Some stores need deeper assessment and others do not because they are excellent performers.  Let’s look at one store and with the desire of loosening up in some areas where perhaps underwriting is too tight.   Dylan and Jeremy at Cashmax call it “turning a knob” or “moving a lever.” Let’s move a knob or lever with this one store and see what happens.

Doing an assessment and would love TOFSC opinions.  First, we are looking back at recent leads that have been sold through a lead buying network, what are others paying (we are going to assume it is a “FinTech”) for the leads they buy from you? After studying the sold lead what are your takeaways? If the smart FinTechs with all the “AI” and “Machine Learning and “Data” who own over half the Texas market are going for approvals with these customers who apply through you, then how can you learn from that and instead approve more for yourself versus letting go of potentially good paying customers?  See below for some key data points from three recent sold applicants.

$88 – Customer A:

No FT ran.

Online app – Google

Time at address: 5yrs

Time at bank: 2yrs

Bank: Bank of America

Time at employer: 7yrs

Employer: Filtration Group

Income: $6,594.77

**Customer was denied for having too many open loans and frequently being negative. He has loans out with Lend nation, Cash Store, Check n Go, TX Car Title & Payday, World Finance, Integrity Funding, and Easy Financial.

Comment: long time at address, bank, and employer, strong income over $6k, tons of loans out and the buyer did not care.  Also, did not care about account being so far in the negative. 

$83 – Customer B:

FT: 111

Online app – Google

Time at address: 2yrs

Time at bank: 2yrs

Bank: A+ FCU

Time at employer: 5yrs

Employer: Travis County

Income: $3,600 (per app)

Comment: customer was denied for having too many open loans. FT shows loans with a total of $4,508 in outstanding balance. On her banking it shows Credit Ninja ($700 borrowed on 09/14) and Cashnet ($800 borrowed on 08/03).

$18.50 – Customer C:

FT: 111

Online: Google

Time at address: 3yrs

Time at bank: 8yrs

Bank: United Heritage CU

Time at employer: 3yrs

Employer: HCA Healthcare

Income: $2,500 (per app but it was verified at $1660.91)

Comment: FT denied due to having too many open loans and too many loans in collections. FT shows 5 loans totaling $897 outstanding balance and 3 loans in collections. However, we cannot find any loans in her banking history.  Lower income and thus a lower sale amount.  But address, bank, and employer were in the same ranges as the other two customers above.  So, is the income the key factor here? Does that trump all other concerns?

Another one of our generous members shared his opinions on lead sales and how quoting lower first-time loan amounts can hinder growth”

“Typically, a loan selling for greater than $50.00 is auto approved with VERY little underwriting with Fintech. The issue you may run into is loan amount. The consumer most likely will not be interested in a loan less than $500, and sometimes the amount of fees will drive them away. But I would most definitely always reach out to them. Sometimes a local company makes them feel more comfortable, and you can close the deal. Regardless, a lead that sells for greater than $50.00 is a very good lead and most definitely worth your time to reach out.

Going further with the assessment: pull the last (3) months of denial reasons, break that out by month, by store.  Look at what the largest set of denial reasons is per store.  Perhaps loosen up in one of the largest areas of denial.  Maybe go one or two layers on the 2nd and 3rd most common denial reason and.  Loosen slightly implement the lever move with the lowest perceived risk.  Might that lever be “too many loans out” if the income is there? How far will you go on a negative balance?  Also, per the comments above, go back and look at the leads that have sold over the last (3) months over $50 to study again and see what patterns exist.   

Would love to hear from our clients, TOFSC members, and industry friends on this.   Send feedback where you can!

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On August 28th, CFSA and CSAT filed “Amended Complaints” that were focused on the payment provisions of the CFPB rule.  I read a thorough summary from Jeremy Rosenblum at Ballard Spahr.  This is some good stuff! I mean, who doesn’t love when someone uses the terms “arbitrary and capricious?  That’s when us laypersons really know there is some serious lawyer-ing going on!   


The amended complaints have some teeth which were good to see strike home and sink deep.  And, the inclusion of debit card debiting in the payments provision got its fair share of attention.  I for one hope that continues, maybe even gets put at the top of the list.  Without thinking deeply, I can say that if that facet were removed from the rule I would be breathing easily on the entire topic.  I know that others with a different business model may differ, but it is by far ours and our customer’s favorite payment method for convenience reasons, and also because it does not cause NSF charges if the payment returns.  It does not seem likely that the industry will have to “go live” with these provisions as they are now, by November.  There is still much to be worked though in this legal process which has been long and winding. With all of the questions at this point how can it be known what the rule will look like anytime soon?  Operators still need fair time to install the proper procedures and notifications and that window is now far too tight for a November go live date. 

 
See below for some takeaways from Jeremy’s blog post:


“Trade Groups File Amended Complaint In Texas Lawsuit Challenging CFPB Payday Loan Rule.

In the Amended Complaint, the plaintiffs (our industry) allege that the Rule violates both the Constitution and the Administrative Procedures Act (the APA).  Starting with the Supreme Court’s decision in Seila Law that the Director of the CFPB who adopted the Rule was unconstitutionally insulated from discharge without cause by the President.

The Amended Complaint argues that a valid Rule requires a valid notice and comment process from inception and not mere ratification of the final result by a properly serving Director.

