Tag: payday loan


Payday Loan, Installment Lending & Direct to Merchant Disruption

Jer Trihouse

Jer Trihouse

By Jer Trihouse. The small dollar loan space is undergoing monumental change. It’s time we step back and remember what our borrower’s goals are. They want money, right! But what’s their next move? To pay a merchant for a service or a product? Maybe pay a bill?

In case you missed this, Max Levchin has entered the lending space. A co-founder at Paypal, Max launched Affirm.com last year. In effect, Affirm provides consumers with 30 day loans to enable them to purchase goods and services from merchants. Affirm offers payment solutions for a wide range of online storefronts across the U.S. Affirm employs Facebook for authentication of borrowers, and uses  other social and data signals to assess risk. Other data Affirm will be using range from incomes per zip code and a user’s mobile device ID. Affirm then guarantees payment to merchants — who pay Affirm a fee — after this underwriting process.

“We are trying to get as close as possible to one-click, which has always been the case on the desktop,” said Levchin. “In mobile, it has become an imperative to be able to buy it now or you lose a customer quickly.”

“You will essentially be putting a purchase on a digital tab, and we’re going to make it work for us by looking at all available data to determine if you are someone who will pay it back,” said Levchin.

Like any credit card, consumers will have 30 days to pay their bills. Affirm will not charge consumers for the service. In addition, he added, the “overwhelming transformation of everything toward mobile shopping changes all the fundamentals.”

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Payday Loans – Consumer Federation of America Wake-Up!

The CFA, Consumer Federation of America, continues to misstate facts surrounding the payday loan industry. It’s intentional and unfair. They are a “non-profit” organization whose sole purpose is to place limits on Americans and reduce their financial choices.

The Consumer Federation of America CFA thinks they know what’s best for the rest of us and is composed of a well-funded group of elitists.

A great example of this occurred when Rep. Luis Gutierrez, speaking to CFA President Jean Fox at a House Financial Services Subcommittee on Financial Institutions and Consumer Credit said, “If you wish to be against the bill because you wish us to do nothing other than eliminate payday lending, which anyone reading your statement can extrapolate…that’s not possible.”

CFA President Jean Fox was asked several times by both Democrats and Republicans to offer an alternative to short term, non-collateralized lending. She had nothing to offer. The Consumer Federation of America is simply AGAINST!

Too bad the Consumer Federation of America doesn’t make an effort to understand why consumers by the millions use payday loans and what criteria payday loan businesses implement to determine if a consumer qualifies for a payday loan.

A recent “Position Paper” offered by CFA erroneously makes the point of stating that, “Given the lower bank account penetration rate for minority consumers,  this payday loan product undermines progress being made to unbanked consumers into mainstream financial services.”

Consumer Federation of America WAKE-UP! Educate yourselves first!! Payday loan consumers MUST HAVE BANK ACCOUNTS TO QUALIFY FOR A PAYDAY LOAN! Of course they must have a job also in order to pay us back.


Payday Loan Business: A Magical Method to Increase Profits

Face it! Paying your payday loan employees $8.00 to $12.00 per hour just won’t get the job done. You have to incentivize your people to achieve your goals.

Doesn’t seem fair does it? You’d think a decent hourly wage with a couple of breaks and lunch thrown in would do it. But it doesn’t.

You want a tip? Figure out what you’re trying to achieve and pay your people a bonus to get it done.

You want examples? Here’s what works for us.

When we open a new payday loan or scrap gold location WE WANT TRANSACTIONS! We want to fund loans; as many as we possibly can. So… after checking our competition, studying the demographics in our area, formulating our advertising spend and determining how much money we have available “for the street”, we give our payday loan and car title loan store reps a minimum target and pay a bonus for every transaction exceeding this target. WE PAY THIS BONUS DAILY!

Now, the exact numbers will vary depending on the size of the market we’re in. But our employee bonus system looks something like this.

