Banks and Credit Unions Force Consumers to Use Payday Loan Products!
The debate so-called “consumer advocates” [not really advocates at all; more anti-business and anti-capitalism] and payday loan advocates get into is stupid! Particularly since these anti-free market folks are peering into our financial products industry from the sidelines.
Do YOU really think banks and credit unions give a crap about their sub-prime customers? Do YOU comprehend that the majority of bank and credit union profits are generated by NSF and other mickey mouse fees they pile on consumers? Do you know who REALLY FUNDS anti-small dollar loan alternative loan products in an effort to eliminate their competition? Do you know that Google funded a payday loan company and then SLAMMED the door to payday loan product advertising on Google? The same Google whose mantra is, “Do No Wrong!”
Other than Professor Lisa Servon, who had the juevos to actually work behind the counter of a RiteCheck in the South Bronx and a payday loan lender in Oakland, California [The Unbanking of America: How the New Class Survives], these people have no clue about the financial needs and measured choices our payday loan, installment loan, and car title loan borrower must make every day.
The misunderstanding about our loan fees is a result of the lack of knowledge about WHY payday loan borrowers CHOOSE our payday loan, car title loan and installment loan products to solve daily financial challenges. Our alternative loan products exist simply because of bank and credit union non-sufficient funds [NSF] Fees.
Nobody “gets” the “business of lending money to the masses” with more thought and empathy than those of us who are on the firing lines, talking and counseling our customers every hour, every day!
Want to see the numbers?
Lets examine the APR formula from a payday lending perspective:
APR = (charge/term) * 365
This APR formula breaks down the APR component to a daily figure and then multiplies that calculation to the annual percentage rate [APR]. This isn’t an amortization formula. That is for our installment loan products.
Interest: $20 dollars per hundred
Term: bi weekly
APR = (20/14) * 356 = 521%
We all know these are relatively static numbers in our industry. The majority of states have regulated payday loan fees to approximately $15 per $100 loaned to consumers. Of course, there are exceptions; Texas is but one example.
Let’s examine a typical NSF/overdraft bank/credit union scenario.
After my 20+ years working with payday loan customers, I’ve learned that the MAJORITY of our customers seek a payday loan product in order to avoid overdraft charges. Because overdraft charges tend to be charged on a per transaction basis, here is an example of what a typical customer would experience when they overdraft $100 dollars from their bank.
Check Amount Bank/Credit Union NSF Charge Balance
$20 $35 -$55
$40 $35 -$130
$30 $35 -$195
$10 $35 -$240
Overdraft Amount: $100
Bank/Credit Union NSF/Overdraft Charges: $140
This is a REAL example. We make payday loans, installment loans and car title loans for customers who overdraft 5 – 10 times on a single $100 balance. Customers come to payday lenders because they easily determine that they are actually SAVING money by employing our alternative loan products to solve their financial challenges.
Put yourself in our borrower’s shoes.
How much would you prefer to pay in fees to borrow $100.00? $140 from your bank? Or $15 to $25 [depends on your state] from us; your friendly small dollar loan provider who is available 6 days per week at a minimum and has store hours enabling you to get off work and visit our store at a time that is convenient for YOU, the borrower.
Banks and credit unions get their money back in LESS than 2 weeks. After all, the borrower’s bank is at “the front of the line” to the borrower’s checking account. The bank takes their money FIRST! Zero risk!! A lot of banks charge a daily fee if your bank account is in the negative. With all that to think about, let’s be CONSERVATIVE and say the bank gets their money back on the next paycheck. And lets forget about that daily negative balance charge.
Here is what the APR formula for a bank “NSF loan”would look like:
Bank/Credit Union APR = (140/14) * 356 = 3650%
3650%!! Are you kidding me?
And, this ignores additional HEAVY financial factors – the shorter term, the daily negative balance charges… If we calculate those figures into the bank’s APR, we’d be looking at a 10,000% APR!
Ladies and gentlemen, regulators and politicians, it’s time to understand that there is absolutely NO DIFFERENCE between the interest we charge and the “overdraft charge” that banks pocket EXCEPT FOR THE FACT THAT PAYDAY LOAN PRODUCTS ARE CHEAPER AND SMARTER for the CONSUMER! At the end of the day, both scenarios are exactly the same: interest on money loaned.
