Recently, I wrote a blog that focused on Lender investment opportunities and strengths of the Texas payday loan market.  Today, I expand my optimism for the payday loan industry beyond Texas. In my opinion the entire payday loan industry is primed for success in today’s new economic reality.

Why?  Look at the economic times, and apply the advantages of the industry and its products.  Need cash now, not later? Check.  Do you have credit problems? Check.  Need flexible payments? Check.  The payday loan industry was born out of innovation and has evolved into a product that flourishes in a consumer market with high defaults, poor credit, and inconsistent payments.  Because of this fact, today’s payday loan option represents an open door when so many others are closed.

Given the additional fact that the American appetite for entertainment, food, and shopping isn’t exactly dying, the industry is in a favorable position, and it is in many ways a perfect storm of opportunity.  It is not about taking advantage of consumers, it’s about meeting a consumer need.

In what ways can our industry stakeholders go beyond the “Payday Loan” and create more value in their relationships with customers?  How can the bigger challenges that the industry faces like regulation and perception be overcome?  One industry leader I know is encouraging communication and the exchange of ideas to answer such questions.  Whoever gets it right will be catapulted into the new global economic reality where they will reap the benefits.

Are we living in a new America?  Yes, and we need to shed the old ways of thinking and get on with it.  China, India and other foreign markets are seizing the opportunity to make money in our country, while America appears to be stuck in the past and applying old fashioned business standards to a world that is no more.  Welcome to the future – it is here!

Instead of trying to get back to the good ole’ days, the innovators and bright minds of today see that the best days lay ahead.  I challenge you to be an innovator and seize the opportunity to lead our country into a new, boundless reality.

After not being able to find the CFPB monthly complaint report on payday loans last week, I found it Wednesday which was a bit later than normal.  The delay might have been because it is a different kind of report, it is focused on “older” complainants who were 62+ years of age.

This new format report focused on just one month, and discloses that payday loan industry had (23) complaints versus (27) in the prior month.  That is a 28% decrease and is very much in line with all of the other reports that have been released I believe this is #23.

There have been 1,610 CFPB complaints submitted on the payday loan industry since complaints started being taken in November 2013, and (60) “older complaints” have been submitted since November 2013.

Overall, 1,163,000+ total complaints have been submitted so far to the CFPB covering all industries not just ours.  1,610 o, so PDL has a .001387931 complaint ratio!

Here is a link to the CFPB’s published report:

https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201705_cfpb_Monthly_Complaint_Report.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.

In an earlier blog the CAB license renewal deadline was addressed as it is coming on January 31st.  It is very much worth mentioning that each year when the CABs across Texas pay the renewal fee of $800 per location, that $200 of that goes to the Texas Financial Education Endowment Fund (http://www.tfee.texas.gov/).  It appears that 2,125 CAB licenses will be renewed this year and that comes to $425,000 in contributions to the fund!

In years past there have been as many as 3,500 CABs so that would have meant that $700,000 was contributed for that given year.  CABs have been contributing to the fund since the CAB law went into effect in 2012 so 2017 will be the 6th year.  CAB renewals fluctuate but it is safe to say that $2-$3 million has been put in to this fund by Texas Credit Access Businesses.

“The Texas Legislature established the Texas Financial Education Endowment (TFEE) to support statewide financial capability and consumer credit building activities and programs. The endowment is funded through assessments on each credit access businesses and is administered by the Finance Commission of Texas.”

This program is 100% funded by the licensed CAB operators in Texas.  As a group we should all be pleased to make contributions towards the kinds of programs that have been given grants through the fund.

One bit of irony worth mentioning is that many of the programs who have received money from CABs are located in cities where ordinances were passed.  Goodwill Industries has been strongly opposed to our industry however they gladly received $32,000 from us in Austin!  I have personally seen them testify at City Council meetings in support of the ordinance.  Their testimony is typical in that had a very narrow, negative, and uninformed set of talking points.  Not only does Goodwill support the city ordinances but they join the argument that CABs take advantage of low income citizens.  Well in the case of the $32,000 grant, they took money money from low income citizens.  And, the participated in a movement that caused businesses to close (about 1,300 across Texas), people to lose jobs (2 per store would be 2,600 jobs gone), and after all of that the rates in ordinance cities went up 12% because of burdensome regulation.  Less competition hurts the consumer, once again…

