Bank Fees are rising and so is use of Alternative Financial Services – coincidence?

Bank Fees are rising and so is use of Alternative Financial Services – coincidence?

by admin on August 14, 2012

I was reading this CNN Money.com article today: http://money.cnn.com/2012/08/13/pf/bank-fees-rise/index.html

This is an issue that I am very familiar with and the result is more customers for Texas Credit Access Businesses.

Monthly service fees on accounts with balances below $5,000 are the banks targets for the monthly service charges, which certainly fits the low and middle income profile of the typical payday consumer. And, don’t forget that NSF and Overdraft fees at many banks are have drifted up into the $35-$40 range.

Options like pre-paid debit cards are becoming more attractive compared to the bank branch, and in many cases the pre-paid cards offer more ideal online account management and smart phone capability, all with lower monthly service charges.

Consumers are learning there are more convenient and less costly options out there, and a migration towards cutting edge alternative financial services is happening. Shape your business accordingly, get creative, and stay convenient!

I refer to the information below very often in conversations – it is published by FISCA and illustrates the real deal on banking related charges versus payday advances – the APRs are less in many cases! Be sure and have these statistics ready the next time the APR topic comes up – and then nail it.

$100 Payday Loan (14 days) = $22.88 Fee (596% APR)
$100 Overdraft Protection = $29.00 Fee (756% APR)
$100 Bounced Check = $54.87 Fees (1,431% APR)

Sources:
(1) Bankrate.com, 2007 Courtesy Overdraft Study – based on average first draft
(2) Average NSF fee $28.23 (Bankrate.com, 2007 Checking Study), based on average first NSF charge, and average merchant return check fee of $26.64 (2006 CFSA fee survey).

{ 1 comment… read it below or add one }

Jer – Trihouse August 22, 2012 at 8:07 pm

Michael,

You made some great points in this piece. Too bad the regulators are not informed. Not only do bank NSF fees translate into higher APR’s than payday loan products but additionally, more than a few banks (Wells Fargo for example) are offering products that compete directly with payday loans. The banks debit these customers the moment their customer’s payroll check is deposited; NO RISK to the bank!

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CAB-New Way

CAB-New Way

The Credit Access Business (CAB) is the new model in Texas for payday loans. In 2011, the Texas State legislature was embroiled in a battle to pass legislation to regulate the payday loan industry. Legislative sessions occur every two years in Texas and for at least the last three sessions, lawmakers and payday loan industry advocates have engaged in heated debates that did not produce any laws or regulations. The 2011 session finally produced two bills that were passed into law, House Bills 2592 and 2594.

With the passage of these laws, the official Credit Access Business license stepped in front of the once all encompassing and vague Credit Services Organization (CSO) model. The CSO model, registration, and need for a Third Party lender still remains, but, in 2012, the Texas government will close a once wide loophole with CAB regulations.

House bill 2594 requires that CSO’s who want to operate in the payday loan space now be licensed as a Credit Access Businesses (CAB) effective January 1, 2012. The new licensing process will consist of a thorough review of the former CSO by the new governing body of the payday loan industry, the Office of Consumer Credit Commissioner, or the OCCC. Applicants will undergo reviews not just of their business operation, but also of the principals involved in the CAB whose personal and business background will be requested. In addition, H.B. 2594 added more fees that licensees will be required to pay versus the past CSO registration. Lastly, quarterly transaction report filing is required by the OCCC, the first of which will be due in April 2012.

House Bill 2592 outlines new requirements related to notices and disclosures to maintain compliance as a CAB. Integration of new notices and disclosures are outlined for both retail and online marketplaces. Changes to customer documentation and procedures related customer communication are part of this bill’s intent, which is to clarify facts, monetary figures, and educate all consumers about the business arrangement. For example, CABs will need to cite other financial resources for customers beyond the payday loan option, discuss these options with customers, and post alternative lending choices in stores or online.

There are many details to discuss to fully understand the broad intent of the bills before January 1, 2012. The OCCC hosted several collaborative stakeholder meetings in the summer of 2011. Business owners, consumer advocates and those who will govern the industry all participated in collaborative conversations about the bill’s intent and real world implementation of new rules. The final version of rules related to the new laws is due to be released in October 2011.

 

Cab Manual

Cab Manual

The CAB Manual contains the basic information needed to start the licensing and compliance transition process. Ordering this manual from C.A.B. Consulting and Brokerage will assemble all necessary elements to begin the transition process, eliminating the need to go to more than one place for initial information, guidance, and paperwork. The manual materials are offered in print and online for our client’s reference when needed.

