THE BLOG

10
Apr

All About Internet Lending for Title, Payday and Personal Lenders

Posted by / Trends & Tactics

 Insight & Wisdom in small dollar lending. Digging down below the media headlines… Continued

How & Why PDL and Title Lenders Must Embrace the Internet.

Does your Team want to enter the lending space w/o the hassle of state-by-state licensing, bonding and compliance issues? “Tribe-in-a-Box” available immediately. Includes a sophisticated, well-funded tribe, ACH, push to credit card, LWS, website… Reach out to Jer@PaydayLoanIndustryBlog.com or 702-208-6736 for details. Borrowers by the millions are out there…

It’s a fact!  Every day, tens of thousands of consumers are using the Internet and their phone to find a local brick-n-mortar or to apply online for a loan.

Borrowers do it from home, from work and from the library. They do it from virtually everywhere in the world including the USA, the UK, Canada, Australia, Korea, Japan, Ireland, New Zealand, the Bahamas and more.

And, let’s not kid ourselves! The Corona virus has put a serious dampner on face-to-face transactions. The future is DIGITAL! Those incumbants who dailed to embrace the Internet, the phone… a digital transition will go the way of the dinosaurs!

They apply for cash advances and personal loans from states not having favorable payday loan laws such as Georgia, North Carolina, New York, PA, NJ, AZ, KY and Oregon.  And, they apply from states and provinces having safe-harbor legislation like Texas, Louisiana, Mississippi, Ohio, Illinois, California, Nevada, Florida, etc.

Is it advisable for you to fund loans to residents in states and provinces lacking safe-harbor legislation? Of course, the answer depends on your business model but expect significant grief from the CFPB – assuming it still exists, State AG’s, compliance expenditures, ACH processing and bank challenges… if you choose to. Even tribes must deal with the FED’s.)

We have clients receiving tens of thousands of installment and cash advance applications every week via the Internet.  Typically they fund 15% to 40% of these depending on their underwriting criteria.

And let’s not forget CashNetUSA – now called Enova.  You remember! An Internet based payday loan company started in 2004; purchased for $35,000,000 in 2007 by Cash America, a brick-n-mortar player. Then spun-off and an IPO succeeded…

Did you know Advance America launched in the UK 30 days later? On the Internet? Using the CashNetUSA software platform?  Unreal! With the aid of the Internet they were able to literally “flip-a-switch” and offer their cash advance product to an entire country!

Now you’re probably wondering how those of you with stores could possibly care about this situation.  The fact is, the Internet guys are taking market share from you.  Our target demographic is 25 to 50 years of age. Every day our customer base is eroding. It may be a trickle now but it is a certainty if you’re not using the Internet to service your customer base you are not going to reach your potential.

The Internet offers you the ability to provide your small dollar loan product to your entire state/province rather than the 5 mile, 8 mile, 10 mile radius around your brick-n-mortar!

You’re licensed in your state!  Why not service your entire state?

By the way. How does your web site look on a smart phone? Whip out your phone and pull up your website. Does it look like CR@#$%P? You better fix this! Type PaydayLoanUniversity.com on your smartphone browser for an example.

Sure, there are challenges. Marketing to a customer base throughout your state/province is a different animal.

Yeah, your team will need to become acquainted with search engine tactics. And how do collect from a client 500 miles away? Hint: sub-prime data scrubbers; CoreLogic, Clarity, DataX… [For their contact info: Resources

I know what you’re thinking.  “I’ll need a web site and Internet based payday, installment or title loan software.” Yes, you will need to address those issues.  If you attended the last CFSA convention, you know these challenges are not insurmountable. And, if you’ve studied our “How to Make by Money Lending Money: Bible”  you already have the answers!

The next issue of Cheklist (sic) Magazine and Currents Magazine will probably provide some answers as well. You do subscribe to Cheklist? And Currents?

Of course you’ve visited Craigs List? The free Internet based bulletin board?  We place a free ad in each city we have a personal loan store located in.  We average 2-5 funded payday loan applications each and every day from Craigs List depending on the size of the city!

We all know the life-time value of a payday loan customer. $1,200? $2,000? $4500? Higher? That’s pretty good for zero cost!

We’ll cover more of this topic in a future Small Dollar Loan Newsletter.

For now, start thinking about this opportunity. Get up to date.

Get on the Internet and start using Google, Bing, YouTube, Facebook, Instagram and Yahoo for installment, payday loan and car title loan research.

This topic is not over.  We are just getting started.
Comment? Questions? jer@PaydayLoanIndusytryBlog.com 702-208-6736

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09
Apr

Payday Loan & Installment Loan APR Calculator

Posted by / Trends & Tactics

APR Calculator & Fees for Installment and Payday Loans

Real World APR Comparison Chart Payday Loans vs Bank Overdraft

Real World APR Comparison Chart Payday Loans vs Bank Overdraft APR’s

APR Formula: [Note: Click LINK below to download a PDF of this Formula.]

