THE BLOG

20
Dec

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

Share
09
Sep

The Payday Loan Tsunami, ACH, Virtual Wallet, Paytoo: Thoughts and Interpretations

The Payday Loan Tsunami, ACH, Virtual Wallet, Paytoo: Thoughts and Interpretations
By: Jer Ayler Trihouse

It’s Tuesday, Sept. 10th and I’m in Paris contemplating the TSUNAMI that hit the payday loan industry!

As YOU know, this is an incestuous industry. Billions $$ are at stake! We’re in the midst of a hurricane! Operators are bailing, consumers can’t get a loan – they’re calling out-of-state stores and literally begging for cash. Loan portfolios are being abandoned or sold at fire sale prices, call centers are shutting down right and left…

I’ve been on the phone 6 AM to past midnight with EVERYONE for the past 14+ days non-stop; Saturday’s & Sundays’ included. You know me! Until this firestorm hit, I woke-up whenever I felt like it :o) Half the time, I was kayaking on the back-bay when I pontificated on our industry.

As you digest this, remember, “Disruption rarely comes from within.”

So what happened?

New York Banking Commissioner Lawsky launched a series of punches to banks and online payday loan lenders demanding they stop making loans to residents of New York. Additionally, he said all outstanding loan principals and fees with NY borrowers are “void and uncollectable.”

Then the NY AG piled on with more…..

ACH providers, NACHA and banks were attacked for enabling payday loan lenders to “skirt NY usury laws.” The Native American Financial Services Association walked the halls of Congress demanding the State of NY back-off on all this “ACH noise” and “end their attack on tribal sovereignty.” ACH providers reacted in knee-jerk fashion and began shutting-off lender access to the ACH system – virtually overnight without warning! Even state licensed payday loan lenders were cut-off!

The bottom line? The online payday loan industry had its business model cut-off-at-the-knees. Lacking the ability to utilize the (ACH) Automated Clearing House, the industry couldn’t deliver funds (debits/credits) to borrowers nation-wide.

Payday loan lenders having “bricks-n-sticks” were jubilant! Suddenly their online competitors – the offshore, the tribes, the choice of law lenders were out of business! Phone calls to stores by consumers “looking” for a loan increased 1000% overnight. Little payday loan stores in places like Lake Forest, California (Danny Verette – Paid2Day.com) were receiving 20, 30 40+ calls per day from consumers all over the country!

During this “firestorm” of attacks and, what APPEARED TO BE eminent destruction of the payday loan industry, a company called Paytoo arrived! What IS Paytoo you ask? Simple! A “virtual wallet.” Literally, a consumer’s financial purse or wallet “in the cloud.” Cash-in, cash-out and money management all from a mobile phone, a tablet, a computer, an ATM machine… The Paytoo virtual wallet platform enables a consumer to access ALL their financial data, bill pay, payroll loan request, transfer funds to friends, family, merchants, load a Discover or MasterCard, get cash at an ATM machine, create a virtual check, deposit payroll proceeds, manage their finances… a Paytoo virtual wallet is literally a depository for a consumer’s dollars made available anytime, anywhere, 24/7 “LIVE.”

What’s this mean for consumers? NO need for the 30,000,000+ so-called “unbanked” to physically visit their local check casher and pay 3% – 9% of their net payroll proceeds to cash their check. Paytoo does this FREE! No one gives a crap about having a bank account. YOU NO LONGER NEED ONE! ASTOUNDING! Via Paytoo, a consumer can deliver money to merchants, family members (in Mexico City, San Diego, or Paris :o) FREE! Cash savings with each “spend.” “Virtual” pay by check is featured. A consumer having a bank account, can choose to “tie” it to their “Wallet.” Paytoo’s platform subscribes to the philosophy of 1 wallet/1 consumer/1 lender. Paytoo brings “real-time” 24/7 comprehensive money management tools to the masses.

What’s this mean for lenders and the AFS industry? No more “check is in the mail.” No more waiting for an ACH to be batched, submitted and wait 2-4 days for transactions to clear. No more 3-5 days of “reserves” to be held by your ACH provider. The lender is at the “front-of-the-line” to be paid by the consumer. The Paytoo platform lowers your “scrubbing” and due-diligence costs on the front-end. Check cashers are DEAD! MoneyGram ?? Western Union?? The stored value cards we’ve all been trying to peddle with ridiculous consumer fees; DEAD! Implement the Paytoo API and launch today.

