting gigs. So, here are just a few things to consider:

  • Your first question should be, “Where do I want to take my business during the next 2 – 5 years? How do I want to scale it?
  • Do you plan on an Internet payday loan operation, a “brick-n-mortar” or some combo?
  • In what country will you begin? This industry is “cranking” in the USA, UK, Canada, AU, SA, Latvia, Mexico, South America…
  • Will you focus solely on payday loans or will you offer car title, installment lending, line-of-credit,  cash for gold, bill pay, money transfer…?
  • Regarding licensing, will you employ the choice-of-law, the state-by-state, a tribe/sovereign model, CSO/CAB, offshore, province, multiple scenarios?
  • You must have a web site today. Will the LMS provider build it? Will it be “phone friendly?” Will you have FTP “rights?”
  • Will you build a network of web sites to generate  leads and serve as a funnel for your secured application page?
  • Who hosts your payday loan software? You want web based or client server or…
  • Support? 24/7? Toll free? Speak English? Email only?
  • Does your LMS Interface with lead providers, ACH processors, call centers, sub-prime consumer data reporters and collection agencies?
  • Will your payday loan software generate the reports you need for state auditors? (Ever been through a California audit :o)
  • Lead filtering and re-marketing?
  • You want built in scripts and templates for processing applications, due-diligence, collections…?
  • How secure is your data? Who has access to it? There are severe penalties for breaching consumer compliance and privacy matters.
  • Does the LMS provider charge transaction fees?
  • Does it have a strong marketing engine for measuring advertising effectiveness, maintaining consumer origination data, reference and re-marketing?
  • Video/picture capture of each customer?
  • Depth of financial reports? Can you create custom reports?
  • Data backup?
  • And on and on and on…

Check out our “Payday Loan Bible” for more on this subject and all the pieces that will enable you to succeed in the micro-lending space.

Sponsored links: and

Jer – Trihouse


Delaware Payday Loan Laws and Regulation

Jer - TrihouseDelaware Payday Loan Short-Term Consumer Loan Limits and Database Requirement.

Effective January 1, 2013, Delaware licensed lenders will be able to make only five short-term consumer loans (sometimes called payday loans) in a twelve month period to any one borrower when the loans are made in the State of Delaware or when the borrower is a Delaware resident. This limitation was established by a new law that also changed the definition of short-term consumer loans to include loans up to $1,000.

To enable Delaware licensed lenders to comply with this law, the Office of the State Bank Commissioner has contracted with Veritec Solutions LLC (Veritec) to provide a database system that will allow those lenders to determine whether a consumer is eligible for such a loan.

The system will be available on January 1, 2013, and all Delaware licensed lenders making short-term consumer loans on and after that date must begin using this system. Prior to the end of this year, Veritec will be providing those lenders with specific information concerning the system’s use, including training schedules, registration procedures, and a preparation checklist.
Full Article here: Delaware Office of the State Bank Commissioner

The new regulations in the state bring these major changes:

  • Five (5) loans per 12 month period (includes rollovers, refinance)
  • All loans must be reported to database (in and out of state)

For the full rules, please click on the following link: Delaware Payday Loan Regulations.


Payday Loan Tupperware Party Sales Trick! Payday Loans Next?

We all know that our peers and friends are our most trusted recommendations for products and services. The solar industry is relying on the fact that their best sales people are their current customers. Solar companies like Smart Power, Solar City and Sunwize Technologies are paying customers referral fees that approach $450 for sharing their experiences with solar and earning a referral fee.

Direct lenders in the small dollar loan niche – think payday loans, car title, “pink slip” loans, cash 4 gold, tax refunds – are joining the band and paying referral fees as well.

John M. with PrestaMe Cash Loan values a new customer acquisition cost at as much as $180.00. To pay a $50 referral fee to one of his good clients is a no-brainer! Should his new borrower get 5 loans during the next 12 months, each having a loan principal of $300 for 3 weeks at $25/per $100 loaned, Mr. Martin earns $375 dollars in fees from this new customer he paid $50.00 for.

Multiply that by 200 customers per month and Mr. Martin can smile all the way to the bank. Meanwhile, his customers are rewarded for helping their friends and family work with a fair minded payday loan company that helps them with their Obama imposed financial challenges.


Payday Loan Metrics & Credit Building

Jer Ayles-Ayler TrihousePayday loan lending transaction volume is booming all over the world! Witness the U.K. lender Wonga (founded by an ex-Google executive). Wonga approved a whopping 2.4 million loans last year, an increase of 300% over 2010.

In addition to the controversy surrounding these small dollar loans and their perceived “high fees” (let’s not get into the costs associated with processing these $300 loans nor the default rates here), mortgage loan lenders are beginning to “frown” on borrowers who have used a payday loan in the past to solve a temporary financial challenge.

This trend is a bad omen for the payday loan industry unless we achieve further inroads with credit reporting agencies – the big 3 – to include consumer debt payment, utility payment, and rent payment history. The Consumer Finance Association’s (UK) chief executive Russell Hamblin-Boone, who leads one of the four major trade bodies that represent the payday loan industry, “Does not think it is fair borrowers with a payday loan are frowned upon by some mortgage lenders.”

“Independent research shows 85% of payday customers have no difficulty repaying their loan, so to decline a mortgage application because a person has taken out a payday loan is an unfair judgement,”  says Mr. Hamblin-Boone.

We at Trihouse are aware that PRBC has done some work in this area and look forward to learning more about their effort. Trends regarding data collection and reporting of consumer payment history and credit building are issues that all of us in the small dollar loan industry are watching. Of course, so is the CFPB :o) For more on this issue refer to Guy Anker’s piece at: MortgageStrategy

Jer – Trihouse