Tag: payday loans

25
May

42,000,000 Adults Over 50 In Deep Financial Trouble in Need of Creative Loan Products

A quick scan of the media headlines leads the average reader to conclude all is well in the U.S. economy.

42,000,000 U.S adults 50+ years old are BROKE! Did they count the homeless?

Hell, if you’re in the business of lending money to the masses, you might conclude that you should shut the doors, layoff all your employees, and open a yogurt shop.

Then, there’s this: The Center for Financial Services Innovation (CFSI), the “nation’s authority on consumer financial health,” together with AARP Foundation, a “national leader in the fight to end senior poverty,” announced the release of a new report based on the U.S. Financial Health Pulse report data that shows 83 percent (42 million) of the estimated 50 million low- to moderate-income people over the age of 50 (LMI 50+) living in America are struggling with some or all of the components of their financial lives.”

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How to Start a Loan Biz

According to the press release, this report, “Redesigning the Financial Roadmap for LMI 50+ Segment: New Challenges and Opportunities,” offers an in-depth look at the increasing financial insecurity of LMI 50+ and the major factors contributing to a more complex financial reality for them than for past generations.

This study revealed that the 50+-year-old demographic want to retire but can’t; they’re broke!

The bottom line according to this Report? It’s a B&*(((tch when you hit 50! No savings. Loss of home in 2008 – renting now, living with kids and grand-kids, medical issues [obesity]…

There was even an expose in I believe the NYT that revealed seniors are “on the hook” for their children’s student debt because Grandma co-signed. [Are you aware student debt cannot be discharged in a bankruptcy?]

The report identified specific financial challenges facing the LMI 50+:

The Report summed up:

  • More than half (51%) have liquid savings of less than three months of expenses, and only a quarter (26%) have an emergency savings account.
  • More than 6 in 10 (61%) indicate they don’t have savings in an employer-provided or individual retirement account. For those with savings in either account, the median amount is $20,000, far less than recommended for a comfortable retirement.
  • The vast majority (81%) have some amount of debt, with half (48%) reporting their debt isn’t manageable.
  • More than a third (36%) with debt report that their debt has delayed or prevented them from saving for retirement.

LMI 50+ Medical Shocks & Multi-generational Living

  • Overall, 38% had to forgo health care or medication in the past year because they couldn’t afford it.
  • Nearly a third (31%) indicate they’re supporting someone financially who lives outside of their household.
  • Households of three or more people report having higher financial stress (87%) than households with one or two individuals (82%). Of households with three or more people, 83% report that their financial stress leads to negative impacts on their family life.

Why is this important to you?

OPPORTUNITY! These folks need a multitude of loan products that work for them. The LMI 50+ demographic is invisible to the majority of lenders in the marketplace today

The Report goes on to state, this LMI 50+ Demographic:

  • Are open to using digital technology to manage aspects of their financial lives.
  • Appreciate being able to monitor transactions and pay bills online.
  • Care about security, but not in a way that limits the use of technology.
  • Desire relevant, actionable financial education and coaching for everyday financial management.
  • Use technology-centric innovations, but have different levels of comfort with high-tech vs. high-touch engagement.

FINALLY, for all my PC [that’s politically correct] readers, rather than attack check cashers, pawn shops, small-dollar lenders… while locking your gate-guarded community entrance tight, [Don’t look at me! We have a bridge, not a gate.] build a team, create a loan product that you define as fair, make some $$, give back to your community and help a little! PS: Don’t leave banks and credit unions out of your attacks! They are not the answer! And then, there are the money transfer businesses working with these banks who charge as much as $25 in fees to transfer $100 to El Salvador, the Philippines… Go Ripple, Bitcoin, Stellar, EOS… Crypto.

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22
Sep

U.S. Bank Simple Loan vs Payday Loan

The CFPB has compared bank & credit union overdraft [NSF] fees to a short-term styled payday loan products with a 17,000% APR!”

According to Pew a bipartisan – in our opinion – “research association” –  12 million people a year take payday loans. If borrowers can’t make the payment, they often pay more fees to renew the loan. Payday borrowers, Pew found, spend an average of $520 in fees to repeatedly borrow $375.”

Yes, and a taxi costs $4800 from New York City to Los Angeles. BUT WHO WOULD DO THAT?Continue Reading..

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15
Apr

PAYDAY LOANS-OBAMA FIGHTS BACK ON CUTTING CFPB FUNDING

The payday loan-small dollar credit industry continues to fight the good fight. However, an administration source was quoted as saying: “On Wednesday, House Republicans are looking to sneak an amendment into HR 1195 that would cut CFPB funding. To be clear, any attempt to limit funding at the CFPB is an obvious effort to weaken the important consumer protections put in place following the financial crisis.”

“In the Dodd-Frank Act, Congress took important steps to promote accountability by the CFPB, such as by constraining its funding more than for any other bank supervisor. The CFPB is the first dedicated financial regulator looking out for consumers and protecting them from deceptive and unfair practices. We cannot allow this dedicated watchdog to have its resources limited in this way.”

