THE BLOG

10
Jul

Payday Loans-Thinking Outside The Box – BankSimple

Posted by / Uncategorized

Innovation and cutting edge technology are the keys to success in financial services. Micro-lending products like payday loans must evolve in order to meet the demands of our customers and survive the regulatory challenges ahead.

Take a look at BankSimple to juice your creative thinking!

As we often point out, the payday loan space employs EXTREMELY smart and creative people. The idea behind this Post is to simply fire up your imagination.

We’re looking for smart guys in the payday loan space with giant ideas! There is plenty of money available if you’ve got a killer solution READY that needs funding. Email Jer@PaydayLoanIndustryBlog.com

Meanwhile, read on and let your imagination play!

BankSimple.com is a “New York startup poised to begin a limited beta soon, as it looks to launch a next-generation online banking service that combines real-time data, predictive money management and smartphones without the fees and penalties associated with many banks.”

Josh Reich of BankSimple says, “BankSimple is taking a big data approach to small personal finance data, applying statistical analysis and machine learning to help create a system that responds to a user’s needs.”

Reich goes on to say, “Smart phones are an essential aspect of BankSimple’s business plan. Customers are able to monitor their funds in real time from their phones. BankSimple will update its transactions instantly to let people understand how their transactions are affecting their goals. The phones are also used to help combat fraud by providing instant alerts on purchases. BankSimple can also see if a user’s location matches the location of a transaction to monitor for fraud.”

BankSimple won’t have local branches. The company is investing heavily in call centers to provide responsive customer service.

What banking features will you provide?

As a BankSimple customer, you receive a BankSimple debit card and access to our website and free mobile applications. With BankSimple, you can make purchases in stores and online, deposit checks using your smartphone, set up direct deposit, earn interest, pay bills, transfer money, withdraw cash from ATMs, and more. In addition, BankSimple Goals help you save for anything and manage your finances. And if that’s not enough, our Safe-to-Spend™ feature offers a uniquely clear picture of your available balance.

BankSimple makes money in two ways, interest margin and interchange:

  • Interest margin is revenue a bank earns from loans, less the interest the bank pays its customers on deposits. For example, if a bank earns 12% interest on its loans and pays 5% interest on its customers’ deposits, the interest margin would be 7%. Our partner banks split this interest margin with us.
  • Iterchange is revenue earned by a card-issuing bank when customers make purchases using that bank’s card. Our bank partners split this interchange revenue with us.

“Since BankSimple is exclusively online, we don’t have any expensive physical branches to build or maintain. That keeps our costs down and allows our business to be supported by interest margin and interchange alone. We don’t profit from fees because we don’t need them.”

So… what do you think? How can the payday loan industry embrace smart phones, access to account status, savings plans, online and mobile experiences, VIP programs, loyalty strategies, customer retention… THINK ABOUT IT!

04
Jul

Stop-You Can’t Beat Up Payday Loan Customers

Posted by / payday loan collections

Over! The Days of Beating Up Payday Loan Customers!

One ringy dingy. Two ringy dingys. Three… “Trihouse Payday Loan Consulting. This is Jer.”

The caller blurts out, “I owe a payday loan company $500. I want to pay them but I can’t all at once. I’ve tried to reason with them but they just won’t listen. What should I do, Jer.? Do I close my bank account? Call my state Attorney General? Maybe call my local newspaper? What can I do?”

I, being the sophisticated, experienced, and knowledgeable payday loan consultant that I am, responded to the caller with, “Are you $%^^^&&&&& kidding me! You’re trying to make a deal? And they won’t make one with you?”

“That’s right Mr. Jer.

“What’s your name?” I ask.

“It’s Donna ZXXXXX. I’m in South Carolina.”

“Alright, Donna. Have you talked to a Manager? Have you made the payday loan company an offer, Donna?”

“Mr. Jer, every time I contact them, the person I talk to says management does not make deals. I owe the money and they want it. Mr. Jer, I don’t have it all now. I know I owe the money and I want to pay off my debt but my family just doesn’t have it.”

“Donna, what did you need the original $500 loan for?” I ask.

“Well, our 1998 Honda needed a new radiator. It’s the only transportation our family has. My husband and I need it to get to our jobs. We were too embarrassed to ask for a loan from our relatives; they didn’t really have the money to lend us anyway. We have one credit card but it’s maxed out.” Donna starts trailing off… she’s crying.

“OK, Donna, calm down. I’ll try to help,” I say. “Tell me a little more. Have you paid any of it back yet?”