Our goal week 1 in a new market might be to fund 3 loans per day per employee. (In small markets with plenty of competition we might only have one employee working 10 hours/day.) Our bonus system might pay $5 per funded payday loan beginning with #4 for the day. So should our employee get 6 payday loans funded that day, they earn their hourly wage plus a bonus of $15 PAID AT THE END OF THEIR SHIFT.

(REMEMBER! That new payday loan customer could easily be worth $5000 or more in fees over their lifetime.)

We might implement this bonus system weeks 1 through 4 and then adjust it to a minimum of 6 per day week 5.

Don’t forget to adjust! Perhaps by week 30 you’re more concerned about collections than you are about transaction volume. As discussed in our Payday Loan Collections Manual, place your overdue receivables in buckets; 0 – 30 days, 31 – 60 days, 61 – 90 days, 91-120 days, and 121 days+.  You might pay your employees a percentage of dollars collected; a little more for each bucket. Or a flat fee per contract paid on.

Now, I’m not going to discuss the justifications for paying IMMEDIATE bonuses to an employee for simply doing their job. And we don’t need to quibble about the actual numbers/goals other than to say you must make the target a challenge, communicate it to your employee, MAKE IT SIMPLE and yet be achievable.


Get creative.

This system works for both our stores and our Internet business and for a multitude of products we offer.

Good software makes this bonus system MUCH EASIER TO IMPLEMENT. See the software chapters in our Payday Loan Manual and our Payday Loan Internet Report.

Empower your people. Set them free. Trust them. The amount of trust that Google puts in its employees and how amazingly those employees deliver results is impressive. This works for our industry as well.

Organize and simplify. (You really should read, “The E-Myth Revisited“)

Finally, as a business owner, the need to implement a bonus system to motivate your employees to perform their job may seem REALLY UNFAIR. GET OVER IT! JUST DO IT!!


What do you think? Jer@PaydayLoanIndustry.com

What’s your biggest problem? Jer@PaydayLoanIndustry.com

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UK Door Stop Lenders Blamed for Poor!

A study by the UK Public Policy Research Institute, which followed the economic fortunes of 58 low-income families, came to the conclusion that making easy credit available to the poor actually harms them.

I suppose the rational is that by not acting as a lender of last resort, the families having exhausted all other means of obtaining cash to pay their rent, buy food and keep the lights burning, these families would have accessed the public dole much sooner.

But wait! The study goes on to describe how the U.K. government is stretched beyond capacity to contend with the growing numbers of families having no where to turn for emergency financial help. Another recent report revealed the government of the U.K experienced a 28% increase in demand by the financially challenged for “crisis loans.”

These people are nuts! Their report actually states, “Cheap credit has pulled the UK’s poorest families into a spiral of debt.” What are they thinking? Would not these families have run out of options even sooner had the “door stop lenders”, payday loan operators, car title and other “no credit checks and no questions asked” lenders failed to provide emergency cash?

Because we make money available to families who have no where else to go WE ARE TO BLAME for their misfortune! Man, I don’t get it.


Magic Numbers Don’t be misled by payday loan statistics.

Magic NumbersDon’t be misled by payday-loan statistics.

This is an interesting article by Thomas Sowell at the National Review.

It’s a good read! Mr. Sowell begins … “Words are not the only things that enable political rhetoric to magically transform reality. Numbers can be used just as creatively — and many voters are even more gullible about statistics than they are about words, apparently because statistics seem more objective.

The latest congressional crusade is to clamp down on small finance companies that provide “payday loans” and check-cashing services in many low-income neighborhoods, where there are few banks.”

He goes on… “A common practice in making small loans of a few hundred dollars for a few weeks is to charge about $15 per hundred dollars lent. Politicians, the media, community activists, and miscellaneous other busybodies are able to transform these numbers into annual percentage charges of several hundred percent, thereby creating moral melodramas and demands that the government “do something” about such “abuses.”

Read the article in its entirety here: National REview.com