The payday industry and uniformity of rules and and regulations

by The CAB Man Texas on February 23, 2013

Yesterday I read an article written by William Webster the former CEO of Advance America, it was published on www.AmericanBanker.com and titled “Forget Payday, It’s Time to Reinvent All Lending Practices.”  The piece resonated with me in regards to local ordinances, and what I would like to see Credit Access Business stakeholders and lawmakers keep their focus on during this year’s legislative session.   Mr. Webster stated that “First, the standards of disclosure for credit products’ fees and terms must be vastly simplified and uniformly applied.”  I have to agree, if we can lighten the load on the operator, and simplify the kinds of things that they need to do to “be in compliance,” then I am confident the approach to a customer will be more simple and easy to understand.

For example, the OCCC Consumer Disclosure documents are 2 pages, those need to be provided in addition to a typical set of consumer loan contracts that are 10-15 pages, for one loan, and the same goes again for refinancing.  Then, is there a payment receipt?  Notice to co-signer?  Privacy Policy?  And, now we are looking at being required to have the documents in English, Spanish, and possibly Cantonese.  Imagine the man hours in salary spent on just handling those documents.  What about printers, ink, scanners, and paper?  A year’s worth of all of those things adds up to a major expense.  And, in the end, the customer rarely reads the disclosures.  Customers want to know how much they are getting, what they are paying back, when its due, and commonly whether they have options versus a full payoff.  Let’s start with what the customer wants and keep it simple moving forward from there.  Competition and transparency would result, per Mr. Webster, and I agree.  Companies would compete, fees would go down, service strength goes up, and the customer benefits on all sides.

Here is the link to the article in American Banker:

http://www.americanbanker.com/bankthink/forget-payday-its-time-reinvent-all-lending-practices-1056839-1.html?zkPrintable=1&nopagination=1

Mr. Webster was really thinking about the industry as a whole, but let’s apply his points to Texas in specific.  Local ordinances in a state with licensed CAB’s are the exact opposite of uniformity.  Consumers and CAB’s are having another layer of confusion jammed down their throats.  Cities don’t know the industry, and don’t even have budgets to enforce ordinances for that matter.

The argument is against the payday industry is always the same:  opponents talk about rates, limits, ridiculous APR%’s, use the term “predatory,” call people loan sharks, etc.  It is a petty angle to take with name calling, and in the end it can actually creates more support for the industry when their representatives stoop that low.  Texas CAB’s are open to improvements, so how can we set the standard, be forward thinking, and innovate with the long term in mind?   The fact is that high risk consumers will always need money fast, and if you restrict legal access to those services then they will be left with less ideal sources.  This is a fundamental truth!  So, bright minds might say what Mr. Webster did,  embrace the industry, simplify, create uniformity, and competition will force licensed operators to be the best they can be.

CAB Consulting has assembled a group of CAB stakeholders and retained a lobbyist for this year’s Texas Legislative Session.  It is our goal to voice some of our perspective on the matters above, as well as offer our own specific “Borrow Smart” message.   The “Borrow Smart” message is innovative and comes with a plan to deliver uniformity, transparency, and competition to the Texas payday industry.  We have already begun to share details on Borrow Smart with industry stakeholders.  Contact Michael Brown via phone at 214-293-8676 or send emails to Michael@CreditAccessBusiness.com.

 

 

 

 

Leave a Comment

What is 8 + 9 ?
Please leave these two fields as-is:
IMPORTANT! To be able to proceed, you need to solve the following simple math (so we know that you are a human) :-)

Previous post:

Next post: