CAB Consulting has been helping small and mid-size Texas Credit Access Businesses navigate the new CAB licensing model ever since its passage just over 2 years ago. Having served almost 200 locations during that time, CAB Consulting could be a great resource for your company. Does your business need a compliance review? Do you feel your business is prepared for an OCCC examiner to walk in your door?

Audit Alert: OCCC examiners are actively traveling the State right now and they typically show up at your door un-announced. Several clients have been examined this month. CAB Consulting clients will be fully prepared for an examination and will know exactly what to expect.

What other needs might your business currently have? The principal of CAB Consulting, Michael Brown, would like to work with you on your Payday or Auto Title loan store to make operating improvements, increase compliance, grow confidently, and become more profitable.

CAB Consulting can deliver a wide array of results to your business, call 214-293-8676 today to learn more, or visit www.CreditAccessBusiness.com for information!

Around March 1st a huge blow was dealt to the “Payday Loan Ordinance” in Texas.  The news came out that an Austin court had ruled in favor of Credit Access Businesses in (2) lawsuits related to the ordinance where the City of Austin was sued.  In those cases, the court ruled that the ordinances were “preempted” by State law in several ways. Preemption is something that we as a group have been after for a very long time and we are pleased to see that our industry got its day in court.  The consumer advocate groups who have been pushing the ordinance on cities should be on notice that the truth is starting to get out.  All that has happen is for the cities to enforce the ordinance.

Many of you may not know the truth, which is that the cities have not been enforcing their ordinances.  This is a deliberate tactic to avoid being sued by Credit Access Businesses. It is also likely that they have no staff or budget to allocate to the endeavor which is worth mentioning as well.  Each city is given a payday loan city ordinance “playbook” that gives them the tactics and methods for enacting the ordinance along with how not to get sued.  If they do not enforce then the payday companies have no legal grounds to sue on because they have not actually been “harmed.”

Well, the City of Austin went beyond its rights and decided to go in and examine and cite two Credit Access Businesses – Advance America and Speedy Cash.  This was the first instance that I know of where a city has enforced and cited a company for not abiding to the ordinance.  So, the first time a city goes in and enforces an ordinance what happens?  They get sued and lose!  This simple scenario is one that should resonate with all cities who have passed an ordinance and with those who are looking at it.  Austin happens to have its act together and enjoys a pretty decent legal budget – if they can lose then anyone can lose.

Cities should know that there is now a very real legal risk for them – their city councils will be embroiled in lawsuits and will have to consider retaining outside legal counsel to defend themselves.  Council members who know that they have been charged with real responsibilities such as protecting water, investing in infrastructure, maintaining police strength, and providing general safety for their citizens know that they are way outside the lines when telling someone how much money they can borrow and how long they can have to pay it back.  It seems incredibly absurd to me.  For many of you it would be like having the city tell you that you can only have a car that costs $10,000 or less and you must pay it off in (6) payments. Also, you can only have one car!  It is literally the same thing.  What if you have the cash to simply pay $40,000 for a car?  What if you have a spouse that you want to buy a car for?  That example plus a hundred more can be made – and what it does is blow a gaping hole in the practicality of the “Payday Loan City Ordinance.”  That is where the whole thing should have stopped years ago.

But now the cold hard truth has landed on the desks of anyone involved in this matter – the court has ruled in favor of Credit Access Businesses.  Cities now need to decide what they are going to do.  They need to be asked publicly, “Are you going to enforce this ordinance?”  If they say “No,” then won’t that mean they are effectively rolling back the ordinance?  If so, Credit Access Businesses will be able to go back to offering the kinds of credit that consumers in the ordinance cities need and want.  Won’t this be an improvement over being told they must drive 15 minutes down the road or get on their smartphone to request a loan from an unlicensed unregulated offshore lender in the Bahamas?

What if they say “yes, we are going to enforce the ordinance?”  Then Credit Access Businesses will be given the chance to defend themselves like Speedy Cash and Advance America did. What they will simply do is execute a transaction that violates the ordinance, then take that one transaction down to the City and “self-report” the violation.  At that point the city must act and if they do cite the Credit Access Business then they will turn around and sue the City.  What lies ahead will be a court decision that will resemble that of the court orders in Austin.

