Tag: Texas Credit Services Organization


Payday Loans and the Hypocrisy of Their Competitors

Texas Credit Union League Headline:

“Texas Regulator Bid To Cap Payday Loan Fees Comes At Bad Time.”

I attended my first national payday loan convention in 1997. As long as I can remember, the payday loan product has been attacked by banks and credit unions. After all, they want our customers! In the past they’ve simply failed to figure out how to properly serve our customer with the right products and still make money.

In Texas, as in many locales, credit unions are aggressively developing products to compete with payday loans; the majority of which are offered under the CSO Model ( Credit Services Organization ). In a nutshell, under the CSO Model, a payday loan company simply fills out a one page form required to register as a CSO along with a bond and they’re in business. (There are a few other details…like forming two entities “at an arms-length-relationship” to (1)act as a “CSO and (2) a “Lender.”)

Anyway… a few Texas Credit Unions have launched a new payday loan product just as the Texas State Credit Union Department has proposed new limits on fees for payday loans.The Texas State Credit Union proposal would limit fees at $20 for unsecured loans less than $1000 for a maximum of 6 months. Additionally the new credit union proposal would limit CU’s to a maximum of 20% of their portfolio.

Now, you readers in Texas don’t need to freak-out! This proposal only relates to Texas credit Unions, not the CSO Model. It’s still an interesting read if I do say so myself!

So… I was incredulous when I read this statement by Jeff Huffman, chief lobbyist for the Texas CU League, “We think that credit unions’ boards and management are really in the best position to determine the fees based on their individual situations.” He continued by saying, “Market conditions vary across the state. We don’t think the regulator should get involved [in setting the fees].”

“They ought to get off the backs of credit unions,” he said. “It’s just a rule that’s unnecessary.”


Whoa! Credit unions and banks spend tons of cash lobbying against payday loan companies while extolling the virtues of protecting our customer from “a cycle of debt” and “poor disclosure.” They would like nothing better than to eliminate payday loan companies. They do their best to regulate us out of business by lobbying for legislation on both a state and federal level.

Those of us in the payday loan industry respond by simply pointing out that our product is in huge demand. Our customers continue to support us by choosing our payday loan products. They choose us because we fully disclose exactly what our product will cost them and when our product is appropriate. If you, the reader doubt this, go into a typical payday loan store and look! In spite of what the media reports, we do fully disclose EVERYTHING; unlike bank, credit union and credit card NSF fees, overdraft fees, late fees… Who can understand all their fees?

Sorry about the rant… I go crazy when our competitors attempt to portray us as loan sharks and themselves as protectors of the people! As they say, “Follow the money.”

So… “Texas Regulator Bid To Cap Payday Loan Fees Comes At Bad Time”? All I can say is, “Poor babies!”

Check back with PaydayLoanIndustryBlog.com for updates on this proposal. Page 14.


CSO-Credit Services Organization for Payday Loans & Car Title Loans

The Credit Services Organization, often referred to as a CSO, is becoming popular in states like Texas for offering payday loans and car title loans. The reason? The state of Texas simply requires a “registration” of a business as a CSO rather than applying for a payday loan or car title loan license.

Additionally, the rates one can charge are not prescribed by Texas statute, unlike a payday loan or car title loan. CSO’s are not subject to the state’s small loan laws or regulation by the Office of Consumer Credit Commissioner! Typical rates for these “loans” are currently in the $20 to $30 per $100 loaned.

What is a CSO or Credit Services Organization? It’s simply a broker that, after reviewing a consumer’s ability to pay, issues a letter of credit on behalf of the consumer to a third party “lender.” The CSO or Credit Services Organization services the “loan”, markets the “loan”, and helps the consumer improve their credit by reporting their payment history to a sub-prime credit reporting agency.

For a thorough description of the step-by-step procedures for setting up a Credit Services Organization – CSO Model including sample contracts, click here to review our 50 page CSO Report.