“Not really,” says Donna. “Every two weeks the payday loan company has deducted $87.50 for the past ten weeks. When I call the payday loan company they say I still owe $500.”

“Alright, Donna. If my math skills are correct, you’ve paid the payday loan company $437.50 ($17.50 per $100 X 5 x 5 two week pay periods) in fees and you still owe the $500 principal. Donna, how much can you afford to pay them until this loan is paid off?”

“My husband and I figure $50 every two weeks,” says Donna.

“Donna, give me the payday loan company’s phone number and I’ll try. We’ll do a conference call with the 3 of us.”

One ringy dingy. Two ringy dings. Three ringy…

“XXX Cash Advances. This is Emmett, may I help you?”

“Hello, Emmett. This is Jer with Trihouse Payday Loan Consulting. My friend Donna ZXXXXX is on the phone with us. Say hello Donna. (Donna says hello.) Donna owes you $500. She needs a payment plan both you and her family can live with. Emmett, as you can see from Donna’s records there on your computer, she has paid your payday loan company $437.50 in loan fees so far. We propose you prepare an ACH authorization and implement a payment plan of $50 every two weeks for 10 pay periods until the principal of $500 is paid in full. That’s a total payment to your company of $937.50.”

“Why should we accept your proposal, Jer?” says Emmett.

“Well, Emmett. Let me count the ways…”

“First, it makes good business sense! In the long run, you’ll retain a good customer and gain access to her friends and family via her referrals and testimonials. Emmett, you and I both know the key to success in the payday loan industry is customer retention.”

“And, ultimately  over a 25 week period, you will have received $937.50 in fees and principal, Emmett.”

“You’ll have implemented FISCA, CFSA and OLA best practices. This is THE trend in our industry. And Emmett, you certainly don’t want your industry peers beating you up at the next payday loan industry convention, do you?” (I always find a little humor helps in these situations :o)

“Emmett, you and your company will avoid coming to the attention of the media, the regulators and the so-called Center for Irresponsible Lending.” (Ok, I can’t help it. Technically, it’s the Center for Responsible Lending.)

“If you’re licensed in South Carolina Emmett, you’ve already exceeded the maximum allowable rollovers and you MUST offer a payment plan to Donna.” (Note to reader: with the right payday loan software, this is very simple.)

“And most importantly Emmett, you’ll feel good about yourself and your payday loan company.”

“OK, Jer and Donna. Let me talk to management…,” says Emmett.

Now, READER, it’s too soon to know what Emmett and his payday loan company decided to do for Donna and her family. And, I don’t know if Donna or her husband will attempt to get 5 more payday loans next week. (Of course, if she does attempt this, and the payday loan companies she applies at use any of the top “scrubbers” – that is sub-prime consumer data reporting services – Donna will have trouble qualifying for a new payday loan.)

Note also READER, the best payday loan software offers the ability to implement a payment plan with fixed amounts deducted to coincide with consumer payroll periods or to create creative pay down plans depending on the specific payday loan consumer situation.

(Don’t worry READER, I’ll continue to cover LMS (payday loan software), sub-prime consumer databases, payment plans, Best Practices, collections, lead generation and MUCH more in future Newsletters and Blog Posts.)

Bottom line READER? Think LONG TERM. Employ Payday Loan Industry Best Practices. Feel good about yourself and your business! Remember, you’re providing emergency loans to consumers having no place to turn. Without you, they lack the ability to keep the lights on, fix the car, buy their kid’s prescription…

And dear READER, if this strategy of “soft-collections” doesn’t make sense to you, YOU and YOUR COMPANY ARE DOOMED! YOU WILL NOT ENDURE!! There are simply too many sophisticated, well-funded groups in the payday loan space who “get this.” Believe me, I know! I get calls and consult for them every day!

Finally, whether you’re a “brick-n-mortar” or an Internet Lender employing one of the creative payday loan licensing models such as Sovereign-Tribal Nation, offshore, choice-of-law, Credit Services Organization (CSO), line-of-credit, installment lending, OR WHATEVER, DO NOT THINK you can beat-up your customers. BE ADVISED! YOU WILL DIE!!

WHAT DO YOU THINK READER? Attack me, call me nuts, fight with me or LOVE me. Comments and altered thinking are welcome!

Are you a Lender? Or, maybe you want to learn how to be a Lender?  You want ideas, know-how, and make more money by lending to the masses PROFITABLY?

Get the latest version of our “Bible: How to Loan Money to the Masses Profitably.” CLICK HERE!. 

