House Bill 996 a “Debt Buyer Bill” is set to be signed by Governor Abbott.  This particular bill limits when a debt buyer can initiate legal action or arbitration to collect consumer debt. It also requires specific notices to be provided to the consumer with respect to out-of-statute debt.  The new provisions are effective Sept. 1, 2019.  Texas Credit Access Businesses definitely work with debt buyers who will need to conform to the new rules.  

Also, it would be a good idea to get some input from our friends at Kilpatrick Townsend & Stockton (https://www.kilpatricktownsend.com/) on whether any of this new bill can be applied to a Credit Access Business who takes ownership of a customer debt after they pay out the third-party lender under the guaranty arrangement.  

What is the definition of a Debt Buyer:

·         A person who purchases or otherwise acquires a consumer debt from a creditor or other subsequent owner of the consumer debt (thinking out loud, is this a CAB??), regardless of whether the person collects the consumer debt, hires a third party to collect the consumer debt, or hires an attorney to pursue collection litigation in connection with the consumer debt.

The term “Debt Buyer” does not include:

·         A person who acquires a charged-off debt incidental to the purchase of a portfolio that predominantly consists of consumer debt that has not been charged off; or

·         A check services company that acquires the right to collect on a paper or electronic negotiable instrument, including an Automated Clearing House (ACH) authorization to debit an account that has not been processed.”

·         The legislation prohibits a debt buyer from bringing suit or initiating arbitration on consumer debt if the applicable statute of limitations statute of limitations on a consumer debt has expired it cannot be revived.

Consumer Notices must be provided:

With the passage of this legislation, Texas joins other jurisdictions in having to provide notices regarding the expiration of the statute of limitations. (the statute of limitations is 6 years from due date)

In Texas, one of the three required disclosures will apply depending on whether the credit reporting period has expired and whether the debt buyer credit reports.

1.      If the credit reporting period has not expired and the debt buyer does credit report this is the notice that must be sent:

“THE LAW LIMITS HOW LONG YOU CAN BE SUED ON A DEBT. BECAUSE OF THE AGE OF YOUR DEBT, WE WILL NOT SUE YOU FOR IT. IF YOU DO NOT PAY THE DEBT, [INSERT NAME OF DEBT BUYER] MAY CONTINUE TO REPORT IT TO CREDIT REPORTING AGENCIES AS UNPAID FOR AS LONG AS THE LAW PERMITS THIS REPORTING. THIS NOTICE IS REQUIRED BY LAW.”

2.      If the credit reporting period has not expired but the debt buyer does not credit report:

“THE LAW LIMITS HOW LONG YOU CAN BE SUED ON A DEBT. BECAUSE OF THE AGE OF YOUR DEBT, WE WILL NOT SUE YOU FOR IT. THIS NOTICE IS REQUIRED BY LAW.”

3.      If the credit reporting period has expired:

“THE LAW LIMITS HOW LONG YOU CAN BE SUED ON A DEBT. BECAUSE OF THE AGE OF YOUR DEBT, WE WILL NOT SUE YOU FOR IT, AND WE WILL NOT REPORT IT TO ANY CREDIT REPORTING AGENCY. THIS NOTICE IS REQUIRED BY LAW.”

The notice must be “in at least 12-point type that is boldfaced, capitalized, or underlined or otherwise conspicuously set out from the surrounding written material.”

It is important that it is mentioned that the content from this blog post was gathered  from the www.Consumerfsblog.com which is a publication of Maurice Wutscher, a financial services law firm.  Our Texas Credit Access Businesses sincerely appreciate the content which was directly cited, summarized, reorganized, and paraphrased in this post.  Here is a link to their blog / website:

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.