100 X 365/D X (C/L -1) =APR

Where: D = number of days of loan

C = total cost of loan

L = amount of loan

Typical Payday Loan example:

Client borrows $100 for 2 weeks (14 days) with a fee of $17.

100 X 365/14 X (117/100 – 1) = APR

2607.14 X .17 = 443.21 % APR Total cost to client = $117.00

Another scenario. Client borrows $100 for 2 weeks (14 days) with a fee of $75.

100 X 365/14 X (175/100 – 1) = APR

2607.14 X .75 = 1,955.35 % APR Total cost to client = $175.00

Typical Bank Overdraft example (NSF’s amount to short term, single payment payday loans:

If a bank customer overdrafts their account by $100 they can be charged a $35+ Overdraft [NSF] fee for the first day. An Extended Overdrawn fee of $35 on the sixth day.

100 X 365/6 X (170/100 – 1) = APR

6083.33 X .70 = 4,258.33 % APR Total cost to client = $175.00

If that same overdraft is for only $10 (some bank’s minimum):

100 X 365/6 X (80/10 – 1) = APR

6083.33 X 7.0 = 42,583.31 % APR

Total cost to client = $80.00

According to PEW, when the state of Georgia outlawed payday loans the banks netted 1.4 billion dollars more in overdraft fees the next year.

Typical Late Fee example:

Using a common Water District bill as an example. If a financially strapped consumer is  one day late paying their water bill of $17.59 a $5 fee is charged.

100 X 365/1 X (22.59/17.59 – 1) = APR

36500 X .28 = 10,220.00 % APR

Total cost to client = $22.59

So… Why do banks and credit unions “HATE” payday loan and installment loan lenders? Because payday loans are cheper for the consumer in a short-term financial pinch AND the majority of bank and credit union profits are derived from the NSF fees thaey charge their customers!

According to PEW, The CFPB and The Consumerist:

“In all, the CFPB found that 60 banks derived a significantly higher portion of their overall recurring earnings from consumer overdraft and NSF fees than their peer institutions.”

“Additionally, the fees represented 65.3% of all reported consumer deposit account fee revenues.”

What’s the answer to all this controversy for an entrepreneur? Grab a copy of our “Payday Loan/Installment Loan Manual” [updated 2X per year] and learn how to make money by lending money!

You don’t really want to open a pizza parlor, a florist shop, another taco stand… do you? In the small dollar lending space, your inventory is MONEY! Money does not rot, die, or get thrown in the garbage at the end of the day.

Link to download a PDF of this calculator.

 

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07
Apr

Texas CSO, CAB and 3rd Party Lender Metrics

Posted by / Trends & Tactics

Texas CAB and Texas CSO- How to Start a Texas or Ohio CSO – CAB lending Company

How Texas and Ohio Installment loan lenders and Payday loan Lenders Use CAB’s and CSO’s – Credit Access Businesses – to
Increase Their APR’s above the lower mandated small dollar loan caps.

The Texas Constitution mandates a 10 % cap on the amount of interest that can be charged on personal loans.

But, via a perfectly legal entity called a CAB – CSO, Texas and Ohio lenders can charge much higher interest rates; 400% to 800% and higher APR’s are not unusual.

And Texas accounts for roughly 54% of the U.S. annual profits delivered to the payday and auto title industries; California is a close second.

How is this possible? CAB’s and CSO’s. Lawful entities backed up by years of legislation and regulation by both Texas and Ohio

Texas and Ohio lenders incorporate their brick-n-mortars and their Internet loan platforms as separate entities that collect 10% interest on behalf of a 3rd party lender and then are allowed to charge additional fees fees and interest for the services that they provide by referring consumers to the lender and servicing the loan.

Typically, these CAB’s and CSO’s charge the borrower for marketing, underwriting and servicing the loan on behalf this  “lender.”

In Texas and Ohio, payday and auto title lenders register as a Credit Services Organization (CSO) Credit Access Businesses (CAB).

Texas and Ohio do not limit fees, interest rates, loan amount size, or refinances and  do not require the CAB to assess ability to repay based upon the consumer’s income; at least not at the time of this writing. The CFPB has much to say about this situation.

Accordingly, for single payment products, CAB’s/CSO’s typically charge an “origination fee” ranging from $22 to $30 per $100 borrowed and, if the borrower is unable to repay the loan by the due date, a “refinance fee” that is usually identical to the amount charged as an origination fee.

