THE BLOG

22
May

Operation Choke Point: FDIC Surrenders to Payday & Small Dollar Loan Industry

Great news for “the business of lending to the masses!” Thanks to the heavyweights in our industry, Advance America and Check Into Cash, consumers continue to win. Consumer access to a multitude of choices when dealing with temporary financial setbacks prevails.

“We uncovered how some FDIC leaders and officials executed a campaign motivated by personal scorn for our industry, contempt for our millions of customers, and blatant disregard for due process. This settlement will help to prevent this disenfranchisement from happening again – to our business or any other legal, regulated business.” Chief Legal Officer Jessica Rustin, Advance America.

It took 5 years but “Operation Choke Point” has been dealt a SEVERE blow. 

Consumers, lenders, and vendors all owe a HUGE thank you to these companies and those of you who support the industry associations and participated on this long, arduous, expensive journey!

SPARTANBURG, S.C.PRNewswire/ — Advance America and Check Into Cash announced today that they have reached a settlement with the Federal Deposit Insurance Corporation (FDIC) regarding Operation Choke Point, the FDIC program that pressured banks to cut ties with certain categories of lawful businesses, including payday lenders.

“Five years after taking the extreme and costly step of suing federal regulators, we are pleased with the FDIC’s actions to address past efforts to cut off our companies’ access to the U.S. banking system,” said Jessica Rustin, Advance America’s Chief Legal Officer. “We uncovered how some FDIC leaders and officials executed a campaign motivated by personal scorn for our industry, contempt for our millions of customers, and blatant disregard for due process. This settlement will help to prevent this disenfranchisement from happening again – to our business or any other legal, regulated business.”

As a result of this settlement agreement, the FDIC will issue a statement to reiterate its policies. The FDIC previously acknowledged that certain employees acted in a manner inconsistent with FDIC policies and existing guidance with respect to payday lenders, creating misperceptions about its policies. These attempts have proven ineffective in resolving the issue.

The steps taken as part of this settlement are consistent with statements made by FDIC Chair Jelena McWilliams, who declared in a letter to members of Congress earlier this year that “[r]egulatory threats, undue pressure, coercion, and intimidation designed to restrict access to financial services for lawful businesses have no place at this agency.”

“While the FDIC took steps to reinforce its policies with staff and the industry, the effects of Operation Choke Point linger, with banks continuing to terminate accounts and refuse services to payday lenders,” said Greg Madson, Chief Legal Officer at Check Into Cash. “It is our hope that this settlement clarifies once and for all the FDIC’s policies so that banks feel free to provide services to lawful businesses operating in compliance with applicable federal and state laws, without fear of regulatory pressure or retribution.”

The FDIC will conduct training of its examination workforce on these policies by the end of 2019 to ensure that its examiners adhere to the highest standards of conduct and respect the rule of law. The training will specifically include matters related to Operation Choke Point.

Lastly, the FDIC has established a robust complaint process through which information regarding potential violations of these policies may be investigated. If banks or customers continue to be concerned that FDIC personnel are not following the FDIC’s policies regarding Operation Chokepoint, they may email the FDIC at transparency@FDIC.gov.

In June 2014, the Community Financial Services Association of America (CFSA), the national association for small-dollar lenders, joined industry partners and its largest member companies, Advance America and Check Into Cash, to file the lawsuit, Advance America et al. v. Federal Deposit Insurance Corp. et al., to end Operation Choke Point and the government’s persistent regulatory overreach. Discovery exposing depositions and damaging emails of government officials, most notably at the FDIC, was released in October 2018 as part of the Plaintiffs’ Motion for Summary Judgment in the lawsuit. The settlement is the result of court-ordered mediation prior to a judge’s ruling on summary judgment.

“Certain FDIC officials operated well outside of the rule of law and disregarded due process when they targeted lawful businesses under Operation Choke Point,” said Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA). “Regulatory policy must never be predicated on personal preferences and this settlement should make clear that such abuses of power will not be tolerated.”

About Advance America Cash Advance 
Founded in 1997, Advance America, Cash Advance Centers, Inc. is the country’s leading provider of non-bank cash advance services, with approximately 1,900 centers across the country. The Company is a founding member of the Community Financial Services Association of America (CFSA), whose mission is to promote laws that provide substantive consumer protections and to encourage responsible industry practices. Please visit www.AdvanceAmerica.net for more information.

