New Study – Unbanked Pay $89 Billion in Fees


By Jer Trihouse – NEW YORK — Today, the Center for Financial Services Innovation (CFSI) and Core Innovation Capital (Core) released their third annual Financially Underserved Market Size Study. The new data reveals that revenue from interest and fees paid by financially underserved consumers rose 8% to $89 billion in 2012 from the previous year.

The report, which benefitted from strategic input and financial support from Morgan Stanley, examined 23 financial products used by over 68 million financially underserved consumers in the United States. The fees and interest figure was generated by an overall market volume of $792 billion in principal loaned, funds transacted, deposits held, and other financial services provided.


Payday Loan ACH versus Check 21

payday loan ACH check 21By: Jer Ayler at Trihouse – For Small Dollar Lenders – Check 21 vs ACH Payments

Payday loan, installment lenders, car title loan and collection companies are discovering it’s a challenge to maintain a <1.5% charge-back threshold as required by NACHA and ACH processors.

Check 21 provides another option to ACH processing.

So… for a small dollar lender, what’s the difference between Check 21 and ACH?

Borrowers provide their lender with a bank routing number and account information in conjunction with an authorization to debit the borrower’s bank account. The collected funds are deposited into the lender’s  bank account.

Check 21 uses bank-to-bank image transfers rather than the Automated Clearing House (ACH) network to process the transactions. Transactions for both Check 21 and ACH clear through the Federal Reserve at midnight.

The biggest difference between Check 21 and ACH from a lender’s perspective? ACH transactions are governed by NACHA regulations which require that revoked transactions – also known as “chargebacks” or “consumer unauthorized” be maintained at less than 1.5%.

Check 21 is governed by check laws and the Uniform Commercial Code. It’s legal for anyone to use a computer scanner or mobile phone to capture images of checks and deposit them electronically; a process known as “remote deposit.” Thus, there’s more flexibility in the number of “revoked transactions” that can be processed.

Advantages / Disadvantages of Check 21 Processing.

If your “revoked transaction” rate exceeds 1.5%, you will not successfully maintain an ACH account. The primary advantage of Check 21 is that provides the lender with a better way to process echecks with fewer concerns about “revoked transactions.”

Lenders concerned about the current ACH environment should implement Check 21 . Note that the Paytoo “virtual wallet” offers a simple to use Check 21 component. See it in action by requesting a demo here: Paytoo Wallet Demo Request

How to Start a Car Title Loan Business


Help a Reporter Out: How to File a Payday Loan Claim

By: Jer Trihouse. Your use of HARO (Help a Reporter Out) can be a good strategy for building relationships with reporters? Why do this? To build your brand, increase your “reach,” and become the “go to resource” for a reporter. Here’s an example of a HARO request I received today:

Summary: How to File a Payday Loan Complaint

Name: Rebekah Coleman

Category: Business and Finance


Media Outlet:

Deadline: 12:00 PM PST – 18 December

Query: Last month the CFPB started accepting payday loan complaints. I will detail how this process works and why it is essential for consumers.

Requirements: consumer protection groups, lenders, payday loan borrowers

I know dear reader, this news makes your heart jump with joy! I welcome your thoughts:


How to Start a Car Title Loan Business – NOT

By: Jer Trihouse. Man, it’s good to be a state licensed car title loan lender!

New York Attorney General Schneiderman Reaches Settlement With Auto Title Loan Company To Refund Interest On Usurious Loans And Forgive Outstanding Loan Balances


NEW YORK – Attorney General Eric T. Schneiderman today announced a settlement with an out-of-state company that offered short-term loans, secured by borrowers’ vehicles, at usurious rates of interest. Under the terms of the settlement, the company agreed to cease doing any loan business in New York in violation of the New York law.

Manor Resources LLC (Manor), a Delaware corporation with its principal place of business in Chicago, IL, operates a website through which it conducts its nationwide loan business. All applications for its auto title loans are made through the website. The stated interest rate is 10 percent per month, or 120 percent Annual Percentage Rate (APR). Manor takes a security interest in the borrowers’ automobiles which, in the event of default, may lead to repossession of the motor vehicles.

“Lenders that bypass our state’s usury laws to prey upon struggling New Yorkers will continue to be held accountable and penalized for their actions,” Attorney General Schneiderman said. “New York is not open for business to predatory online lenders, and Manor is just the latest company to learn that lesson. My office will continue to monitor the web for businesses like Manor so that we can put an end to these illegal practices and protect New Yorkers in financial distress.”