The only difference is the price: 521% APR for a payday loan versus 3650% APR for the bank.
Don’t believe my numbers because you think I’m biased? “Overdraft fees have reached their highest level since 2009, which was at the end of the Great Recession. Consumers paid $34.3 billion in overdraft fees during 2017 compared to $33.3 billion in 2016, The New York Post reported.Mar 29, 2018.”
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Banks boast that their interest rates are around 8% APR, but do our customers have access to them? Show me a bank that will hand out a $300 loan at 8% APR to someone who has a credit score in the 400 – 500’s and I’ll place you on the lap of Santa Claus. It won’t happen because it’s simply not profitable for banks. The reality is that banks boast about their 8% APR loan which are made ONLY available to the rich (with perfect credit scores), while secretly charging the middle to lower class customers more than 2000% on small loans.
The fact is, the majority of society is in the middle class to lower class income bracket today. They need 3 “gig jobs” to live with a roommate, deal with their student debt, make their car lease and EAT. Banks don’t make nearly as much by lending to the rich; APRs are too low and the probability of them paying back the bank is nearly guaranteed.
Banks make the MAJORITY of their money on NSF/Overdraft charges. In a society which lives mostly from paycheck to paycheck it is almost a sure thing that everyone will overdraft their bank accounts once or twice a year at minimum. But that is a whole other subject.
Want to learn how to help consumers avoid these crazy high bank and credit card fees?
Want to learn “how to lend money to the masses?
Invest in our quarterly updated “bible” of lending, “How to Lend Money to the Masses Course.” We reveal everything you need to know. Installment loans, car title loans, payday loans, licensing, contracts, location, software, how to begin, collections, underwriting, phone scripts… Here’s a link to our “Table of Contents.” Instant download in Adobe Acrobat PDF.
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If you're worn out spending hour upon hour searching Google for consumer loan business strategies, know-how, software, licensing, consumer credit reporting, sample contracts, collection tactics, profitability, how much start-up capital you need, anticipated default metrics, and on and on and on... Our "Bible" delivers ALL THESE ANSWERS AND MORE!
How to loan money to consumers! Payday loans, car title loans, installment loans, line-of-credit loans... via the Internet and storefront models.
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How to launch a consumer lending business
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What loan management software to use?
Collections? How to Collect Your $$
Borrower Underwriting? 3rd Party Credit Reporting Agencies for the Sub-Prime
Store & Internet Lending tactics & strategies
Sample contracts, License apps...
Tribe Model: How to Partner with a Native American Indian Tribe
How to Deliver the $$ to Your Borrower [ACH, Debit, Cash, Checks...]
Texas & Ohio CSO/CAB model
Marketing, Branding, Advertising: How to Put Your $$ to Work
Leads: Buy $2 leads or $200 Leads?
Web Sites: Why You Need Them. How to Get One Built Inexpensively. Mobile-Friendly...
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Default Rates: How Many Borrowers Will Fail to Pay You
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$197.00 How to Operate a Texas CAB?CSO Loan Biz
|CSO Credit Services Organization Report (Texas)
An analysis of the Credit Services Organization Model as it applies to Texas. An alternative to the Payday Loan Model.
What is a Texas CSO Credit Services Organization?
In essence, a CSO or Credit Services Organization is defined by the Texas Credit Services Organization Act (Section 393 of the Texas Finance Code) as an entity or person that provides one of the following services:
* Improving a consumer's credit history or rating.
* Obtaining an extension of consumer credit for the consumer.
* Providing advice or assistance to a consumer regarding the previous two services.
How does the CSO Credit Services Organization work with payday loans?
The CSO Credit Services Organization operates as a broker, The Texas Credit Services Organization Act (CSOA) allows the payday loan lender to register as a CSO and act as a loan broker. Thus, the CSO can make loans via "3rd Party Lenders" that are UNREGISTERED and UNLICENSED. The CSO Credit Services Organization acts as a broker for the consumer in need of funds by issuing a "letter-of-credit" on behalf of the consumer to a "3rd Party Lender." This 3rd Party Lender funds the "loan" brokered by the CSO.
How does the Texas CSO Credit Services Organization collect its 3 fees:
A referral fee for referring the consumer to the lender that actually funds the "loan." This is not stipulated by any law but is currently $20 to $30 per $100.
