“Dear Trihouse Payday Loan Company,

Regretfully, we can no longer service your payday loan company. Although you’ve been a great customer for years and we’ve made a ton of money off of you, you have 30 days to find a new bank. We have no clues, ideas or suggestions for you. You’ve done nothing wrong. We just don’t like your industry.

Sincerely, Wells Fargo Bank.”

“Bank discontinuance” has been an issue for payday lenders, check cashers, and money service businesses for years. The first FISCA conference I attended in 1998 (actually it was then called The National Association of Check Cashers) had a workshop focused on “Bank Discontinuance.”

Funny thing is, Wells Fargo, in addition to CitiBank, Fifth Third and others, provide financing for the “big boys” in the small dollar lending industry!  Adam Rust, an opponent of the payday loan industry, has worked hard at documenting this. From Adam:

“Commercial banks, including Wells Fargo in San Francisco and U.S. Bank, are a significant source of capital for the country’s $48 billion payday loan industry, extending more than $1 billion to companies such as CashNetUSA parent Cash America, Dollar Financial and First Cash Financial.”

I recommend you signup for BankTalk.org. [No affiliation other than that he’s worth following.]

And, get this: Fifth Third bank has re-entered the payday loan industry as a LENDER while shutting down their competition – those of us in the PDL space. Revisions of Fifth Third Bank’s payday loan product called Early Access service include a reduction of the transaction fee from 10% to 3% of the amount of each advance, increasing the repayment deadline for each advance from 35 days to 45 days, and a reduction in the number of months a customer may advance the maximum credit limit from six to three months. Worse, this Fifth Third program gives no attention to a borrower’s ability to pay; an issue we are continually attacked for. The FCC and the OCC have made specific reference to this for pressuring Fifth Third Bank, U.S. Bank, Wells Fargo, Regions and others to shut down these payday loan styled products.

Banks are using “Operation Choke Point” , and every other excuse possible, to shut down the small fish in the payday loan industry. Again, not only are they offering competing products, but they provide capital to the incumbents.

Here is the official announcement from Fifth Third:

On January 17, 2014, Fifth Third Bank announced that it will no longer offer new customers its Early Access deposit advance service after January 31, 2014.

Effective January 1, 2015, Fifth Third Bank is making changes to its Early Access deposit advance service.

The following is a summary of the changes:

• Lower Cost: Fifth Third is reducing the cost of the Early Access transaction fee from 10% of the amount of each advance to 3% of the amount of each advance. For example, if you advance $100 on or after January 1, 2015, you will be charged $3 instead of $10 for that advance. This will go into effect for each advance made after 9 p.m. ET, December 31, 2014.
• More Time to Repay: We are increasing the repayment deadline for each advance from 35 days to 45 days. Therefore, any advance or portion of any advance that is still outstanding as of January 1, 2015, must be paid in full by the 45th day from the date the advance was drawn, or the amount will be automatically debited from your associated checking account. (Please remember that Fifth Third will automatically repay your advance from your next direct deposit of $100 or greater until the advance is paid in full.)
• Reduced Maximum Advance Period: We are decreasing the number of months that you may advance your maximum credit limits from six months to three months. If for 3 consecutive months you have advanced the maximum amount of your credit limit, you will be ineligible for an advance for 30 days following the 3rd month. For example, if you advanced your maximum credit limit in October, November, and December of 2014, as of January 1, 2015, you will be ineligible for an advance for 30 days.
• “”Fifth Third continues to proactively engage with key stakeholders to review new options for what the bank considers a clear and continued need for small-dollar, short-term credit solutions,” it said in a news release. “A primary objective is to serve customers within the traditional banking system, rather than having them access less-regulated providers outside the banking system.”

The gall!! The audacity!! The boldness!!! Astounding? No! Remember, I’m talking about A BANK. And let’s not forget these banks get money from the FED at discount rates that would cause a loan shark to blush, then loan it to consumer facing lenders such as World Acceptance, CSH, DLLR, Enova, QC Holdings at prime + 500 basis points.

Bottom line? If you have a bank, get a backup. If you lost your bank, SORRY! If you’re a small bank with aspirations to become much larger and collaborate with successful, licensed lenders with serious AML programs in place, call Jer at 702-208-6736 or shoot an introductory email to Jer@TrihouseConsulting.com

Nope! It’s not compliance, regulation or the CFPB. You’ve seen this coming since the day you got into this game. Game changing rules are a fact of life as a money lender.

Wrong! It’s not John Oliver’s Last Week Tonight Show laugh your ass off satire on the payday loan industry. Even John had to admit that nearly 50% of your customers are happy you’re here.

Nah! It’s not the 1200%+ APR’s you charge your borrowers.  Even the CRL admits behind closed doors that money cannot be loaned at 36% unless it’s subsidized by tax payers.

Zilch again! It’s not the ACH debacle that sent you scurrying for Rolaids last October.

Uh-uh. It’s not the loss of your bank account, stored value cards, kiosks, “Operation Choke Point” or any of the other arrows, bullets, grenades and drones you’re having nightmares about.