It further asserts that ratification of the payment provisions is arbitrary and capricious because the payment provisions were based on a UDAAP theory expressly rejected by the CFPB in its revocation of the underwriting provisions of the Rule and the CFPB has failed to explain how a lender can commit a UDAAP violation, consistent with the theory of the revocation of the underwriting provisions, when the consumer is free to eschew a covered loan based on a generalized understanding of the risk of multiple NSF fees.

The Amended Complaint takes issue with the payment provisions based on a number of additional alleged infirmities, including the following:

The CFPB provided a lengthy period for the industry to comply with the original Rule but failed to provide any compliance period for the ratified Rule.  Thus, the current Rule differs from the original Rule it purports to ratify in a key respect.

The 36% APR trigger for covered installment loans is fundamentally at odds with the provision of the Dodd-Frank Act explicitly prohibiting the CFPB from establishing usury limits.

The alleged harms the payment provisions are designed to forestall are caused by the banks holding the consumers’ deposit accounts and not by the lenders who initiate payments declined due to insufficient funds.

The Bureau acted arbitrarily and capriciously in extending the payments provisions to multi-payment installment loans, where consumers have lengthy periods of time between installments to respond to failed payment-transfer attempts (and where, we would note, consumers are already free under the Electronic Funds Transfer Act to decline to authorize loan payments through recurring electronic fund transfers).

The Bureau also acted arbitrarily and capriciously in extending the payments provisions to debit and prepaid card transactions, where failed payment-transfer attempts typically do not, if ever, result in fees.  (We have repeatedly expressed the view that this key aspect of the Rule is indefensible.)

The CFPB evidence supporting the payment provisions was insufficiently robust and reliable, especially with respect to storefront and installment loans since the CFPB relied upon evidence about online single-payment loans.

The timing requirements for notices under the Rule arbitrarily prevent consumers from scheduling earlier payments.

The CFPB did not consider whether enhanced disclosures could have adequately prevented the perceived consumer injuries.

We believe that the Amended Complaint represents a powerful attack on the payment provisions of the Rule.

We have only one point we would emphasize to a greater extent:  There is no apparent link between the UDAAP problem identified in Section 1041.7 of the Rule—consumers incurring bank NSF fees for dishonored checks and ACH transactions after two consecutive failed payment transfers—and the burdensome notice requirements in Section 1041.9 of the Rule.

To our mind, these elaborate notice requirements are arbitrary and capricious for this further reason.”

Here is a link to the article – thank you Ballard Spahr! https://www.consumerfinancemonitor.com/2020/08/31/trade-groups-file-amended-complaint-in-texas-lawsuit-challenging-cfpb-payday-loan-rule/

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Tax Prep Season is here let’s get after it!

January 9, 2020

We are nearing the end of the Holiday Season’s high demand period that coincides with the beginning of Tax Season.  Many CAB Consulting clients and TOFSC Members offer Tax Preparation services, and some will be doing it for the first time this year.   I know many who are ready to get after it so let’s […]

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OCCC set to report to Finance Commission Friday

December 18, 2019

The OCCC is all set to report to the Finance Commission this Friday, December 13th.  Below for the key take-aways for CABs offerring payday, installment, and title loans in Texas.  The report will compare September-October 2018 vs. 2019.  The Septermber-October 2019 part of the OCCC “fiscal year to date 2020”). ·         Examinations are down across the […]

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OCCC is having a special stakeholder meeting on the questions posed to the Attorney General recently about CSO’s.

December 3, 2019

See below for a recent email sent out to OCCC stakeholders: “On December 9, 2019, at 2:30 p.m., the OCCC will hold a stakeholder meeting on credit services organizations and attorney general opinion KP-0277. A stakeholder meeting notice is available at: https://occc.texas.gov/publications/attorney-general-opinions. On this webpage, click the link labeled “Stakeholder Meeting Notice.” The meeting notice provides […]

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Helping Green Dot and other pre-paid card holders get funded on loans…good or bad idea?

November 21, 2019

Lending to Green Dot Card Customers – is this a good or bad idea?  Many feel these and other pre-paid card accounts carry too much risk because the card holders are not as “married” to the card versus the commitment assumed is had with a traditional bank with local branches.  We had one TOFSC member […]

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Keeping an eye on FinTech Lending

November 15, 2019

Why should Texas CABs keep an eye on FinTech Lending?  We need to watch and learn, let’s evolve our businesses by watching their successes and failures.  Where you can, implement their techniques that work, into your CAB’s capabilities! Think marketing, underwriting, process flow, etc.. These recent OCCC MSA report statistics show that FinTech now owns the […]

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OCCC will be reporting to the Finance Commission Friday, October 18th.

October 22, 2019

The quarterly Finance Commission Meeting will be this Friday, mostly information will be reported for September to August 2018 vs. 2019…that is their fiscal year. OCCC will report that: ·         Examinations were down in 2019, went from 638 to 475. ·         CABs went to the bottom in terms of acceptable level of compliance…due to lower examination volume.  […]

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What is a FinTech really? Be one.

October 7, 2019

Seems like over the last year that the industry buzzword has been “FinTech.”  According to BuiltIn.com “”Fintech” is a portmanteau (combination of two words to create a new one) of financial” and “technology.”  It is the application of new technological advancements to products and services in the financial industry.” For those of us in business […]

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The “Lend 360” Conference is coming up in Dallas on the 25th here are the summary details.

September 24, 2019

The “Lend 360” Conference is coming up in Dallas, September 25-27.  Since it is in our back yard versus Florida or California wanted to discuss it a bit and give you some information for you to better decide on whether you will or will not attend.  Many of our vendor and TOFSC sponsor companies will be […]

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