About Check Into Cash 
Founded in Cleveland, Tennessee in 1993 by entrepreneur and philanthropist Allan Jones, the Check Into Cash brand is a state licensed and regulated small balance lender. Check Into Cash stores offer check cashing, Western Union® money transfers, prepaid U.S. Money Cards, and other convenient services as a complete One Stop Money Shop®.

Check Into Cash is a founding member of the Community Financial Services Association of America (CFSA), the trade association representing the nation’s payday lenders. The CFSA advocates for best practices and helps enact legislation that balances the needs of the consumer with the interests of the industry.

04
May

Ending Debt Traps in the Payday and Small Dollar Credit Industry

Financial Services Committee

Payday loans, small dollar loans… the pros and cons of a federally mandated 36% APR. Where do folks go if small-dollar lenders are forced underground? No doubt, more than a few legislators “get” that the elimination of small-dollar loan products does not solve the basic problem: 70% of US households cannot get their hands on $500 cash in an emergency! [Watch the Video below.] Yes, this is horrible. Yes, few of my readers here can relate to this fact. Unemployment is at record lows. Our economy is kicking ass! Employers are struggling to secure talented employees. And yet, we have a problem. The publicly traded lenders are an easy way to gain a bit of transparency. ENOVA reported they’ll loan $1.2B. CURO  reported just over $1B for their year. Robert Sherrill, CEO, Imperial Cleaning Systems is a convicted felon who used small-dollar loans to make ends meet and establish a successful business after serving time. The “Financial Services Committee” is SO BIASED and uninformed while residing in their Ivory Towers, that they actually accused Mr. Sherrill of testifying favorably about payday loans “in order to get clemency from President Trump!” Egads… House Financial Services subcommittee on consumer protection and financial institutions hearing, “Ending Debt Traps in the Payday and Small Dollar Credit Industry.” Here’s the Video to the Hearing:
01
May

Check Cashing Store Opportunity Available: Philadelphia, PA.

BUSY CHECK CASHING STORE FOR SALE IN THE HEART OF PHILADELPHIA, PENNSYLVANIA.

Well established for decades. Licensed by the State of Pennsylvania Banking Department.  Owner is retiring and wants to sell. [A “Baby Boomer…”

Check cashing breakout

  • Payroll 60% (average fee 1.5%)
  • Government/tax refunds 20% (fee 2%)
  • Attorney checks/settlement 10% (fee 2%)
  • Commercial check cashing 10% (fee 1.5%)  big room to grow here.
  • Gross sales: 2018
  • Check cashing 12.3 million
  • Bill payments 2.7 million
  • Wire transfer $925,000
  • Money Orders 3.5 million
  • Debit cards $106,000
  • Store grosses approximately $150,000 per year
  • The building is owned by the seller. A long-term lease is available! [The location also has a basement if needed to store the piles of cash you make!]
  • Note to my astute readers: “Operation Chokepoint,” MSB licensing and banking not an issue for the buyer.

Services currently offered:

  • Check cashing
  • Western Union wire transfer
  • Western Union money orders
  • Bill pay via check free pay
  • Nexis prepaid debit
  • Lotto
  • EBT
  • ATM (lease, they pay per transaction)

Want to explore this “Buy then Build” opportunity? Philly@PaydayLoanUniversity.com

22
Apr

Mercenary Available for Hire: Ex-Advance America & Dollar Finance Exec. for Small Dollar Loan Companies…

Consumer Loan Mercenary for Hire

An extraordinary payday, installment, car title, and line-of-credit executive with a deep skill set in “the business of lending money to the masses – profitably” is available to 10X your consumer loan business.

Dean has contributed to the success of more than a few of the biggest lenders in our space! Advance America, Dollar Financial, Money Mart… he started as a single-store operator years ago!

The best part? Dean is open to any and all “creative” collaborations!

Does your consumer loan business need immediate help with?

  • Profitability?
  • Collections?
  • New Loan Originations?
  • CAC [Customer Acquisition Costs]?
  • FTPD [First Time Payment Defaults]?
  • REACTS?
  • Employee training?
  • Audits?
  • Compliance?
  • Marketing Spend?
  • Charge-offs?
  • Identifying Key Metrics to Analyze, Utilize & Inform Decision Making?
  • Operating Expense Reduction?
  • Increase Top Line Revenue?
  • Preparation of your Business to be Sold?
  • Identifying acquisitions?
  • Recruit, coach & develop team members; align your “owner” incentives with employee “interests” to achieve an extraordinary ROI?