Summary of included items:

•Transition process summary and opinion letter with important information related to the new license and licensing process
•Compliance summary and opinion letter with important information related to notices and disclosures
•Reference copies of important laws and regulatory publications
•Rules summary with interpretation and comments
•License application documents
•Inclusion of company members to the CAB Consulting and Brokerage Newsletters, Emails, and RSS Feeds

C.A.B Consulting and Brokerage does advise clients who purchase this manual that further research will be necessary and seeking the consultation of an attorney who specializes in the payday loan industry is recommended.

To learn more about details and specifics of the CAB Manual, contact C.A.B Consulting and Brokerage at Michael@CreditAccessBusiness.com or call 214.293.8676.

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Who We Are

Who We Are

Who is C.A.B. Consulting and Brokerage?

C.A.B. Consulting and Brokerage is a payday industry based business that assists other companies in the traditional consulting sense as they operate in the dynamic financial services sector.  We learn needs and call on our industry knowledge and relationships to provide solutions to our clients.

Also, we operate as a broker who facilitates new relationships between companies and collaborate to help them execute deals.

Our strengths are centered around payday industry licensing, compliance, capital, acquistions, procedures, and operations in the payday and auto title loan industy. It is our goal to build relationships, understand needs, and provide pathways to achieving goals.

C.A.B. Consulting is headed by Michael Brown.  Michael attended high school at W.B. Ray in Corpus Christi, Texas.  He later attended the University of Texas at Austin and graduated with a degree Radio Television and Film in 1996.  In his later years at Texas he began focusing on Advertising Sales and started his career by working for several Radio and Television stations.  In early 2003 Michael and a trusted partner started an online payday loan website named My Cash Time.com.  Starting with just an online lending operation, the company eventually grew into the retail sector where they operated stores in Utah, New Mexico, and Texas.

Michael is married to a stunningly beautiful, intelligent, and wonderful woman named Amanda. Together they have two children, Dylan and Amelia.

What We Do

What We Do

Experience areas are listed A – Z.  Scroll down to read!

CAB Manual

The CAB Manual contains the basic information needed to start the licensing and compliance transition process. Ordering this manual from C.A.B. Consulting and Brokerage will assemble all necessary elements to begin the transition process, eliminating the need to go to more than one place for initial information, guidance, and paperwork. The manual materials are offered in print and online for our client’s reference when needed. Summary of included items:

•Transition process summary and opinion letter with important information related to the new license and licensing process
•Compliance summary and opinion letter with important information related to notices and disclosures
•Reference copies of important laws and regulatory publications
•Rules summary with interpretation and comments
•License application documents
•Inclusion of company members to the CAB Consulting and Brokerage Newsletters, Emails, and RSS Feeds

Collections and Debt Sale

C.A.B. Consulting and Brokerage has a unique relationship with a debt selling platform that assists clients in liquidating their bad debt portfolios quickly and easily to the highest bidder.  Finding the right source for this end of your business is critical, and partnering with the right people is step one.

Competitive Advantage

The most competitive businesses provide benefits to customers beyond just a payday loan in exchange for their commitment.  C.A.B. Consulting and Brokerage possesses a set of specific opportunities that are available for companies to utilize in this manner.  Let us work with you to implement new programs that broaden your relationship with your customers.  Providing benefits and increasing communication will give your business a competitive edge in a crowded marketplace.  Also, improving the company image and marketing online is an area of great need for our small to midsize payday loan clients.

Compliance Consulting Services

C.A.B. Consulting and Brokerage works for Texas CAB’s who are planning a transition towards a new Credit Access Business license or those who already have.  We are all still relatively new to “CAB,” so a continual review is smart, where one might pinpoint potential red flags, and gain more understanding the laws & rules.  C.A.B. Consulting and Brokerage has turn-key plans ready to ensure that each CSO-CAB we work with will have their license request approved, be prepared.  We are also working with an on-site independent auditor who can do audit files and troubleshoot problems in stores across Texas.

Consumer Loan Contracts

Many operators invest thousands of dollars with industry experienced attorneys to have their Consumer Loan Contracts written.  While it is always recommended to consult an attorney, some operators choose to rely on the contracts generated by their software company.  At times, these documents are used by many different clients of the software company, are basic, and do need re-working so they can be precisely applicable to your business.  CAB Consulting offers a set of Consumer Loan Contracts that have been written by an industry experienced attorney.  And, over the last 18 months CAB Consulting has worked hard to make improvements on the contracts as OCCC rules and regulations began to be more clearly understood by the industry.  Having a strong set of Consumer Loan Contracts is a top priority and a great way to ensure a passing grade in your next OCCC examination.