An application fee for filling out the CSO documents; typically $10 per $100.
The interest on the "loan;" Texas state law caps this at 10%/year.
Our 100+ page "Texas/Ohio Credit Services Organization [CSO] Report" includes a thorough description of how this model works, how to construct the loan entity & the CSO, sample agreements between the CSO and the 3rd Party Lender, sample consumer contracts & more.
| ||Payday Loan, Title Loan, Boot Camp, Installment... Boot Camp -LIVE
Boot camps are run in our South Texas “live” Loan Center
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You and one employee/partner may attend
Our "Bible: How to Loan Money to the Masses" is included
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We cover both the store model and the Internet Model
The fee is $5000 total per company (Including our Bible)
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2-Days in a "live" Loan Center in South Texas. Includes our "How to Loan Money to the Masses Bible" emailed immediately in Adobe Acrobat.
||Schedule a Call with our Founder.
You want to learn how to make money by lending money? You’re fed up spending hours and days with “google search” in an attempt to figure out if small-dollar lending, payday loans, car title lending, and installment loans are profitable?
Talk to an expert!
1] Request a Call; as little as $75.00 for a 15-minute call. Extend the call if you like.
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Jer and the Team at Trihouse Consulting have taught thousands of entrepreneurs the correct way to identify, evaluate, negotiate, perform due diligence on, finance, turn-around and operate payday loan, car title loan, and installment loan businesses; the business of making money by lending money. Some people think we’re nuts for doing this, but the truth is that we’re far from crazy. DOING & Teaching opens doors for us that pales in comparison to any other channel.
Consumer Loan Business/Payday Loan ProForma Excel Spreadsheet
|Consumer Lending > Biz Plan Excel Spreadsheet Pro Forma
Internet/Storefront Lender Excel Pro Forma
Every startup entering the consumer lending/payday loan industry needs our new "PDL Excel Spreadsheet Pro Forma." We had our analytics gurus build this tool. With it, you have the ability to "play" with multiple inputs including lead costs, default rates, loan conversion rates, number of loans funded daily/monthly, average loan principal amount, fee charge per loan principal, rollovers, employee costs, overhead expenses...
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There is nothing like this tool on the market today. We've invested our 20+ years of payday loan knowledge and experience as a Lender in this tool. You simply cannot get access to anything like this tool unless you bring serious consumer/payday loan experience and Excel experts to your "game." For both storefront and Internet consumer facing lenders.
HOW TO VALUE A CONSUMER LOAN/PAYDAY LOAN BUSINESS
|A Guide to Consumer Loan Company Valuations
Valuation Approaches and Considerations for Buyers, Sellers and Startups of Check Cashing, Payday, Title, & Consumer Loan Companies. Thoroughly covers payday lending, car title lending installment loans... consumer loan business valuations. Delivered immediately to your Inbox.
|How to Get Your Money
What can be worse than not getting paid? Getting sued, or FINED by Government agencies.
There are regulations at the Federal and State level that are created to protect the public from unsavory collections practices. As you work to collect your money, keep in mind that the courts have a mandate to take the side of your non-paying client. Even if this person has cursed you up and down, written you bad checks and lied to you every day for 10 years?
None of that matters. The courts and the law are created to protect the public. Not you or your business. If you go into a collections procedure with an attitude, and crappy documentation, you’re going to get run over by the system and it’s not going to cost your deadbeat customer a cent.
How to Launch a Tribal Lending Enterprise
Tribe Sovereign Nation Documentation, Term Sheets & More
A complete package of all the legal documentation required by tribes, lawyers, investors, marketer/servicer groups... to successfully launch a TLE.
Note: All Word Templates are editable for your private use.
- Template-Standard Tribe Resolution Creating a Tribally Owned Business
- A RESOLUTION OF THE GENERAL COUNCIL OF THE (name of tribe) CREATING AND ESTABLISHING THE TRIBALLY-OWNED BUSINESS (NAME) PURSUANT TO (vesting power in General Council resolution) [Word Doc.]
- 3 year Pay Day Lender Loan Volume Projections
- (PDF Doc.)