CABs are already sufficiently regulated by the Office of Consumer Credit Commissioner.  We have 20-30 page contracts for a $300 loan!  We adhere to a long list of federal and state rules and regulations (all in our contract package) and our complaint percentages on the state and federal levels are fractional on a complaint to loan basis.  I believe in Texas the complaint percentage is .000153% (yes that is three zeroes!).  Our CABs abide by a 90-point CAB Examination checklist that we obtained from the OCCC.  TOFSC members tune in to a weekly conference call every Wednesday where we talk about CFPB and OCCC compliance, share ideas, and try to safeguard our businesses.  We are small business owners banded together to try and survive the ordinances.  In the last (4) years CABs have shrunk from over 3,500 in Texas to about 2,200 that is a 37% decrease in CABs.  That is thousands of jobs lost, thousands of leases broken, a significant loss in tax dollars for cities, and a loss of livelihood for many.  All of that and the demand has not decreased (check OCCC data and consumer reports for online inquires in ordinance cities the data is there if you want to do some homework) although there has been a 37% decrease in stores.

TOFSC Members are tuned in to this issue and we are ready to fight to save our businesses and to bring the access to credit back to consumers in ordinances cities that is desired.  Cities should prefer that legal, licensed, and regulated businesses serve their citizen’s needs.   C’mon cities – let’s bring it back to the CABs and let the cities focus on their big priorities!

See the links below for the court orders.  For media inquiries – feel free to call Michael Brown at 214-293-8676, or email me at Michael@CreditAccessBusiness.com.  Michael is the President of the Texas Organization of Financial Service Centers (“TOFSC”) which is a trade group comprised of small to mid-sized Credit Access Businesses in Texas.  As well, he is President of CAB Consulting, a consulting firm that offers startup, licensing, compliance, and operating guidance to payday businesses in Texas and other states.

https://drive.google.com/open?id=0B2eRFUSSFqhzaXJfa19FbmRuRmc

https://drive.google.com/open?id=0B2eRFUSSFqhzWjUwZkxRaWMwVjQ

Yesterday in El Paso, the City Council unanimously voted to proceed with enacting an ordinance to regulate Payday and Auto Title Loan businesses. The Council asked the City Attorney to draft the ordinance and it could be approved by January. This will be the 4th such ordinance in Texas, if it is ultimately put into effect.

As of today we know of ordinances in Dallas, San Antonio, and Austin. I believe that each of the cities are entangled in legal proceedings brought against them by CAB’s.

Some of the details of the proposed El Paso ordinance are:
• Require lenders to provide borrower’s with financial counseling information.
• Payday loans would not be allowed for more than 20% of the borrower’s monthly income.
• Auto Title Loans would be limited to 3% of the borrower’s annual income.
• Auto Title Loans would also be limited to no more than 70% of the vehicle value.
• Installment loans would be limited to no more than 4 installments, refinances would be limited to 3.
• CAB’s would be asked to register with the City of El Paso.
• Would go into effect in July 2013.

It is curious that the effective date is July 2013. I am thinking that the City of El Paso knows that there will be activity in the Texas Legislature regarding CAB operating rules and city ordinances. Consider the additional compliance burdens on licensed CAB’s with locations in cities with ordinances. Is it reasonable to ask any business to manage compliance to Federal, State, and now City regulations too?

As an industry, we need to dig our heels in on the local ordinances. 2012 has been a good year for CAB’s under the new licensing and we have demonstrated our good faith, desire to operate legally and fairly. Let the State of Texas handle this and keep the cities out of it. The Texas Finance Commission has expressed its position on the ordinances, and they indicated that an improvement on this problem was needed. So, it is my opinion that the version of the El Paso ordinance that was unveiled may not make it to July 2013. Something different might end up being put in place, or perhaps nothing at all after the session.

If you are interested in learning more, I am working with my contacts in El Paso and Austin to gather additional information on how to play a part in the fight against the ordinances. Will know more soon, the session starts next month and the El Paso bill is slated to be formally introduced on December 19th.