This bill was authored by Senator Carona, and is “relating to authorized acquisition and delingquency charges for certain consumer loans.” The term “certain consumer loans” is referring to what is commonly referred to as “micro loans.” The loans referenced in this bill are funded under Texas Finance Code Chapter 342, or the “regulated lender license.” The regulated lender loans are different from CAB loans in that they are funded by the licensee, not a third party lender for whom the CAB is a special limited agent. As well, the regulated lender loans have historically been “term loans” that go beyond the 180 constraint of CAB transactions into terms of 12,24,36 months. These term loans are either 24% or 80% depending on whether they are Subchapter E, or Subchapter F. Now, it looks like something new is being addressed in this bill and loan amounts that are less than $30, $30 or more but not over $100, and then “cash advances of more than $100.”

The bill says that the following charges are authorized on the loan types below:

“Acquisition charges:”
$29 or less, an acquisition charge that is not more than $1 for each $5 of advance (aka 20% of loan amount)
$30 or more, an acquisition charge that is not more than the amount equal to 1/10th of the amount of the advance (aka 10% of loan amount)
$100 and up, acquisition charge of not more than 10% of the advance.

Then, there are monthly “Installment account handling charges:”
$35 or less, $3 per month installment account handling charge, flat fee
$35 to $70 cash advances, $3.50 per month installment account handling charge, flat fee
$70 and up, $4 per month installment account handling charge, flat fee
$100 and up, not more than $4 per month for each $100 of cash advance (aka 4% per month)

Default charges are addressed as well:
Loans of $100 or more, instead of additional interest the contract may provide for a delinquency charge after 10 days, on any installment payment within the term of the loan. Cannot exceed “the greater of $20, or 5 cents for each $1 of the late payment.

Later in the bill after most of the items in Chapter 342 are covered, there is another provision where “instead of charges authorized under Chapter 342.252 and 342.201, it addresses loans that could be instead funded under Chapter 341, in the amount of $100-$200. There would be a 10% acquisition charge and a monthly installment account handling charge of no more than $4 per month for each $100 of cash advance. Would go into effect 9-1-2013.

Click here for a PDF of SB 823! SB.823

This bill was authored by Villarreal, and is “relating to authorized charges for certain consumer loans.” The first section of the bill addresses loans under Chapter 342. This is an intricate bill, with many components that are outside of the traditional CSO-CAB environment. Considerable dialogue with operators, lawmakers, advocates and regulators would be required to make first make an apples to apples comparison to the proposed measures in HB 2315 and its alternatives.
The first proposed Section 342.201 would establish a maximum interest charge for certain loans in certain amounts, as dictated by Chapter 341, subsection C.
There would be limits on interest charges at certain tiers and loan amounts, and the specifics are difficult to understand with a close review of Chapter 341, subsection C. More information is needed in order to accurately report on this section.
Villarreal moves on to a recommended amendment of Chapter 342.252 that appears to coincide with SB 823 and micro loans. In this section, acquisition charges and installment account handling charges are outlined, however they appear to be incomplete as critical items have been lined out that site certain rates.

Acquisition charges:
$29 or less, an acquisition charge of ??? (“not more than $1 for each $5” was lined out)
$30 or more, an acquisition charge ??? (“that is not more than the amount equal to 1/10th of the amount of the cash advance” was lined out)
$100 and up, acquisition charge ??? (“not more than $10” was lined out)

Installment account handling charges:
$35 or less, not more than $3 per month
$35 to $70 cash advances, $3.50 per month
$70 to $99, $4 per month installment account handling charge
$100 and up, not more than $4 per month for each $100 of cash advance (aka 4% per month)

The Texas Finance Commission would need to prescribe by rule the maximum amount of an acquisition charge. And, this bill states that an acquisition charge under this subchapter is not to be considered interest.

The final section of the bill offers “Section 342.259(a),” an amendment to Chapter 342. This section provides for an “acquisition charge” (no amount named and “that is not more than $10” is lined out), and an “installment account handling charge” that is not more than the ratio of $4 a month for each $100 of cash advance.” This appears to repeat some of the same criteria as cited earlier in the bill. More correspondence is needed with Representative Villarreal’s office in order to fully grasp this bill.

This bill would go into effect on 9-1-2013.