What’s this mean for Regulators? 1 consumer = 1 payday loan. (Hm.. appears to be a state data base “killer.” States may not be happy to lose the revenue many of them currently receive from Veritec. Think Florida for example.) KYC (Know Your Customer) issues? Solved. Paytoo Corp, a wholly owned subsidiary of Paymotech Finance Corp., is a registered Money Service Business (“MSB”) with The U.S. Department of Treasury.

Mobile phone owners have already achieved “KYC.” Should Paytoo become the “de facto” payday loan lending platform, a federal solution to multiple, simultaneous PDL’s would be moot.

So, what’s been the reaction by the payday loan industry to the intro of the Paytoo platform? “Every lender wants to keep this for themselves.” Not possible. Could not keep the “lid” on this thing. All hell broke loose! It’s like a shark frenzy :o)

And, how is it that Paytoo just “happened to appear” on the scene at this moment in time? Just as this “ACH TSUNAMI” nearly annihilated a $50B industry?

Paytoo CEO Michael Poignant has been quietly laying the groundwork for the Paytoo virtual wallet “killer application” since 2005. Michel P. has been beating on our vertical for years! He was used, abused, disrespected, left waiting in lobbies…until “The Perfect Storm!”

You might ask at this juncture, why Jer finds himself in the enviable position of playing a role in helping Michael Poignant, Brett Hudson and the rest of the Paytoo Team re-introduce the Paytoo platform to the AFS industry? All I can say is, “Thank god I promptly responded respectfully (and with humor) to the communications Michel P. shot out to me over the past many, many months!

Those of us in the AFS industry who survive, and come out on the other side, bent but not broken, will be rare. The “Virtual Wallet” is the future. ACH will remain but there are better, cheaper options. Europe, S. America, Mexico… even Africa is ahead of the States with adoption of digital, virtual currency, bill pay, money transfer…

Is Paytoo the “killer app” for our space and more? Will Paytoo become the “default” $$ delivery platform for the AFS industry as Google is for search? How far along are Paytoo’s competitors? Can Paytoo scale fast enough to meet demand? Can DLLR, CSH, EZPW… or any other behemoth build/employ/scale as robust a platform as Paytoo has already deployed in Europe and S. America and now the USA? Paytoo is inundated with Demo Requests and “sandbox” setups for testing. Lenders with $100M + are testing now; they’ve only dipped their toe in the waters so far… afraid they could be eaten by a SHARK. Afraid of what happens to their data, their customer… Can Paytoo sell-out? Get eaten?

Remember: 1 wallet; 1 consumer; 1 lender. If Paytoo IS the “killer app,” lenders better “jump-on board” and secure market share FAST! Are you listening Al Goldstein., Mark C., CSH, DLLR, EZPW, FCFS, OLA, CFSA, FISCA, NAFSA…?

Paytoo has 4.5M world-wide consumers currently using the Paytoo virtual wallet! Only 300,000 are U.S. based. These numbers are increasing daily. Who wants to partner with Paytoo? Who wants to do business with Paytoo in the USA NOW?

“Apple will sell a few to its fans but the iPhone won’t make a long-term mark on the [financial services] industry.” Bloomberg, January 14, 2007. (THX to Bank 3.0 by Brett King. Attention: READ THIS BOOK or die! Better! Buy Brett’s book and bring it to FISCA for his autograph :o)

No single Lender has a large enough market share to slow adoption/integration with the “virtual wallet.” A complete and irreversible DISRUPTION is upon us. Fail to embrace the “Wallet” and your business will perish. We are in the midst of a MAJOR SHIFT in financial services. The $$ distribution system HAS changed.

Today’s consumer has grown-up with Facebook, Twitter, iPhones… Lenders who fail to figure out this new paradigm will soon be irrelevant. As a lender, your costs will come down, your market share will increase, Big Data loan decisioning algorithms will improve your ROI, human loan officers will soon be archaic, consumer rates and fees will fall…

OK, ENOUGH NAME! Signing out from Paris. I’m hiding out from all the flack…  :o) Use this in its entirety!

Jer – Trihouse
Jer@TrihouseConsulting.com (Skype: 702-425-9106)
Brett Hudson  BHudson@Paytoo.com 954-465-7202
Michel Poignant m@Paytoo.com

You’re kidding me? You’re a lender and YOU STILL have not seen the “Paytoo Wallet demo?”
GO HERE: http://trihouse.wufoo.com/forms/request-for-demo-of-wallet-via-trihouse-consulting/

WHAT? You’ve demo’ed the Paytoo Wallet and you’re still on the side lines? Then get out of the way. You are about to be crushed.

