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The Fed says nearly 4 in 10 Americans lack enough money to cover a $400 emergency expense

A fellow Texas CAB and TOFSC Member shared this article with me today that was featured on Fortune.com.  For those of us operating in the short term small dollar loan industry offering payday loans or auto title loans we know that having as much as $400 set aside for emergencies is damn good compared to the 18% of folks that don’t have $100.  Based on the stats quoted in the article if 37% of Americans don’t have $400+ cash reserve that comes to 123 million people, the 18% with less than $100 comes to 60 million people.  Those numbers are sobering.  With savings continuing to drop, some might say it is common sense to make sure there is growing access to credit for US consumers.  The more access to credit the better – let a wide-open market compete and let the consumers choose what works best for them in that moment.

Here’s the link to the article:

Nearly 4 in 10 Americans can’t cover a $400 expense, Fed data shows | Fortune

CFPB’s 16th Monthly Complaint Report released on October 25, 2016.

CFPB’s 16th Monthly Complaint Report released on October 25, 2016.

by The CAB Man Texas on November 1, 2016

I always look forward to the new CFPB complaint reports that come out each month around the 25th.  Why?  Well as you will see if you follow them as well, the “Payday Loan” industry (this is the umbrella term used in these reports to refer to companies who offer payday loans, installment loans, title loans, cash advances, etc) has yet another double digit decrease in complaint volume versus the same 3-month period (July-August-September) last year.  This month showed a 21% decrease.

It is unfortunate that there were complaints, and I can tell you that our clients would be extremely concerned in the event any complaint was filed by their customer.  They would respond promptly and work to communicate with the customer to clarify any misunderstandings and work out a resolution.  Zero complaints – that is the goal.

As is the case with the other monthly reports – we are always the industry with the largest decrease.  There are 10 other industry categories and we are the only one with these giant drops in customer complaints, consistently.  Student loans are #1 and our bank friends are at #2 with a 37% increase.

I am aware that consumer advocates and others who are not so friendly to the industry visit this website.  I am wondering if they also view the CFPB complaints each month.  The story being told here is that consumers complain less about our services than any CFPB category.  I would recommend you shift your focus to the biggest offenders if you are currently hyper-focused on shutting down the “payday loan” industry.

After all the work you have done to work up complaints you have only mustered a double digit decrease in complaint volume, you may be able to do better somewhere else.  I think the banks are where you should go – they target our customers with abusive overdraft charges and NSF fees with astronomical effective APR’s (think 1,600.00%), and bring in about 4 times the amount of annual revenue that our industry does.

Here is the link to this month’s report (see page 4):

CFPB October 2016 Monthly Complaint Report

This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers.  He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.

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Fun with the filing of liens on Motor Vehicles in Texas.

Fun with the filing of liens on Motor Vehicles in Texas.

by The CAB Man Texas on November 17, 2016

Dealing with Texas DMV office who refuse to allow Credit Access Businesses to add a lien to a vehicle (for a Title Loan)  when the registered owner of the vehicle has outstanding warrants, tickets, toll fees and or recent child support payments on file as delinquent can be a problem.  We have seen this in a few counties recently – it appears to be referred to as a “Scoff Law”.

The only fix we have seen that works is to simply process the lien in a different county. There are 254 counties in Texas, and each tend to do their own thing!

Another instance that has come up with some title loan borrowers is when one consumer who has a title loan with a CAB sells their motor vehicle to another consumer without the buyer getting the title.  The buyer in these cases can either be tricked into doing this or may just be careless / unaware.

For the CAB in this case, because they actually have the title and the lien, they “own” the vehicle and would be forced to repossess if the seller stops paying on the loan (this would be what triggers awareness of any issue other than if the buyer comes back later and asks for the title).

If you find yourself in this predicament as a buyer or a CAB, follow the law and rely on other professionals to consult you on the best course of action.  For CABs (as always) follow the proper disposition methods in compliance with Texas Business and Commerce Code Chapter 9.

This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers.  He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.