Click here for a PDF of HB 2315! HB.2315

• Review your company policy regarding acceptable methods of payment for motor vehicle title loans in Texas as a Credit Access Business. With tax season upon us, there will be an increase in the number of folks paying off loans, especially motor vehicle title loans as the income tax refunds start to pour in over the next few weeks.  For that reason, it is a good time to issue this reminder.
• Many seasoned companies choose to only accept certain forms of payment on the pay-off a title loan prior to releasing that title for certain reasons.  For example, what if a paper check is accepted and that check bounces later?  Your business could have released the title to the customer without being paid!
• Accepting debit cards without getting the consumer sign the debit card receipt could be viewed as a swipe transaction versus a signature transaction and it could result in “chargeback.” Days later this would occur which would also mean that your business could have released the title without getting paid.
• Allow several days to pass before relinquishing the title so that you are assured the payment has successfully cleared. (If you accept these payment types).
• There is no right or wrong way of doing this. We cannot hold a consumer’s title for an extended period. (10) Days is what we have seen as the norm for an acceptable amount of time of holding on to the vehicle title.  In some cases, where if a check is used, the title will be released after the check clears. This normally takes 3 to 5 business days. Other cases involving a debit card, the store-front requires the consumer to do a signature transaction where the consumer signs the receipt as they would at a restaurant. Of course,
• Cash is always ideal for Credit Access Businesses in these situations, but not everyone uses it and consumers may not prefer it when amounts are larger.

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.

I just about fell out of my Toyota Prius when I learned what the CFPB spends its money on.  Anyone who has been watching the CFPB has probably heard about how the expenses there are out of control, but this was a mind blower.  Come to find out, they have actually been getting looked at by the “Government Accountability Office” regarding the recklessness of their spending…

For starters – Advertising is the #1 expense at CFPB and this was discussed in a Wall Street Journal article awhile back.  Here’s that story: https://www.wsj.com/articles/report-on-government-ad-spending-highlights-pentagon-and-cfpb-outlays-1475691906

It is a shame to say that with all of that advertising budget they can only manage to give up 150 or so complaints per month from the entire country.  About 15 million people have a loan out at any given time during a month in the United States.  That’s a complaint % of .00001 (yes that is four zero’s on the right side of the decimal).  We have cited the statistics before from the CFPB Monthly Complaints report and the “Payday” Industry complaint percentages drop 15-2-% each month since they have been getting tracked!  So, needless to say the advertising dollars spent by the CFPB preying upon consumers and trying to coerce them into complaining have not been working.  Specific to our industry, this is particularly telling of the high level of satisfaction our customers actually have, and that the “payday loan” issue is highly politicized.

That brings me to payroll at the CFPB – it is incredible what these people are getting paid.  See below for some comments from an article that came out in The Washington Free Beacon on February 9th:

“Some of the larger salaries at the agency have eclipsed those paid to some of the country’s most influential lawmakers, such as Senate Majority Leader Mitch McConnell (R., Ky.) and House Speaker Paul Ryan (R., Wis.).

The Senate majority and minority leaders are paid $193,000 annually. Two hundred and one CFPB employees outdo Sens. Mitch McConnell and Charles Schumer in pay.

Speaker of the House Paul Ryan of Wisconsin receives $223,000 per year, but that’s less than what 54 CFPB employees are paid.

Another 170 CFPB employees earn more than the secretaries of defense and state, the attorney general, and the director of national intelligence. All Cabinet salaries are capped at $199,700, but not at the bureau. Thirty-nine CFPB employees earn more than the $230,000 paid to Vice President Mike Pence.

The in-depth analysis uncovered that over 449 CFPB employees make over $100,000 and 228 employees make over $200,000. Nearly 200 of these employees make more than their most senior boss, Federal Reserve Chairwoman Janet Yellin, who earns $201,700 a year.”

This information is eye opening needless to say.  I hope that President Trump is dialed in to the CFPB as he looks into Dodd-Frank!

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.

