We have been hearing a lot lately about the continued decline of retail business in the US.  Zales and Jared jewelry retail stores are the latest to announce closures of hundreds of locations.

Online is booming and it seems like Amazon rules the world.  If your business does not have an online presence you are missing out on a lot of opportunity because your pure brick & mortar market is shrinking by the minute.  Consumers are evolving and many low to middle income consumers are willing to do more and more to get access to credit at crucial times.  How will you engage with this new dynamic?

Forbes.com featured an article that discusses how increased online markets are opening a consumer’s willingness to share their personal info online while also touting the strengths of today’s alternative data.  I included some excerpts below.

“People Are Plenty Willing To Share Personal Data To Get A Better Loan.”

• New research suggests that people are surprisingly comfortable sharing their data as long as it’s being put to good use, especially in the world of lending.
• A recent Harris Poll found a surprising consensus among American adults — 71% of those surveyed said they would be willing to share more personal data with a lender if it led to a fairer loan decision.
• More significantly, the Harris Poll shows that the majority of consumers feel unfairly treated by the current system.  More than 80% of African-Americans and Hispanics – and 7 in 10 of all adults – say they wish there were a better way to prove themselves to lenders.
• But in today’s era of large-scale data collection and unlimited computing power, the traditional credit score is showing signs of age and mathematical limitations.
• Consider some of the things credit scoring excludes: your job history, your roots in your town and thousands of other bits of information that are left untapped. It’s no wonder 70% of people polled say it’s difficult to get financial institutions to see them as anything but a number between 300 and 850.
• One-third of renters say credit scores have kept them from buying a home.   
• Alternative data simply means anything that’s not included in calculating a traditional credit score. It could include timely utility payments, history of holding down a job, even large debts you had years ago (outside of the traditional credit score models) that you successful paid off.
• Bringing that added data into the credit scoring decision creates a more nuanced picture of borrower risk, helping banks spot worthy borrowers further down the credit spectrum (and flagging troublesome borrowers who look good on paper).
•  The Omidyar Foundation found that in the six biggest emerging economies, using more data and machine learning techniques can get as many as 580 million unbanked people into the financial mainstream.”

Many of us are using “alternative data” with Factor Trust and Microbilt (often referred to as “Credit Reporting Agencies” or “CRA’s”).  If you are not, get on it as soon as possible!  

Factor Trust was recently acquired by Trans Union, and another CRA “Clarity Services” was acquired by Experian awhile back. In the future hopefully that will mean better things for how CRA’s are utilized by our industry and will also mean more robust access to credit for consumers.”

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.

New Technical Rules for 2017 you should be aware of.  Did you know there are new rules related to the application for new licenses, transferring a license, and criminal history of CAB owners?  Much of this was covered during CAB Consulting’s “CAB II” project that many clients and members took advantage of. 

*The language for rules and transfers removes the part mentioning that you need to wait on the OCCC’s approval to operate a CAB while the license is being transferred. The transformer assumes all responsibility of the license until the license has been transferred to the transferee. 

**Criminal History can affect license holders. This affects anyone with a State license from a concealed handgun license to a Credit Access Business license. In the eyes of Texas, it is a privilege to maintain a Texas license, and therefore license holders must be law abiding residents.  

Here are several areas of infraction that could compromise your CAB: 

Theft, assault, any offense that involves misrepresentation, deceptive practices or making false or misleading statements. 

Any offense that involves breach of trust or other fiduciary duty.

Any criminal violation of a statute governing credit transactions or debt collection. 

Failure to file a government report, filing a false report or tampering with a government record. 

Here is a link to the rules: http://occc.texas.gov/sites/default/files/uploads/pub/rules/cab-adoption-fc-010517.pdf 

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.

So the United State Postal Service might become a financial services provider? I have been hearing about this over the last couple weeks, and am I missing something here? Perhaps I don’t have all the facts, but is this really being considered as a possibility by our Federal government?

I think that the Post Office offering financial services such as bill payment, debit cards, and savings accounts could theoretically be possible. Has anyone been to a Post Office recently? How could they manage to add on such high touch, data sensitive, disclosure heavy, non-traditional services? The Post Office loses billions of dollars every year, it is antiquated, archaic, and lost in the past. How would these new services be launched, managed, and made profitable? The most important question regarding anything to do with the Postal Service is: could it ever be profitable? If not, then what is the point? These are crucial points that any successful business person would make, so how about the media publishes some comments from business people on the matter? Consumer Advocate groups dominate the public forum with strong media support, but the problem with that is their groups typically aren’t saddled with the need to turn a profit!

Post Office lines are long and slow, the offices are understaffed, and the average Postal worker I encounter when I go to a local office doesn’t exactly come off as pleased to serve me. There is a systemic dysfunction within the Postal Service that could be a very large road block to the addition of financial services to its existing workload. Will the government hire more people to work there to handle the larger workload? Will the government pile more payroll expense onto an entity that loses something like $10 billion per year? I haven’t really seen anyone else make that point in the media – and I haven’t even gotten into the topic of small dollar loans yet.

Here are some more questions that must be asked… Is the government going to lend consumers money? Who will provide the funds for the short term loans? Is a government agency that loses $10 billion per year now going to fund small dollar loans to consumers in need of emergency credit? What interest percentages are they going to charge? One more thing: it is very easy to fund a loan – who is going to collect on the loan? 99% of the loan business is collecting! Is the United States Post Office going to also be a “Collections Agency?”

The Post Office’s record and profitability make it the absolute worst candidate for loaning consumers money, they would lose millions in taxpayer dollars, guaranteed. This is another important point that Consumer Advocates never consider – consumers often do not pay back loans at all, and many consumers must be consistently communicated with to keep from defaulting. People make jokes about the government giving money away, well this program would certainly end up as some of the easiest money ever.

Consumer Advocate groups are opponents of my clients and it is my opinion that these groups want to see all of us out of business, despite my being told otherwise. It is also my opinion that Consumer Advocate groups will never be satisfied until loans are made at 0%, despite my being told otherwise. Now these groups tout the Postal Service as the next in line to fight against predatory lenders in the “Payday Loan” industry.

So, when the Post Office funds loans to consumers at 36% APR are the Consumer Advocates going to go after the government for taking advantage of the very citizens it is there to serve? Problem is, the Post Office is going to have to charge more like 500% APR to be profitable, and don’t forget that will only put them in position to be profitable. What if they do a really horrible job? It could get really bad.

I have to say that I do not want a single penny of our country’s tax dollars going towards the Post Office offering financial services. I am sure millions of people feel the same way. This would be an absolute nuclear bomb of a loss, so many people would be fired and resign over this idea that it would go down in history as one of the most epic failures on record.

I would love to hear your comments on this, and would be thrilled to see any of these comments get picked up in the media. Submit a comment or reach out to me as always at 214-293-8676 or via email at Michael@CreditAccessBusiness.com.

Did you know?

• 7 in 10 Americans have less than $1,000 in savings in case of emergency.
• 34% of Americans have zero savings.
• 5% of Americans have relied on payday loans or similar services.

Customer Demographics – per a Georgetown University McDonough School of Business study:

• Majority earn between $25,000 and $50,000.
• 90 % have a high school diploma or better, 54 % have some college or degree.
• 53 % are under 45 years old (only 9 % are 65 or older).
• Majority of customers are married and 63 % have children in household
• 32 % own homes, 54 % have credit cards, 100 % have steady incomes, 100 % have checking accounts.

For more information, go to:  http://cfsaa.com/about-the-payday-advance-industry/customer-demographics.aspx

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.