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Military Lending Act Questions

Military Lending Act Questions

by The CAB Man Texas on November 21, 2016

As many of you may know, in October 2016 we all began operating by new rules in regards to how we must treat “Military” applicants and their dependents.  We now need to verify what has been told to us by the applicant regarding their status on this topic.  The burden is on us as operators to confirm the status versus the past where the applicant simply checked the “yes” or “no” boxes on the application form or on the consumer loan documents.

You can go directly to the Department of Defense’s MLA website to perform the checks or if you employ Credit Reporting Agencies like Factor Trust or Microbilt they have the checks integrated.  Here’s a link to the MLA website: https://mla.dmdc.osd.mil/single_record.xhtml

My very close personal friend and true Southern Gentleman Max Wood at Borrow Smart Alabama put out the following thought provoking questions on this Military Lending Act topic and I wanted to pass those along to our site visitors.  Please review and due your part to make sure your operation is as strong as it can be on this subject!

1. Will will be violating SCRA rules if we don’t rewrite an existing customer who on paper said they were not a covered borrower but when accessing the DOD we discover they are?

2. On a busy day, clerks want to run DOD reports in the morning for all customers due that day so they won’t have to slow down the loan making process during the day. Is this acceptable or do they have to run reports only when customer is standing in front of them?

3. How will we determine if someone is the dependent of an active member in the military or reserves without having that family members information?

4. Will we need to continue to check the DOD website after the first advance of someone is permanently disabled, or is of social security age?

5. Will the following provide safe harbor: MLA website, “big three” credit bureau, SCRA website, retail credit report ostensibly re-reporting from “big three”?

6. If a product APR is too high for Military but was obtained pre-military, may it be re-financed with or without additional credit (not a payday loan)?

7. Does the database search cover all exposure for noncompliance with MLA?  In other words if the database search is performed and comes back clear does that cover any possible violation?

8. What exposure do we have for spouses, family members for this.  What are some of the questions we need to ask to determine all related persons to the applicant are covered?

9.  If the website is down when the search is performed is it enough to document that and have them sign a disclaimer stating that they are not an active member of the military.  Would it be a good       idea in this case to run a search after the site is up and document the file?

10. My understanding of this is basically when a new contract is executed a search has to be performed.  What are the exceptions to this?

11.  For an installment  loan renewal does a new search have to be performed when the loan is renewed?

12. For a flex loan (open line of credit) do we need a search when the customer takes out an advance on their existing line?

13. For a Tennessee Title Pledge loan do we have to do the search prior to sending a renewal letter for an extension?

14. Is there any reason to take existing Military Act questions off of the existing contracts?

15.  Is there anything that needs to be done re pre-10/3 loans (e.g., scrub against the database)?

16. Do MLA restrictions apply to “mere” loan extensions?

17. In AL a title pawn is actually a traditional pawn transaction (title is held as merchandise for pawn) – unlike most other states.  At the end of 30 days the customer may pay the fee (interest) and extend for another 30 days.  There are a couple of ways people do this.

a) After the initial transaction and contract each subsequent extension is done by accepting the payment and extending for another 30 days.  If the loan amount increases the old contract is paid off and a new contract is generated that reflects the new amount.  This transaction type would require a check of the database, I am sure.  BUT, if there are no changes or principal is paid down and only a receipt is printed, is a check of the database required?  To further complicate the situation some operators use a different pawn number for each extension and others do not change the number.  Would a check of the database be required under either or both scenarios?

b) A new contract is generated at each extension.  My guess is that a database check will be required.

18. If a lender is in compliance with the new MLA rule including the database check, is there a problem with a lender continuing to obtain a signed military form (the model form) for our files in addition to the new required database check confirmation certificate ID number?

19. Are there any prohibitions to refusing to lend to a covered borrower?

20.  A new customer divorced her husband who was active duty.  She received no spousal support in the divorce yet her MLA search lists her as a dependent.  The database had not been updated to reflect her as no longer deriving income from her now ex-husband.  Is it acceptable to provide a loan to the customer as long as income and divorce documentation is provided?

This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers.  He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.

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