I have touched on this subject before, and this morning I was reminded once again that banks are an easy target that the payday industry should exploit more.   Banks are lucky to have the payday industry – it deflects negative attention from the regulators and consumer advocates.  Some banks say they have launched innovative products that will compete with the payday or auto title loan.  Most who I speak to in the payday industry aren’t really concerned, the services don’t have the same flexibility or might not be enough to get the consumers fully taken care of.  And, banks aren’t really equipped to handle the short term loan needs of consumers.  Their mindset is much different, one based on volume and low servicing requirements.

About every month or two I see an article like this one titled “Fifth Third sued by payday advance loan borrowers” in the Cincinnati Business Courier.

Here’s the link:  http://www.bizjournals.com/cincinnati/news/2013/02/14/fifth-third-gets-hit-by-another.html

Basically, Fifth Third offers a payday product, they did a bunch of loans, and a class action lawyer sued them saying the bank really charged 900% APR on their payday product.  There are administrative fees on the service in addition to the APR % that spike the perceived APR of the entire agreement when days in the loan term are shortened due to early payoff.  That’s the argument, I have seen it many times in Texas with the Credit Access Business service fees, lien fees, and the 10% APR all being rolled into one finance charge and forced into an annual percentage rate.

So, industrious attorneys are realizing that banks are easy targets!  Banks are not equipped to operate in this sector of consumer need, so you can bet that they are going to have holes in their payday products that leave the door open for lawsuits. The payday industry needs to do the same and target bank liabilities in the same way.  Representatives of the industry should spend less time defending the payday products and more time highlighting the weaknesses of the banks.  So, let’s arm the readers of this blog with my all time favorite piece of data on the common bank NSF charge APR% a consumer will pay on a bounced check.

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

Yes, a consumer will have to pay 1,431% APR if they write a $100 check that bounces at a local retailer, then have pay a $35 NSF fee to the bank, and the remainder in return item fees to the retailer.  In this case the bank is not even honoring the check and just charging a $35 overdraft fee!  The retailer is the one who ends up extending the credit to the consumer until they come back in and pay for the purchase, which is so much worse.  So, what is the bank’s purpose in that scenario?  The fact is that down deep, the banks do not want the middle and low income consumers who run into these problems, which is indicated by their decrease of deposit accounts and the increase in the size of the “non-banked consumer” market.

The payday industry is very pleased to offer the service and attention that consumers in this growing sector deserve.  Consumers who utilize Credit Access Business services in Texas have a 92% satisfaction rate.  JD Power and Associates’ 2012 Retail Banking Study arrived at a 75% consumer satisfaction rate in the sector.  So, Texas Credit Access  Businesses have 23% higher satisfaction rate, and in many cases charge fees that are 60% lower!  Whoa, let’s tell that story more…

CAB Consulting is headed by Michael Brown.  Please contact us anytime to discuss your involvement in the payday industry!   Email Michael@CreditAccessBusiness.com or call 214-293-8676.

Recently another new dynamic in our industry has surfaced and this is reminder that as a small business owner in the payday loan-cash advance-installment loan industry, everyone on your team needs to continually study and learn customer behaviors. 

What is this new dynamic? It is the borrower habit of switching their debit card “on” “off” by logging into their bank account, and with the click of a button, they lock out any charges from occurring to that card number.     

By switching off the debit card number, consumers are given a tool to protect themselves from unauthorized charges which is a good thing.  But it does lock out authorized charges as well.  Once the consumer has located a lost card or perhaps successfully evaded authorized charges (mostly during the pay-date starting early in the a.m. and going all hours that due date of the authorized charge) then they can switch the card back “on” begin using it again.   

This tool that consumers have been armed with is similar to the red flag behavior of withdrawing all of the recently direct deposited pay the moment it hits their bank account, which has long been a warning sign of a consumer who does not want to make their payments.

What Consumer Advocates rarely want to focus on is how many borrowers default, or who evade, outthink, and delay making on-time payments.  This problem is directly correlated to the higher APR’s in our industry which are set where they are, to offset defaulted loan costs.  Defaulted loans are not good for anyone and for the small business owners in Texas it is a constant concern.  Hoping that sharing this recent observation will assist you and your team in your ongoing education in our industry today!