How to Start or Improve a Consumer Loan Business: Storefront or Internet anywhere!

How to Start or Improve a Consumer Loan Business: Storefront or Internet anywhere!

Jer@PaydayLoanIndustryBlog.com
https://www.PaydayLoanIndustryBlog.com
702-208-6736

11
Jun

INNOVATIVE PAYDAY LOAN PRODUCTS

Posted by / Uncategorized

INNOVATION in OFFERING PDL PRODUCTS & SERVICES

It’s time to rethink our approach to serving the payday loan consumer.

In addition to building a payday loan operation from scratch, I’ve been consulting in this space since 1998. I attended my first FISCA convention in 1999. I’ve attended virtually every FISCA and CFSA convention since then with an OLA here and there as well. As a result, I’ve witnessed the tremendous growth in the payday loan space – from virtually zero revenue in the 90’s to an estimated $45 billion dollars today!

In late 1998, I built my first web site in HTML. I studied all the SEO stuff I could find and followed many of the early gurus. I read everything I could find regarding SEO and subscribed to every newsletter!

No one really knew what a payday loan was back then and I was selling over 3000 payday loan leads/month to a Lender in Costa Rica for a few dollars each. My costs for these leads was zero! By the way, these leads were simply customer Name, phone number, and email address.

In those early days, before Google, I played with Alta Vista, an early PPC (pay per click) GoTo that became Overture, Infoseek, Ask Jeeves, Lycos, Excite, Yahoo Directory, yada, yada, yada.

Man have things changed!

I’m consulting with clients today facing $135 leads and lucky to fund 20% of them! If they don’t successfully re-market to the payday loan consumers they do fund, they lose their butts! Add to these costs the transaction fees Lenders typically pay to their LMS provider, their ACH provider(s), their lead scrubbers/sub-prime consumer data bases, their outsourced call center provider and more than a few Lenders begin to whimper they’re simply working for their vendors!

So, what do you do?

1st, as I’ve been repeating for years, “Embrace the Internet.” Don’t rely 100% on your brick-n-mortar approach.

Focus on the quality of your revenue stream. The barriers to entry in the payday loan space are relatively low. Margins are eroding. Sophisticated money is pouring in. Demand by consumers for payday loan type products is skyrocketing.

Don’t give up on developing organic traffic in spite of what the lead generators and call center folks tell you. Sure it takes time. However, if your model relies solely on lead purchasing, your margins will continue to erode. And, with heavy marketing costs, your enterprise value will suffer. Do know that organic traffic is not free. You do need to devote resources to long term development of organic resources.

Build a network of web sites. If your model requires the purchase an “off-the-shelf” LMS platform, you generally do not have the ability to tweak your content, META tags, TITLE tags, etc. at your whim. So, build a network with unique URL’s, hosted by multiple providers, link them together and put a member of your team to work on this. Do it in-house, out-source it, whatever! Learn to use all the various social media, Twitter, Facebook, Youtube AND the next new “thingy” that appears tomorrow.

Think social! Think community!! Google, LinkedIn, Facebook, Open Table, etc. never ran marketing ads or PPC campaigns. Everyone in the PDL space is taking the same approach. Avoid this!!

What about a “membership” site offering consumers discounted fees in return for access to their employment, bank info and an ACH authorization?

What if your payday loan customer had to sign in via their Facebook or Twitter account to qualify for a host of goodies? (See http://www.gri.pe/ )

What if you provided credit build, education, debt organization and management, access to ShareBuilder, a credit card and more?

What about a smart phone app for your previous, successfully paid off customers? They need a quick $400 deposited in their bank account to cover their car repair bill or face an NSF.

How about a whole different “loan?” Some kind of “line-of-credit,” “installment loan” product for your less-marginal customers? Look at http://www.kiva.org/

LET YOUR IMAGINATION PLAY!!!! Start down a new path! Look at what the developing countries are doing with financial services! Break out!!!

Now attack me, agree with me, or discuss with me BUT don’t ignore me!

Jer _Trihouse PDL Consulting
702-208-6736

31
May

Credit Unions Remake Themselves as Payday Loan Companies

Posted by / Credit Unions

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.

 

26
May

Texas Payday Loan Bills-Legislation HB 2592

Posted by / Uncategorized

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

Jer@PaydayLoanIndustryBlog.com

 

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How to Start or Improve a Consumer Loan Business: Storefront or Internet anywhere!

How to Start or Improve a Consumer Loan Business: Storefront or Internet anywhere!

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