Paytoo Virtual Wallet

Share
02
Sep

ACH Killer Wallet Update

If you still have not seen the ACH “Virtual Wallet Killer,” Go here:

http://trihouse.wufoo.com/forms/request-for-demo-of-wallet-via-trihouse-consulting/

This is disrupting the AFS industry; to put it mildly. For Internet and store -front lenders. Be up and running in 24-48 hours. You MUST take a look at this! If you’re an ISO, be certain to check the box!

If you’re bored, exhausted or simply quit, jump-out your window.  Best wishes in your future endeavors!

Jer@TrihouseConsulting.com (I check email daily!)
Skype 702-425-9106 (BEST) I’m on the road the next several days)
Share
06
Aug

New York State Attacks Payday Loan Lenders: Claims ACH System the Weak Link

New York State’s financial regulator sent letters to 35 payday loan Internet lenders, instructing them to “cease and desist” from offering loans that violate local usury laws. The regulator, Benjamin M. Lawsky, ordered the lenders to halt the “illegal” loans within two weeks. New York outlaws any loans at rates above 25 percent annually.

Additionally, Mr. Lawsky requested 117 banks block online lenders from accessing New York consumer checking. He questioned why the ACH. network had allowed online payday lenders the “foot in the door” they needed to ensnare consumers. Mr. Lawsky “urged the banks to work with us to create a new set of model safeguards and procedures” that will identify illegal loans. (Jeez, this is like asking the wolves to guard the hen house!  Banks provide capital to payday lenders, offer competing loan products at very high rates to borrowers, and make a ton of money on the ACH transactions!)

My response?

Fact: Consumers want and need access to small dollar loans without a lot of hassle.

Fact: The costs associated with lending must be absorbed with sufficient profit to “remain in the game.” Lacking a reasonable profit (who gets to decide what is reasonable?) lenders will move on. Where do borrowers go?

Fact: Tribes are authorized by the Feds to participate in e-commerce as sovereign nations.

Fact: Regulators cannot end demand for small dollar loans Witness, alcohol, tobacco, sex, drugs, big coca colas…

Fact: Attacking the ACH system to force big brother down the throats of lenders and borrowers is not the answer. Silicon Valley is so far ahead of of bank 1.0 that no regulator can keep a lid on demand or loan proceeds delivery methods. New delivery systems are being created as I write this.
What authority will make the determination that a payday loan ACH occurred rather than an installment loan or a collateralized loan or a merchant cash advance or… too complicated.

Fact: The long-term answer to this “payday loan issue” is to ensure the continued existence of a multitude of loan products having full disclosure of all fees and costs available to consumers. Allow enlightened borrowers to decide what’s best for them.

Fact: Technology and competition already influence rates and forcing lenders to develop a multitude of loan products. Why should a resident of New York be forced to rob me for $300 when a resident of California can pay $45 to borrow $300 for two weeks?

Fact: There still remain 33+ states offering safe-harbor small dollar loan legislation in which an entrepreneur is legally able to offer a fairly priced loan product via the Internet or a brick-n-mortar. Proof not all state regulators are unrealistic.

What does Mr. Lawsky expect residents of New York to do when faced with a lack of cash to pay the rent, fix the car, turn on the gas… There are no lenders in New York offering a $300 loan at a rate 0f $1.44 per week in interest.

What do you think? Leave a comment with a fake email address so the regulators can’t track you down :o)

Share
03
Mar

Same-Day ACH as a method for banks and credit unions to increase their margins and offer better customer service

Jer TrihouseFirst, The New York Times blasts the banks for aiding payday loan companies via the ACH system. Next, a highly regarded consultant (Serge Milman)  for banks and credit unions suggests “Same-Day ACH” as a “method for banks and credit unions to increase their margins and offer better customer service.” The Fed’s are looking into all of these incestuous relationships… The tribe “sovereign nation model” is coming on stronger than ever. And in spite of all this, offshore capital and their banks want a piece of the U.S. domestic small dollar loan market. (I know, I get the calls.) VERY interesting times ahead for those of us willing to enter the treacherous consumer loan industry.

Meanwhile, “same-day” ACH technologies are here! Internet lenders and store operators are making loan proceeds instantly available to their borrowers 27/7, including Saturday’s and Sunday’s.

Relative Cost Structures by Payment Type - Check, Credit, Debit, Wire, ACH

Share
Share
Share