Fact: Not many “true” operations exec’s are available in today’s environment who can deliver a 10X to your ROI! Most are full of B.S!

Want to explore! Dean@PaydayLoanIndustryBlog.com

Meanwhile, go make some Serious Money!

Jer – Trihouse

 

 

10
Apr

Payday Loan Franchise? Buy & Build? Internet or Store? Answers!

My pic HIGHLY Photoshopped!

By: Jer Trihouse. I received a call this morning from John. John wants to start a payday loan business. More specifically he wants to open a consumer loan business. He’s been researching the payday loan industry for 6 months. John’s question, “Should I buy a franchise? Or, should I start an online payday loan business? Do I really have to stick it to folks; charge the hell out of them in fees? Am I too late? What about a car title loan business? I have a $100,000 CD in my bank making no money! Can I put my money to work with an operator? How much can I get if I do? Do I need a license? Are these things REALLY profitable? I see them everywhere!”

NOTE: In my discussion below, payday loan businesses include all business to consumer – B2C – loan products. This means brick and mortar, internet and smartphone originated, short term [typically 14 days to 18 months] extremely expensive [100% APR’s at a MINIMUM ranging from $10 per $100 loaned to $35+ per $100 loaned for 14 days] small dollar [generally $100 to $1000] non-collateralized loans made to the approximate 50% of the USA demographic unable to get their hands on $400 CASH in an emergency.

If you are new to “the business of lending money to the masses profitably,” it’s likely you don’t know what a pathetic situation the typical household is in:

  • 42% of consumers say they do not have enough savings to cover at least three months of living expenses.
  • 47% of consumers say their spending equals or exceeds their income
  • 55% – more than half of consumers (138 million people) – are just “financially coping.”  These individuals are struggling with some aspects of their financial lives.
  • Half of all consumers cannot get their hands on $400 cash when the car suddenly breaks down, the utility bill is due, a prescription needs filling…
  • This sucks! Life in the USA should not be like this!! This situation needs fixing!!! I can’t fix it. You can’t fix it. WE CAN FIX IT!!! But that’s another Post!!!!
  • Hard to grasp, right? Here’s a link to just one of the hundreds of studies: Center for Financial Innovation

Here’s a link to a real consumer’s story and how she got $300 deposited on her Wells Fargo debit card using her phone on a Sunday within 120 seconds! Tiffany’s Story

So, here’s a list of the financial products that appeal to average folks who need cash immediately:

  • Payday loans [single-payment, principal and fees due on consumer’s next payday]
  • Car title loans [These loans are collateralized by the title to the car, truck, RV…]
  • Installment loans
  • Line-of-credit loans
  • I’m not referring to business to business loans, merchant cash advances, factoring, etc.
  • Additionally, I’m not covering check cashing stores. Check cashing is an extremely low margin business with a LOT of headaches. [Cash on the premises, face-to-face transactions, employee theft, owners must secure an MSB [Money Service Business] license from the FED’s…

Payday Loan Franchises, Stores, Internet…? Buy Cheap & Build?

This particular payday loan franchise company requires John to have about $215,000 to open. This consists of a $35,000 one-time franchise fee, $65,000 for build-out,  $15,000 for software, signage and miscellaneous marketing materials. This leaves roughly $100,000  “for the street.”

Finally, a 6% monthly commission must be paid to the Franchisor on the gross revenue of the business. That’s 6% on the gross revenue! As John explained this to me, the Franchisor has a system for payday loans – nothing else. That means,  if John develops a scrap gold buying business or if John adds car title loans or anything else for that matter, he must pay 6% on his total gross revenue; this despite the fact that the Franchisor offers zero support and expertise for these additional services.

This Franchisor cannot guarantee a specific return, but they imply John will earn 18%/month EBITDA. (This using a licensing model allowing 15% of the face amount of the loan to the consumer.) Of course, as in life, this potential return depends on a lot of factors. There are no guarantees.

So… should John purchase a franchise? With zero hesitation, I responded to John with an emphatic, “NO.”

BUT, I began to listen to the path John was on. I sensed the frustration John was experiencing. AND I sensed the answer to his initial question requires a macro perspective rather than a simple yes or no to, “Should I buy a payday loan franchise?”

For the past 6 months, John has used Google.com for keyword searches like, “how to start a payday loan business, payday loan software, payday loan industry, payday loan customer demographics, payday loan lawyer” and on and on…

He’s called and participated in demos of various payday loan software vendors such as SparkLMS, eChecktrack, Answers, Epic, Azo Blue, Infinity, Alpha Omega, IntroXL, TranDot, eCash, EData and more.