Corporation Startup, Filings, and Formation

The filing of corporate setup documents for LLC’s and Corporations is something that CAB Consulting ended up being positioned to do more for convenience of the client and the saving of time.  Working through Texas SOS and the IRS website to get a Tax ID #, Register a Business, or file an assumed name certificate can be done much more quickly by CAB Consulting versus some of the other “pay for service and filing” companies online.

Education

C.A.B. Consulting and Brokerage aims to be the go to source of information as payday and auto title loan businesses transition from Credit Service Organizations to Credit Access Businesses.  January 1, 2012 was the mandated date for all current payday and auto title loan operators in Texas to be certified as CAB compliant businesses.  C.A.B. Consulting and Brokerage will not only educate clients on the details of the transition, but develop long term relationships to build stronger companies into the future. Small to mid-size operators in Texas need to be informed about the laws & rules, to be kept abreast of developing changes, and to maintain a continual focus on operating in a compliant fashion.  C.A.B. Consulting and Brokerage is building its business around the needs of these clients.

Investment Opportunities

From time to time CAB Consulting is approached by individuals and organizations that are looking to passively invest in the payday industry.  There are two channels in which this can be done: the Third Party Lender, or investment on the operator side with growth capital.  As well, startups and existing operators who are growing contact CAB Consulting to discuss their desire or need for investment capital.  If you need money for growth or have capital available for investment in the industry, contact us.

Licensing

CAB Consulting has helped dozens of entities get licensed in the State of Texas as a Credit Access Business.  We work with operators to prepare for the submission of the CAB Application, make sure its the best it can be, communicate with OCCC during the process, and handle any hiccups that come up along the way.  So far, not a single client we have worked with has been denied a license!

Marketing & Advertising Ideas and Strategy, Customer Customer Acquisition Plans

CAB Consulting has developed a wide array of different marketing and advertising ideas, plans, and strategies, both B2B and B2C.   When working with startups many times they are new to the business and considerable time must be spent with these clients on strategy, how to get customers in the door, and how to engage consumers once they are in the lobby.  Sample materials, web designs, referral programs, and dba recommendations are just a few of the areas where CAB Consulting can step in and help a startup get their business opened with tools for success.

Payday Boot Camps

Two close associates of CAB Consulting are Tri-House Consulting and Paid 2 Day, since June of 2012 our three groups have been putting on the “Payday Boot Camp.”  The Payday Boot Camps are two day in-store training sessions for persons interested in starting a payday or auto title loan business.  Typically, the clients fly in from their hometown location, and spend two full days in the Paid 2 Day store.  The agenda covers both a “macro,” and “micro” look at the industry, where the attendees are taken through detailed strategy sessions, their business plans are reviewed, commented on, and adjusted if need be.  Training in a “live” store also gives the attendees a chance to watch a loan get funded and see a payment get taken.  Instruction on in store compliance and store organization is also provided.  After the Payday Boot Camp our goal is for the operator to have a clear vision of where they are headed with their startup, and to go along with that they will have direct experience with some of the biggest keys to running  successful payday business.  Paid 2 Day is owned by Danny Verrette, a California payday lender in Lake Forest, about 50 miles South of Los Angeles.  The Paid 2 Day store is setup like a typical payday loan store, but also has offices and a conference room that are ideal for instruction during camp sessions.  Tri-House Consulting is headed by Jer Ayles-Ayler.  Jer is the original source behind the Payday Boot Camp and is also an industry leader, blogger, conduit, and overall expert in high level thinking when it comes to payday business.

Sales and Acquisitions

Because of the relationships we have in the industry many times CAB Consulting is approached by organizations that are looking to acquire businesses.  CAB Consulting has connected many existing clients to buyers and played a role in the many successful sale transactions.  Some deals have required full and complete leadership by CAB Consulting, and others have simply been the exchange of the contact information between parties.  Being a part of a multitude of deals has given CAB Consulting important perspective on how the process works, how to arrive at values for a business, market valuations, licensing transition, and third party lender issues that come along with the transaction.