Give up? Ok, before I tip my hand, think about the problem you’re trying to solve. Think about the pain your customer is experiencing daily. Your customer wants access to money fast and easy. No hoops to jump through. No “financial education” course. She wants minimal paperwork and hassle.

Your customer wants, needs and is literally begging for small dollar credit NOW!

Smart lenders focus on reducing the “friction.”

Borrower behavior has changed. The 1% can regulate a LOT of things but they can’t successfully regulate consumer behavior. Eventually, regulators have to recognize and embrace reality or risk revolution. Think marijuana, alcohol, drugs, prostitution, money lending…

Google, Amazon, Uber, and  iTunes  changed the way consumers behave.

The phone is the HUB!

A generational shift is occurring now.  The phone is the HUB! Smart phones reduce the “friction” in financial services. The Kindle changed the way people buy books. Smart phones are changing the way consumers borrow money.

You need an example? Here’s a simple one:

• Whip out your phone. Type automobilepawn.com/ in your web browser. Take a close look.
• Now, visit AutomobilePawn.com on your iPad, desk top or laptop computer.

Another example:

• Whip out your phone. Open your web browser and type in “AceCashExpress.com.” Take a CLOSE look at the website.
• Now, use your desktop, laptop or iPad and repeat this step; AceCashExpress.com . See the difference? It’s MAJOR!

Both AutomobilePawn.com and AceCash.com recognize the device used to visit their website. It’s automatic.

The difference is immediate! Using their phone, a borrower can simply click a button and apply for a loan, get directions, send a text or email message, make an appointment or share the website with friends and family members in need.

The SMART PHONE is the REAL game changer in the Small Dollar Credit (SDC) space! The rest is all noise.

Your task is to reduce the “friction” in lending. Figure this out and you can earn a higher ROI lending money than in any other industry AND survive the slings and arrows headed your direction.

How does your business “look” on YOUR customer’s phone?

Here’s an inexpensive solution: EZMobileToday.com

Jer@PaydayLoanIndustryBlog.com

Who are the Significant Players in the Payday Loan Small Dollar Credit Space? 

Medium.com seems to think it’s Benjamin Lawsky, Western Sky, Scott Tucker, Richard Cordray, Jer with Trihouse, and Four Oaks Bank. Small dollar credit is evolving rapidly! This was outdated the day it appeared.
Who’s Who in the World of Payday Lending

1. Benjamin Lawsky:

Benjamin Lawsky

Benjamin Lawsky is in charge of the New York Department of Financial Services. He’s been aggressive as hell towards the payday loan – small dollar – credit industry. He blew-up the industry last summer when he wrote a letter to 117 banks demanding that they stop ACH processing of online payday loans to residents of New York. Without a doubt, Lawsky’s team found the “Achilles Heel” of the payday loan industry; the ACH payments platform.

2. Western Sky:
Highly controversial Western Sky was sued by a multitude of attorneys general and finally ceased lending. Run by M. Webb, an individual member of the Cheyenne River Sioux Tribe, Western Sky was not immune from state lawsuits. To qualify for tribal immunity, a payday lending business must be blessed by a true tribe economic entity and benefit the tribe’s members substantially. This is still playing out in the courts.

3. Scott Tucker:

Scott-Tucker

Scott Tucker is one of the early payday lenders from “payday loan central;” Kansas City. Mr. Tucker is engulfed in state and federal lawsuits. He too was an early advocate of the tribe lending model. The courts are determining how well his strategy will pay out. Set up “Google Alerts” to keep abreast of Mr. Tucker’s status.

4. Jer Ayles-Ayler:

Jer-Trihouse

Simply referred to as “Jer,” he  is a Newport Beach, CA-based consultant, well known throughout the payday industry for his “Payday Loan Bible” ($367.95) and his colorful, rambling e-newsletter, dispensing “payday loan insider strategies.” The latest one advocated employers to get into the “workplace advance business.”“‘Workplace Cash Advances’ trump all other payday loan/small dollar loan solutions for employees. Opportunities for entrepreneurs are here —NOW,” he wrote. Jer and his team offer advice for prospective payday lenders for $5/minute.

5. Four Oaks Bank:

Four-Oaks-Bank

Four Oaks Bank, in North Carolina, is the latest target of Operation Choke Point, the Justice Department’s crackdown on illegal online payday lending.

6. Richard Cordray

Richard-Cordray

Consumer advocates, payday lenders, banks, and vendors are focused on Richard Cordray, the director of the Consumer Financial Protection Bureau. Since the CFPB was created in 2011, it has published several studies that claim payday lending can trap consumers in a “cycle of debt.” The CFPB continues to be very aggressive and created a data base collect consumer complaints about payday lenders, sued Cash Call, collaborates with “Operation Chokepoint” and a plethorat of additional directives in an effort to shut down lawfully licensed payday loan businesses.

Note: a somewhat similar version of this Post appeared here: Medium.com I’ve added our interpretations to their original observations.