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11
Mar

Texas: Guns, Payday Loans, CABS-CSO’s, 3rd Party Lenders and Car Title Lending in Texas

Jer Trihouse Payday Loan ConsultingThe state of Texas has long held a reputation for personal freedom, low taxes, and minding one’s own business. Texas attorney Greg Abbot recently ran this ad in The New York Times, “Wanted: Law abiding New York gun owners looking for lower taxes and greater opportunity.”

The Facebook landing page reads, “We have right to work laws and a reasonable regulatory environment. Texas has created more than 275,000 jobs in the last year alone! And we’ll fight like hell to protect your rights. You’ll also get to keep more of what you earn and use some of that extra money to buy more ammo.”

So, all appears well in Texas. Except Atty General Abbot has not managed to enlighten Texas Senator John Carona regarding the “reasonable regulatory environment” nor the “jobs” theme!

SB 1247, introduced by Senator Carona is perhaps the most draconian, job killing, consumer coddling, Texas legislation in a long, long time.

(As you read this, remember that the state of Texas already has strong small dollar loan consumer protection legislation in place!)

In a nutshell, here is SB 1247:

*18 pages of gobbly-gook. No consumer, business operator, regulator or court will have a clue as to how 80% of this bill is, or will be be, interpreted and enforced. No small business person in their right mind will risk the fines and compliance burden SB 1247 would implement. That being said, uncertainty will drive Texas entrepreneurs and consumer small dollar loan choices underground or out of existence.

*A consumer may only have 1 loan out with a CAB. What the…! How does this work? Does the Senator plan to block all access to the Internet? China, North Korea and Iran cannot even achieve this. Internet lending transaction volume is growing 30% per year. Why so slow :o) Because in 30+ states, borrowers can still get a loan from their local business man. You know, that business woman who leases office space, employs Texans; Texans who pay taxes, buy McDonald’s burgers, purchase homes and rent apartments.

Will the Senator setup road blocks at all the Texas state-lines and search all vehicles for payday and car title loan contracts?

We all know the Senator’s ultimate, longer-term strategy is to employ a state data base as implemented in Florida, Oklahoma, etc. Based on real world evidence, state data bases are not the panacea they were once thought to be. You want a $500 loan? Grab your phone, enter “Austin payday loan,” click the link, fill out the application and the $500 will be in your account in the morning. (Hell, with today’s technology, a borrower can pull this off on a Sunday and spend the $$ Sunday afternoon!)

Alternative finance services (AFS) products including installment loans, line-of-credit loans, payday loans, car title loans, a loan on your Rolex… are all accessable from a Lender in another state, another country, an indian tribe in the U.S./Canada, or a store you can walk into.

I could go on but read the bill for yourself over at CreditAccessBusiness.com ! (A great Texas resource I might add :o)

Simply said, draconian legislation is not the answer to solving the financial challenges 20 million consumers faced last year when they chose – “voted” – for access to payday loan styled products. AFS Lenders WANT THEIR MONEY BACK. They will not loan their hard-earned capital to borrowers unable or unwilling to pay it back or in states that make it too tough to collect their money. (Funny thing: One experiment “suggested payday loan borrowers who received an interest-free loan were as likely to take out successive loans as those who paid the normal interest and fees.” –Fusaro and Cirill 2011)

Witness the recent introduction of safe-harbor payday loan legislation in North Carolina, PA… Why? Because the legislators of these states, and others, recognize their constituents insist on using AFS products to solve their financial challenges. Consumers need AFS products and demand access to them. A Bertrand and Morse Study (2011)  conceded that “loans maybe fairly priced and that many borrowers are fully informed, capable and simply face a pressing need for cash at a moment when they lack other, cheaper forms of financial aid.”

You want AFS fees paid by consumers to decrease? Make legislative compliance easier to comprehend and allow competition in the marketplace. (I’ve got a New York Federal Reserve paper to prove this theory as well – Donald Morgan: Defining & Detecting Predatory Lending)

ENOUGH for now :o) Jer Trihouse Consulting  702-208-6736

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17
Jan

Payday Loan and Car Title Pledge Loans: Unintended Consequences of Access to Credit

There is a strong argument for advising regulators to avoid restricting consumer access to credit alternatives. A piece written by Todd Zywicki and Robert Sarvis  at Mercatus.org does a good job of championing a multitude of financial products including car title “pledge” loans and payday loans. Here’s a portion:

“Well-intentioned legislators and regulators assume that restricting particular forms of credit will lead to fewer bad financial outcomes. But this is misguided and can lead to worse, not better, outcomes. Restrictions on particular types of consumer credit don’t necessarily induce consumers to refrain from unnecessary purchases or to avoid bad out- comes. Consumers resort to these financing options because they have pressing needs. So repressing one form of consumer credit will often only lead to a shift to other new or existing forms of consumer credit offered on less favorable terms for consumers. Restrictions on payday lenders might simply turn them into title lenders, as they seek to make up for caps on fees and interest rates by demanding collateral to reduce losses in the event of default, or push consumers to online payday lenders, which often charge higher rates than brick-and-mortar payday lenders. The ad hoc regulatory program of restricting disapproved forms of consumer credit thus has a whack-a- mole nature to it; limiting one form simply spawns a new one that avoids existing regulations.”

Read the entire article here: http://mercatus.org/publication/pitfalls-regulating-consumer-credit

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