Software Vendor Recommendations and Introductions

CAB Consulting has direct experience with many software providers in the payday industry.  Over time, we have accumulated a valuable database of information about these providers and have placed it all into CAB Consulting Software Matrix.   The Software Matrix is comprised of 50 important questions that every company should ask when evaluating what software option may be best for them.  The answers come directly from representatives of the companies and can be a huge time and money saver.

Supplementary Documents, Procedures, Checklists, Requirements

All of the “supplementary” documents necessary for business to operate can be provided by CAB Consulting.  Documents necessary for compliance such as Fee Schedules and OCCC Consumer Disclosures do take some time, and require the ability to calculate APR%.  As well, internally created documents like customer application forms, denial letters, privacy policy, requirements for approval, employee guides, and evaluation checklists are available to clients.

Third Party Lender Connections

An important component to the CSO-CAB is its choice of Third Party Lender. C.A.B. Consulting and Brokerage represents several entities who are actively seeking to step in as the lender for CAB approved businesses. If growth capital is a need for your business, C.A.B. Consulting and Brokerage has the necessary relationships to support your growth.

Variety of loan products: Payday, Title, Installment

The Credit Access Business license covers payday loans, auto title loans, and installment loans in Texas.  CAB Consulting directs its clients on each of these business models, can assist in development of fee structure, and provide competitive data on other CAB’s fee structure, state averages, etc.

 

 

 

Texas Credit Access Business CAB Information

CAB Packet

The CAB Packet contains the basic information needed to start the licensing and compliance transition process. Ordering this packet from C.A.B. Consulting and Brokerage will assemble all necessary elements to begin the transition process, eliminating the need to go to more than one place for initial information, guidance, and paperwork. The packet materials are offered in print and online for our client’s reference when needed.

Summary of included items:

•Transition process summary and opinion letter with important information related to the new license and licensing process
•Compliance summary and opinion letter with important information related to notices and disclosures
•Reference copies of important laws and regulatory publications
•Rules summary with interpretation and comments
•License application documents
•Inclusion of company members to the CAB Consulting and Brokerage Newsletters, Emails, and RSS Feeds

C.A.B Consulting and Brokerage does advise clients who purchase this packet that further research will be necessary and seeking the consultation of an attorney who specializes in the payday loan industry is recommended.

To learn more about details and specifics of this package, contact C.A.B Consulting and Brokerage at cabconbrokerage@gmail.com or call 214.293.8676.

 

3rd Party Lender

3rd Party Lender

With over 3,000 registered payday loan businesses and 25 million people, Texas represents one of the most prolific markets for Lenders in the industry. One significant reason for this is the state’s licensing structure, called the “CSO Model” or “CAB Model.” You can read more about each of these models on our web-site’s “CSO – Old Way” and “CAB – New Way” pages.

The model requires that Credit Services Organizations (CSO’s), and Credit Access Businesses (CAB’s) operate alongside the 3rd Party Lender who provides the funds for loans to consumers.

Yes, despite the fact that many CSO’s and CAB’s do have the assets for loan funding they can never be used for that purpose, and arm’s length relationships with other entities must be established to play that role if they wish to participate in the robust Texas market.

In the arrangement, a CSO or CAB functions as a broker who markets its services, administers the loan process, and assists the consumer in attaining the loan much like a co-signer.

The 3rd Party Lender’s role is often a silent and secure one.  Interaction with the customer is rare, and it is common for the Lender’s proceeds to be guaranteed by the CSO / CAB with collateral in a number ways.

Are you a CSO or CAB that needs a Lender?

Have the new requirements and rules related to the Credit Access Business licensing process forced you to seek another Lender?

Are you interested in exploring the opportunities available to investors serving as Lenders in the CSO / CAB Model?

Call or email C.A.B. Consulting and Brokerage for details!

{ 1 comment… read it below or add one }

Magda Oviedo August 19, 2016 at 2:15 am

I am looking into starting a CSO business primarily focused on home mortgage lending/refinancing. I wonder if a home based business is a good way to start since I do not have access to much capital. I also need a source of income soon due to being unemployed at the moment. I recently resigned from my 9 year Spanish teacher position.

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Texas CAB Credit Access Business Solutions

Lenders

With over 3,000 registered payday loan businesses and 25 million people, Texas represents one of the most prolific markets for Lenders in the industry. One significant reason for this is the state’s licensing structure, called the “CSO Model” or “CAB Model.” You can read more about each of these models on our web-site’s “CSO – Old Way” and “CAB – New Way” pages.

The model requires that Credit Services Organizations (CSO’s), and Credit Access Businesses (CAB’s) operate alongside the 3rd Party Lender who provides the funds for loans to consumers.