Banks that feature the “turn card on / off function that we have tracked so far: 

• Chase.
• RBFCU.
• Abilene Teachers FCU.
• Austin Telco.
• University of FCU.
• Wells Fargo.

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.

A friend forwarded me an article today from the Associated Press. The article was titled “IRS head says budget cuts could delay tax refunds.” This could have a number of trickle-down effects on taxpayers expecting a their tax refund sooner than later. As well, many companies who serve those people can also be negatively impacted.

Here is the link: (http://hosted.ap.org/dynamic/stories/U/US_IRS_DELAYED_REFUNDS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-12-18-15-39-07)

Many Americans wait for their tax refund to pay off debt that has accumulated throughout the year. And the businesses who serve them (like many of you who are reading this post) have traditionally depended on their customers to payoff their obligations at tax refund time. Often, consumers are given the choice to wait until that refund comes in to do just that. It is a market dynamic that exists and over the years has become a give and take between consumers and businesses in a certain sector of the U.S. economy. So, a change in that balance brought on by a delay in tax refunds can be concerning.

The article also shows how government initiatives can have un-intended consequences and cause harm to Americans who have the least amount of financial cushion. It is suggested that Obamacare is the source of the delay because the Republicans cut down IRS funding as a back door technique to cripple its implementation. 2014 is the first tax year that the IRS will be tasked with the reporting of health insurance payments by taxpayers. The IRS budget cuts mean one more thing is added to the workload of smaller staffs causing slower tax return processing times, which in turn leads to a delay in when the refunds are issued.

Getting back to how these kinds of dynamics effect the short-term small dollar loan space – it is an example of what heavy government intervention can result in. Big government causes big problems! Many would agree that we should have stuck to a free market approach to health care and no government intervention. This minimizes un-intended consequences and creates fewer opportunities for politicians to make pawns out of hard working Americans who need to make every penny count. Many states have enacted heavy regulations on the short term small dollar loan industry that decimated businesses in those states while the consumer need remained the same. Where did the consumer go to get their needs filled?

Let’s keep these lessons in mind when it comes to the short term small dollar loan industry. Less restrictions and a free market model encourages competition, which is always best for consumers. Let the businesses decide…

In today’s world of the smart phone, apps, and Amazon, every retail “brick and mortar” business needs to evolve around the newer consumer behaviors in the virtual marketplace.  As surprising as it is, many companies like Toys R’ Us and Sears with decades of brand loyalty just could not make their model compete and evolve in the fight against online shopping namely Amazon.  Things could have worked out much better for these two legendary American brands if they would have seen the writing on the wall much sooner.  

What would the writing on the wall have said?  Invest in online, get an app, decrease store expenses, close losing stores, have the best web site in all of your industry!  Be prepared if you were faced with having to operate 100% online. Could you?   

A recent article on CBS News.com titled “Retail graveyard: More than 7,000 U.S. stores have closed this year” was posted and it was incredible to see the drastic number of store closures this year versus 2018. Check out these statistics:

• “Last year, the U.S. lost 5,864 stores, while 3,258 opened.
• So far this year, 7,062 have closed, while 3,017 have opened.
• All told, the retail closures in 2019 could easily double 2018’s total — extending beyond 12,000.

Here are some of the well-known brands who are closing locations: Payless Shoe Source, Gymboree, Family Dollar, GNC, Walgreens, Zales/Kay/Jared Jewelers, Rent-A-Center, Office Depot, Lowes, Kmart, CVS, JC Penney, Party City.”