- “THE RISKS AND BENEFITS OF TRIBAL PAYDAY LENDING TO TRIBAL SOVEREIGN IMMUNITY”
INTRODUCTION: [25 page PDF by Bree R. Black Horse J.D. candidate at Seattle University School of Law, and an enrolled member of the Seminole Nation of Oklahoma in cooperation with The American Indian Law Journal. Public Domain]
- Two Key Tribal Court Cases:
- While there have been many, many cases upholding tribal sovereign immunity over the years, two, in particular, are specific to tribally owned payday loan businesses. [4 page PDF]
- 3 Year Proforma.
- A 3 year tribe pro forma portfolio [Excel format]
- Boilerplate Marketing & Servicing Agreement
- Template for TLA & Marketer/Servicer arrangement with Revenue Share Exhibit A. [12 page Word Doc.]
- Consulting Agreement
- Template Consulting Agreement with Tribe Lending Enterprise [Word Doc]
- RESOLUTION OF THE GENERAL COUNCIL OF THE (name of tribe) VESTING ECONOMIC & COMERCIAL DEVELOPMENT IN THE GENERAL COUNCIL [Word Doc]
- Car Title Boilerplate Agreement
- Example Marketing/Servicing Agreement with TLE [11 page PDF]
- Car Title Consulting Agreement
- Typical Consultant/TLE agreement specific to car title loan lending [6 page PDF]
- Typical Lenders Introduction and Compensation Agreement
- Example Tribe/Consultant introduction & revenue share term sheet [5 page PDF]
- Example Monthly Payments-Revenue Share Agreement
- Typical consultant – TLE revenue share statement [1 page PDF]
- Example of Typical Non-Recourse Promissory Note & Security Agreement
- Ordinary Borrower/Lender capital security agreement [4 page PDF]
- Lawyers' View: Minimizing Regulatory Enforcement Actions Against TLE and Service Providers
- Important Factors in a Tribal Lending Relationship [3 page Word Doc]
- Frequently Asked Questions Regarding the Mechanics of TLE-TOB/Marketer-Servicer Collaborations
- Allen Parker responses to FAQ’s submitted by potential consultants, tribes, and providers of capital. [2 page Word Doc]
- Typical TOB Lenders’ License
- [19 page Word Doc] A financial services license authorizing the TOB to do business “THIS IS TO CERTIFY that, consistent with Section 4 of the Mahalo District of the North Dakota Tribe Tribal Financial Services Regulatory Act, the enterprise under the jurisdiction of the Mahalo District of the North Dakota Tribe has been licensed by the Mahalo District of the North Dakota Tribe’s Tribal Financial Services Regulatory Commission to provide financial services in furtherance of the Tribe's economic self-sufficiency and political self-determination. It is…”
- Example Consultant- Lender Representation Agreement Boilerplate
- As titled, an example Consultant retainer/representation agreement [2 page Word Doc]
- Example Consultant- Lender Representation Agreement Boilerplate
- As titled, a template for consultant –services/marketer agreement [1 page PDF]
- Example Declaration of Servicer-Marketer Skill Set Submitted to Tribe
- As titled, a sample declaration to tribe regarding servicer/marketer skill set [1 page PDF]
- Template for Statement of Consultant-Servicer-Marketer Power Point Presentation to Interested Parties
- Editable Power Point presentation [12 page PP]
- Typical Tribe/Servicer/Marketer Credit Reporting Business Rules
- As titled, a phenomenal Excel list of go/no-go CRA implemented business rules [Excel 10 pages]
- Template for “Finders’ Fee”
- As titled, editable Finders’ Fee for use by Consultants [2 page Word Doc]
- Template for “Finders’ Fee”
- As titled. A second version of a Finders’ Fee
- Example Business Development Agreement
- As titled, editable template for business development agreement between TLE & Consultant [5 page Word Doc]
- Term Sheet
- As titled. [4 page Word Doc]
- TLE-Lender-Services/marketer Bank & Loan Flow Chart
- As titled, an visual of “how the money flows.” [1 page PDF]
- “Tips for Tribe Economic Directors”
- As titled, a public domain analysis for tribal economic development principles. [9 page PDF]
- Limited Solicitation RFP
- A typical Request for proposal submitted by TLE’s [2 page Word Doc]
- PDL Sovereign Nation Manual by Allen Parker
- An analysis of the TLE Model [8 page PDF]
- Your investment: $1995.00