Additionally, John has reached out to legal counsel including Paul Soter, Claudia Calaway, Hillary Miller… to discuss compliance,  consumer contracts, arbitration agreements, licensing models (choice-of-law, state-by-state, offshore)… This led John to Allen Parker and the tribe model (a sovereign nation) and the Texas CAB/CSO licensing model.

John talked with the consumer data scrubbers; Clarity, DataX, CoreLogic-Teletrack, Idology, Microbilt, Factor Trust,  and more.

And of course, John contacted a few ACH providers like Advantage, LST, ACH Works… and the new payday loan”wire transfer” provider introduced at OLA. ($3.00 wire transfers using the EFT Network rather than the ACH system. Instant, same day funding! 24/7/365. Push your loan principal immediately to consumer debit and prepaid cards!!)

Then there are the web site builders like Frank Masotti, the lead generators, the SEO and SEM companies, outsourcing of call centers vs in-house, analytics experts, collection companies, reputation management companies…

After doing all this research and reading some of our training and start-up materials, John still didn’t have clear answers to questions such as:

Is the PDL industry saturated? Is there room for another payday loan lender? Maybe I should lend capital to an existing operator? (For example, there’s a team with 50 brick-n-mortars in 3 states offering 10% returns with personal guarantees. Or, an operator in Las Vegas with 3 locations is offering 3% per month with car titles as collateral.) Or, John wonders if he should act as a 3rd party Texas Lender by making capital available backed by a CD and an Irrevocable Letter of Credit? He’s been told he can earn 15% – 24% annually on his capital with very little risk.

Should John buy an existing consumer loan business from a motivated seller and then build it with renewed enthusiasm and energy? [Read my “Buy Then Build” Post.

John has correctly determined that there is a TON of opportunity in the payday loan – micro-lending space! The puzzle for John is to figure out HOW he wants to play it based on his goals, his family situation, his existing skill set, and his appetite for risk.

So… John asks himself the following:

Internet or store or both?

Should I Launch a new consumer loan business or should I buy or build?

How do I market? Online and off-line?

How do I deal with the evolution of borrowers using their smartphone to find my consumer loan operation? Millennials are coming…

Do I focus solely on payday lending, installment loans, car title loans, cash advances…?

What other products and services make sense to add to my consumer loan business?

Do I really need to invest in a franchise system or can I do this on my own?

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!

“I’m concerned about my family (John’s health is questionable and he has a wife and 1 child) and their ability to carry on the business should something happen to me. Would my being part of a franchise system reduce this risk and add value to my new enterprise?”

“Do I need legal counsel on retainer or can I rely on the Franchisor to keep me compliant?”

“As a Franchisee, I’ll be part of a system, a group of peers in the same industry. How valuable is this? Or, do I go on my own and rely on my state organization, FISCA, CFSA and/or OLA to educate me and help me build my business? Will I have the time and money to be part of these trade organizations?”

What do you think? What would you do? For that matter, maybe you already made the decision! What are your thoughts? What would you advise John to do? Put on your consultant hat! It’s time to give back… LEAVE A COMMENT!

Jer@PaydayLoanIndustryBlog.com

Are you ready to dig in? You think you can handle the business of lending money to the masses? Face-to-face? Or, you prefer to run an internet operation? Maybe open a tiny, limited office to get your state license and scale it via the Internet?

My Team and I have done it all! Started in 1998 with a single location in Garden Grove, Calif.

We are operators. We are teachers. We are consultants. We run Boot Camps in a “live” store. Consumer loans via the Internet? We do it. Loans via smartphones? Let us show you the way. Your journey starts here: Click Here to Get our Course. Read it. Study it. Keep it near you. It’s your “Reference Guide.” Then, call me. Here’s my direct number: 702-208-6736. It’s my cell! Crazy huh? Nope. There is a method to my madness! Every day, I get to talk to operators, entrepreneurs, folks with capital they want to put to work in consumer lending without having to run the day to day operations,  consumers/borrowers, vendors & platform providers offering new state of the art money transfer, loan software, analytics solutions, VC’s, Family Offices, tribe servicers, lenders with stores to sell, buyers,  website builders, smartphone application loan providers… and on and on and on! I LOVE IT! I LEARN EVERY DAY.

The business of lending money to the masses will never go away. [Doubt me? Read “Debt: The First 5000 Years.”]


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