New York Banking Law §340 makes it unlawful to engage in the business of making loans in the principal amount of $25,000 or less to an individual for personal, family, household, or investment purposes and charge greater than 25 percent interest without first obtaining a license from the State Superintendent of the Department of Financial Services. Without such a license, the maximum interest rate a lender is permitted to charge by law (General Obligations Law §5-501 and Banking Law §14-a) is 16 percent APR. New York Penal Law § 190.40 makes it a crime to charge interest at a rate exceeding 25 percent APR.

Manor’s loan contracts required that all disputes between the parties had to be resolved through arbitration in Illinois rather than through the courts. The settlement provides that loan agreements hereafter used in New York shall not have any mandatory arbitration clauses.

The agreement also provides for all loan accounts on which a balance is currently owed, whether such accounts are current, delinquent, in default, or charged off, to be closed with a zero balance. In addition, the agreement requires the company to notify any consumer reporting agency to which it gave consumer information to delete all references to the transactions from customers’ credit records. The company will pay the Attorney General’s Office $23,120, representing all interest and fees (but not principal) that it collected from New York residents, and the Attorney General’s Office will distribute refunds to eligible consumers. In addition, the company has agreed to pay the Attorney General $10,150 in costs and penalties.

This matter was handled by Special Assistant Attorney General Stephen Mindell and Assistant Attorney General Herbert Israel of the Consumer Frauds and Protection Bureau, under the supervision of Jane M. Azia, Bureau Chief of the Consumer Frauds and Protection Bureau, and Karla G. Sanchez, Executive Deputy Attorney General for Economic Justice.
How to Start a car Title Loan Business:


Future of U.S. Payday Loan Industry Rate Caps: Look Across the Pond

Regarding the future of U.S. payday loans:

Jer Payday Loan ConsultantBy: Jer Trihouse

U.S. payday loan lenders need do no more than “look across the pond” for guidance. The U.K. has been advocating and implementing rate caps, “best practices,” affordability issues, roll overs, etc. for years. A stone thrown in the waters in the U.K. typically generates a flood in the U.S. payday loan marketplace 12 – 18 months later.

An easy method for verifying my thesis is to simply follow DLLR. Regulators in the U.K changed the game significantly for Internet lenders and lead aggregators months ago. Many of the so-called U.K. “rogue” lenders abandoned the payday loan space as a result of a “dialing for dollars” campaign by the Feds. Embedded lenders such as DLLR, after having their website hijacked, experiencing sub-standard share price performance and declining revenues, are on the mend. Today, DLLR is aggressively taking market share and investing heavily in compliance. It’s paying off!

In the USA, payday loan lenders are experiencing the same issues. AG’s are “dialing for dollars,” subpoenaing  3rd party records in an effort to ID payday lenders abusing borrowers and lacking state licenses, and encouraging lawyers to enlist consumers for costly legal battles. All of us in the payday loan space have friends, clients and peers who have literally abandoned small dollar lending.

So… what’s this mean? Other than “outlier lenders” leaving the small dollar loan industry, not much really. There remains around 60,000,000 U.S. residents in need of our loan services. The lenders who continue to focus on building a recognizable BRAND, drive down their customer acquisition and servicing  costs,  implement conservative “licensing” models, invest in educating our legislators and regulators, and implement the blizzard of new technologies and social identification methodologies as they become available, will prevail. Our customers are NOT going anywhere! Except to their phones.

Here is more on the future of the U.S. small dollar loan product as we look across the pond.

Statement on a cap on the cost of payday loans: FCA in the U.K.

The duty to cap the cost of credit will be formally established through amendments to the Banking Reform Bill, which is currently going through Parliament.

This will be one of a number of powerful measures that the FCA proposes to use to ensure consumers are treated better when applying for, and repaying, payday loans. As well as a cap on the cost of credit, the FCA has proposed to require a mandatory affordability check for every loan, capping the number of rollovers to two, and limiting to two the number of times a payday lender can dip into a bank account to seek payment. We believe these measures will protect consumers but also allow businesses to operate successfully.

In October we published our proposed regime for all consumer credit activities, for which the FCA takes over the regulation on 1 April 2014. As we said at the time, we need to gather more information before we can cap the cost of credit. This is a complex issue and there are many different aspects to consider to ensure that we get a cap that works well for the UK market. That means researching it, economic analysis and then publicly consulting on its use.

We will also consider the lessons of other countries that have adopted this power to ensure that any cap is right for UK consumers.