Again, because of the CSO/CAB 3rd party lender model, CAB’s/CSO’s also charge consumers an additional 10 % annual interest rate while the loan is in repayment on the lender’s behalf. Most CAB’s share late fees and application fees with the 3rd party lender as well. Thus, it’s not uncommon for a “lender” in this 3rd party arrangement to achieve a 12% – 18% ROI on their money.

Per The Texas OCCC, Texas CSO’s/CAB’s grossed approx. $930 for a $325 consumer loan. Borrowers averaged several thousand dollars in fees for a $1000 car title loan.

How to start a payday loan business

PDL Biz

You want to learn how to start a Texas or Ohio CAB/CSO and begin making money by lending money? Invest in our “How to Start a Payday Loan/Installment Loan Manual.” Click HERE to begin.

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28
Nov

Bank Accounts for Payday Loan Lenders

Posted by / Banking

Payday loan lenders and micro-lenders continue to suffer from “bank discontinuance” issues as a result of “Operation Choke Point” launched by the Obama administration in August 2013.

The Community Financial Services Association of America (CFSA) and Advance America said ” a preliminary injunction was needed to end the back-room campaign of coercion by the Federal Reserve, the Federal Deposit Insurance Corp, the Office of the Comptroller of the Currency, the CFPB [ruled unconstitutional by a D.C. Court]  and competitors masking themselves as so-called consumer protectionists.”

U.S. regulators are collaborating in an attempt to stop banks from offering banking services to micro-lenders in an effort to force consumers in need of emergency funding to beg, borrrow or steal when facing financial stress.

Nearly 50% of U.S. residents are unable to access $400 cash [Link to Federal Report] when faced with the need to fix their car to continue working, purchase a medical prescription for their child or a family member, turn on their heating or electricity…

Payday lenders, istallment lenders and additional small dollar lenders requested a federal judge for immediate relief! 

Jer Ayles-Ayler Trihouse Consulting

Jer TrihouseConsulting

The survival of mom and pop loan businesses is at stake!

It’s rumored that the big, multi-billion dollar online Fintech lending companies – SOFI, Lending Club, Prosper, Marcus, Avant, Enova… are adding additional pressure to wipe-out the small dollar lending industry; including the small independent store owners.

Advance America said its own situation became dire after five banks decided in the last month to cut ties, including a 14-year relationship with U.S. Bancorp, “putting it on the verge of being unable to maintain a bank account.”

The small lender national association injunction requests the federal court to “order the agencies to cease and desist from harming the reputations of Advance America and other CFSA members; from applying pressure on banks, encouraging them to terminate relationships with the banks and other CFSA members; denying CFSA members access to financial services; and from depriving members ability to pursue business.”

Instead of eliminating the “bad apples” of the payday industry, the agencies have “set about to choke off the life-sustaining financial oxygen that the entire industry, and millions of under-banked individuals, depend on.”

The CEO for CFSA, Dennis Shaul, stated that the results of Operation Choke Point for the payday loan, installment loan and micro-lending industry has been “dire.”

Mr. Shaul says that U.S. Bank has dropped its affiliation with several members, including Advance America, allegedly putting the company “on the verge” of being unable to maintain a bank account.

Another example by CFSA is thata smaller payday lender, DollarSmart Money Centers,  was forced to close when it lost all its banking services.

Here’s a link to the Injunction by the CFSA vs. the FDIC

Here’s a link to the Original Request

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04
Oct

Evil Center for Responsible Lending vs Payday Loan Industry

Posted by / CFPB

Why do payday loan lenders take a beating by the media and the politicians so often? Because of organized campaigns like this one launched by the CRL. [Remember the Center for Irresponsible Lending? Founded by credit union and bank executives – think Wells Fargo – whose mission is to crush the payday loan industry so they can maintain their 2000% APR NSF fees?]

The CFPB has received over 170,000 positive payday loan testimonials from real borrowers. That’s great! We’ve done a good job with this. But our “system” for asking our happy customers to enter  these positive stories on the CFPB website is CLUNKY, SLOW and CUMBERSOME.

Now, take a look at the CRL campaign to bury us:

stop-payday-loan-sharks

The CRL makes it so easy. They send every Tom, Dick and Harry to this website. The negative payday loan commentary is already present in the comment box. All their sycophants have to do is enter a fake name, email address and zip code, hit “Submit” and the dirty deed is done! We eat it!

SMOOTH! SMART!! And EVIL!!!

Here’s their website: CRL EVIL WEBSITE

And, in case you didn’t submit a POSITIVE payday loan testimonial – which you should – here’s their EVIL “Thank You Page.”

Here’s what you need to do:

  • Go to the CRL website
  • Enter phony information like the CRL idiots do
  • “Submit” your bogus info and share the Thank You page with friends, family and customers; like they do.
  • Oh, and even better, write a simple positive payday loan “Template” testimonial for those with whom you share.
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PDF: 500+ Pages $150.00

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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