The past 5 months I’ve been in payday loan workshops and conferences in 3 countries and 5 states. I’ve been lucky enough to attend meetings with operators, hedge funds, software providers, sub-prime consumer data reporters, 300+ seat call center operators, ACH providers and investors representing the full spectrum of major Internet and “bricks-n-sticks” lenders funding 1000’s of loans each week to small mom-and-pops funding less than 100 loans each month.
I’ve had personal conversations with industry leaders at FISCA, OLA, CFSA. And, thanks to The California Financial Service Providers, I’ve had the good fortune to put direct questions to regulators such as Edwin Chow, West Regional Director at The CFPB, regarding his outlook for tribe and offshore lenders.
My visceral reaction after digesting all this input?
More than a few of us “old timers” are just plain tired. Tired of the constant attacks by the media and the so-called consumer protectionists. Tired of the prospect of navigating through all the State and Federal regulatory hoops. Tired of our legal counsel bringing the newest threat to our attention. And tired of trying to figure out a strategy for the Internet, what role the smart phone apps will play in our future, is the death of the “brick-n-mortar” a certainty. And on and on…
I can’t tell you how many times this year I’ve listened to an experienced lender in our industry lament about “the good old times.”
Well, B.S! I’ve been a lender since 1997. I began consulting in 2003. The payday loan space has ALWAYS been a regulatory roller coaster. We’ve been called loan sharks (hell, I use this term myself), scum bags, predators and much, much worse.
And yet, HERE WE ARE :o) Making money and serving our customers by the millions all over the world!
So… what do I think? This business of loaning small sums of $$ to the middle-class has gotten a bit more complicated. But bottom-line, consumers all over the world cannot wean themselves off small-dollar cash advances. Eventually, they run out of friends and family to help them fix the car, keep on the lights, pay for their prescription, or buy that iPhone before their next payday. And I haven’t met a “consumer protectionist” yet willing to reach into their own pocket and build a money lending business that can survive charging 36% APR’s. Sure, they’re happy to reach into the taxpayer’s pocket to “lend a helping hand.”
The reality is that payday loan products, and this includes line-of-credit, installment loans, car title loans; literally micro-loans, will not subside!
What to do? I don’t have to be particularly smart to comprehend what’s happening in our space. And, although I was educated in California, I can read. (Of course, my punctuation is a little edgy :o)
When Mexican billionaire Ricardo Salinas, the fourth richest man in the world, bought payday lender Advance America Cash Advance Centers Inc. for $655 million – a man with serious lending experience in South America – who reached out of nowhere and grabbed Advance America by the throat, we have to step back from the edge of this perceived abyss and examine this event from a macro-viewpoint.
In spite of all the PR and bluster from The CFPB, the State AG’s and their politicos, the competition from bank and credit union payday loan styled products, the perceived impact on store-fronts by the Internet… how can we fail to conclude that WE OFFER A PRODUCT CONSUMERS DEMAND ACCESS TO!
If you’ve hung in this long, READ THIS! These are REAL STORIES!
Dan XXX opened a single store in a second floor location, lacking visibility and surrounded by competitors in a highly regulated state. After 6 months, he’s funding just shy of 150 payday loans per month at $17.56/$100. Defaults are <2%. The average loan is $300. Last month he began offering car title loans as well. He completed 5 in total. One of which was a $3000 loan on a 2011 Toyota truck at 8%/month. In plain English, he became the official lien holder on a $22K truck for $3K; not much risk I’d say! He’ll receive $240/month until the truck owner pays Dan back the $3K. Be aware, he’s in the early stages of developing his “secret sauce” and he is NOT aggressively marketing his services YET!
Hedge Fund XXX approached me several months ago. Their plan was to build a payday loan Internet enterprise, put $1M – $2M “on the street” over the next 12 – 18 months, learn the ropes, and eventually add additional capital by allowing their investors to participate in their new business. To make a long story short, this hedge fund “did the work,” built a Team, partnered with the vendors and suppliers who they thought offered the best solutions and pulled the trigger. A few weeks ago, they reported to me they had everything in place. That day they bought 40 leads and funded 8. They were jazzed! You would think they had just made $10M on Facebook. These are sophisticated guys with a huge appetite for risk and EXCITED to have entered the payday loan space in what us “old timers” perceive to be troubled times!
So… what do I say? Demand for our products is undeniable and will not cease! But, we must evolve, be flexible, refuse to lose our optimism, build Teams and enter the fray. Or, you can just keep on “kicking the tires” and watch the rest us us! WE aren’t going away!
Jer – Trihouse
Your thoughts? Jer@TrihouseConsulting.com