Yes, despite the fact that many CSO’s and CAB’s do have the assets for loan funding they can never be used for that purpose, and arm’s length relationships with other entities must be established to play that role if they wish to participate in the robust Texas market.

In the arrangement, a CSO or CAB functions as a broker who markets its services, administers the loan process, and assists the consumer in attaining the loan much like a co-signer.

The 3rd Party Lender’s role is often a silent and secure one.  Interaction with the customer is rare, and it is common for the Lender’s proceeds to be guaranteed by the CSO / CAB with collateral in a number ways.

Are you a CSO or CAB that needs a Lender?

Have the new requirements and rules related to the Credit Access Business licensing process forced you to seek another Lender?

Are you interested in exploring the opportunities available to investors serving as Lenders in the CSO / CAB Model?

Call or email C.A.B. Consulting and Brokerage for details!

 

New Rules for Texas Credit Access Businesses

New Rules for Texas Credit Access Businesses

by The CAB Man Texas on October 23, 2015

The 2015 Texas legislative session passed a “Clean Up Bill”, which authorized the OCCC to review, repeal, and replace rules regulating CAB’s.  Those new changes were proposed in September for pre- comment and voted for approval by the Texas Finance Commission Board to be published in the Texas Register on October 16, 2015 (last Friday) at the Texas Finance Commission meeting in Austin, Texas.

We have counted approximately 144 new changes to TAC 7, Chapter 83, Subchapter B.  This is the first time in 4 years that any new rules for payday loan or auto title loan businesses known as “CABs” have been put into place.  It is time to get educated on changes and make the necessary modifications to your documents, processes, and other operating methods.

The changes affect a broad range areas from; Definitions; Licensing Fees, Notice of Delinquency of Annual Assessment, Denial, Suspension, Revocation based on Criminal History, Examinations, Files & Records, Separation Between Third Party Lender and CABs, and Case Hearing Procedures.

CAB Consulting has thoroughly reviewed the changes and put together a compliance plan to ensure CABs, their software providers, and third party lenders are compliant moving forward into 2016.   We are told the first round of changes are slated to be made effective in late December of this year or early January 2016.

If you would like to learn more, please contact Michael Brown at 214-293-8676 or Robert Wheeler at 956-639-7162.

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Information for Texas CSO’s on Credit Access Business licensing

Information for Texas CSO’s on Credit Access Business licensing

by The CAB Man Texas on September 13, 2011

There’s decent list of new requirements that the Texas CSO needs to know about when they are applying for their new Credit Access Business license this fall.  Substantial input has been provided by many CSO’s in Texas as far as the new rules go, and recently I attended two stakeholder meetings in Austin at the Capitol Building to contribute my thoughts.

In the past I have not been to such a meeting and so I was all ears. At the beginning I wasn’t sure if the atmosphere was going to be contentious, if the members of the Finance Committee were going to be friendly, or if they were truly seeking input. I have heard of some heated confrontations on the House floor so I was kind of expecting the same. But, it was actually very co-operative, and the stakeholder input was asked for more often than it was given believe it or not.

From a high level – the OCCC is going to dig a little deeper this time around and take a close look at both sides of your business model versus your prior CSO application. Information about owners all the way down to 5% may be asked for, and they want important information for the lender as well.  Reports are going to need to be submitted quarterly, there are new ways that you must disclose information to consumers, and certain procedures will be required that have not been mentioned before.  And, there’s going to be several more fees charged to the licensee.

All in all, the forum in Austin was warm, and the word “flexible” was used often by the OCCC board members.  An example of the OCCC listening to stakeholder input and their being flexible was in regards to the request for Credit Access Businesses to provide their contract forms with their CAB application. This request was met with concern, the concern was expressed, and as a result the documents will not be required with the application.

October 21 is the next date CSO’s need to be aware of – OCCC will be firming up proposed rules and rules changes.  I will keep everyone posted on my blog – looking forward to your return.

Questions?  Feel free to call me! Michael Brown at C.A.B. Consulting and Brokerage (214-293-8676).

 

{ 2 comments… read them below or add one }

Luis g Garcia May 21, 2013 at 4:40 am

I need info about the CAB licence what the cost you charge for this license I ready to open Mr title loans and pay day loans en eagle pass tx but I need you help to fix the premises or licenses

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admin August 10, 2013 at 7:41 am

214-293-8676 call us first for an exploratory call

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