Comment: The bottom line of this is that it is a reminder for all of us that we have to be fully involved in the online aspects of the payday industry.  The most commonly used software amongst our group is Infinity Software.  Infinity Software has every single tool that we need to go toe-to-toe with the FinTech’s who dominate the Texas market online.  Did you know that  about 15 out of state FinTech’s have a bigger share of the Texas market than the Houston region that includes all cities and towns around it?  That comes to more than 1/3 of the entire Texas market!  Embrace online lending capabilities and trim away the antiquated facets of your business.  This means – invest in SEO, market online, online applications, killer website, e-signatures, debit card payments, ACH funding (credits), text messaging, and more!  

Infinity Software: https://infinityels.com/

Online marketing, websites, SEO: https://hearstdms.com/localedge/tofsc

Link to the CBA article: https://www.cbsnews.com/news/more-than-7000-us-stores-have-closed-2019-final-tally-could-exceed-12000/

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.

The 84th Texas Legislative Session gets underway in just over a month.  Session starts on Tuesday January 13th, 2015.  So far from what I can tell there have been (3) bills filed having to due with payday loans, installment loans, and/or auto title loans.

The Texas Legislature meets in a regular session every two years, convening on the second Tuesday in January of every odd-numbered year. These biennial sessions are limited to 140 days. The governor can also call additional special sessions as necessary, which cannot exceed 30 days. The 84^th Legislative Session is January 13, through June 1, 2015.

Here is a write up on the three bills out at this point:  SB 91, SB 92, and SB 121.

SB 91, Written by Senator Ellis: Proposes an APR Cap, the APR will include all interest and fees associated with the transaction, and the cap is set at 36% APR.

SB 92, written by Senator Ellis, the rules in this bill DO NOT pre-empt city ordinances, if there is a conflict, the more “stringent” rule would control. (Wondering who decides what more stringent is – the borrower, the City, or Ellis!) The contracts must be provided before signing, in the language in which the deal was negotiated, and must be read in its entirety! Must disclose info on Non Profits who may help the borrower, documents must be available in English & Spanish, PDL loan amounts no more than 20% of monthly income, title loans no more than 3% of annual income, max 70% of value of vehicle, must verify income, no more than 4 installments, 25% reduction in principal for each installment, no refinances on multipayment loans! Single payment loans cannot be refinanced more than 3 times. A new loan within 7 days of the last loan is considered a re-finance. Transfer or assignment of licenses is prohibited. Docs must be kept for 3 years instead of 25 months.

SB 121 has so much in it I decided bullet points are needed.  Last session we had the ugly baby bill, this one should be called the “kitchen sink” bill because everything is in it but the kitchen sink!  See below:

• Database.
• 7 day cool off or it’s a re-fi.
• Extended payment plans, and notices of extended payment plans.
• Fines of $2,000 per instance, plus damages up to $10,000 per violation
• Cannot evade the City Ordinance, cannot transfer loan to another sister location.
• CAB applications must have the Third Party Lender agreement included.
• Unsecured loans max 90 days, title loans max 180 days, $5,000 fines for this category.
• Spanish language contracts.
• Only one loan rule, customer has to sign a form stating they have no other CAB loans out, CAB must try to confirm this, $1,000 fine for violations on this.
• Must establish and verify income.
• Cap on loan amounts: unsecured is max 20% of income.
• No less than 10 days and no more than 35 days on a single payment loan, max re-fi’s is (3.)
• Extended payment plans must be offered if there has not been one in (12) months.
• Multi-payment loan payments cannot exceed 10% of the monthly income if less than $28k annually, 15% if they earn more, no more than 12 installments, max 180 days, must be fully amortizing.
• Single payment title loan amounts are capped at 6% of annual income if they earn less than $28k, if they earn above, then it goes to 8%, limit of 70% of vehicle value, no more than 3 re-fi’s.
• Multi-payment title loans cannot exceed 70% of value, each payment cannot exceed 20% of the gross monthly income if earn below $28k, or 30% if they earn above $28k, must be fully amortizing, no more than 6 installments, max 180 days, no re-po without extended payment plan default.
• Effective date: 9-1-2015

Michael Brown is President of the Texas Organization of Financial Service Centers, and President of CAB Consulting.  Contact information:  214-293-8676 or Michael@CreditAccessBusiness.com.