For more information on market changes related to ordinances please go to the OCCC’s website and review the MSA reports for the last several years: http://occc.texas.gov/publications/activity-reports#cab

As for the good news – Texas Credit Access Businesses should get more positive attention for the impact they have on programs that do good for others, see below for some of the grant recipients:

K-12 Financial Education & Capability:

Texas Council on Economic Education – $32,000.00

Financial Coaching:

Family Pathfinders Tarrant County – $32,000.00

Community Development Corporation of Brownsville – $32,000.00

Adult Financial Education & Capability:

Goodwill Industries of Central Texas, Inc., Austin – $32,000.00
Easter Seals of Greater Houston, Houston – $32,000.00
Texas State Affordable Housing Corporation, Statewide – $32,000.00
El Paso Credit Union, Inc., El Paso – $25,000.00
Family Service Association of San Antonio, Inc., San Antonio – $32,000.00

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 Austin American Statesman put out an article this week (“Senate votes to limit city regulations on private businesses.”) that discussed two bills in the legislature that were about to be passed by the Senate.  The bills, SB 2486 and SB 2488, will limit local government control over private businesses.  It appears the bills are directly focused on employer issues like hiring practices and break times.  

After hearing some very familiar talking points that support the authority of State law over local ordinances, it stands to reason that the passage of bills like these could lead to better days for Credit Access Businesses offering payday loans, installment loans, and title loans in Texas. 

Of course, an Austin City Council Member testified at a hearing against one of the bills.  Greg Cesar said one of the bills “disgracefully” preempted local regulations.  Let me remind Councilman Cesar of what a disgrace the attempted enforcement of the Payday Loan City Ordinance has been for the City of Austin.  They have been involved in two lawsuits for 2+ years against Speedy Cash and Advance America.  It has been a back and forth legal battle that has consumed City of Austin resources for far too long and even with all that money and time spent, no victory for Austin.  I am sure the residents of Austin would rather have their tax dollars spent on more meaningful subjects.  That is the disgrace! 

Now that I got a good swipe in against the Austin City Council, I will get back to two strong talking points I saw used. Each of them can be used almost as a mirror image in the argument for preemption of the Payday Loan City Ordinance by existing Texas law.

“One comment dismissed concerns over water breaks and work environments, stating that the Occupational Safety and Health Administration already regulates workplace safety.”  (This is exactly the same scenario with Credit Access Businesses – we are already regulated by the Office of Consumer Credit Commissioner).

Senator Creighton said: “I believe in uniformity across the state for the applicant and also for the employer, and it should happen in this building.” (This really applies to any business in Texas with more than one location.  Operating Credit Access Businesses in a City with an Ordinance and one without an Ordinance causes operational confusion and customer inconvenience).

At this point I believe that many Cities in Texas no longer look at passing the Payday Loan Ordinance because they know if they pass it and enforce it they will be looking at allocating several years’ worth of time in lawsuits over it.  So that addresses the further spreading of the Ordinance.  In terms of rolling back existing Ordinances across Texas, perhaps there issome opportunity ahead where the passage of these two bills creates the precedent for leaders in our industry to get that done!

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.

Wanted to get some dialogue going on the Dallas Payday Loan Ordinance, I have one client with stores in Dallas proper who I am looking at it with.  Talked with some other folks who have a position within city limits and also talked to City of Dallas, have a call into some council members as well.

Here’s what I know:

Last year the City of Dallas passed an ordinance that attempts to regulate Payday Loan businesses.  This was passed within a week of the Texas laws related to Credit Access Businesses, and at that time a trade group named CSAT which is comprised of several of the larger players in the market filed an injunction.  I have not been updated on the injunction since last July.   Dallas is moving forward and has licensed 20 businesses, another 18 are pending.

Some basics of the ordinance that supposedly went into effect on January 1:
-Get a permit, pay $50
-Cannot loan more than 20% of gross monthly income on Payday Loans
-Auto Title Loans cannot exceed 3% of gross annual income
-Installment programs no more than four payments, must paydown 25% of principle with each payment
-Refinances are limited to 3
-Loans made less than 7 days after a payoff are considered a refinance
-Max of $500 for violations

My opinion  along with many others is that the Dallas City Council / City of Dallas is exceeding their jurisdiction when citing restrictions on the ways in which a business can offer its products or services.  The OCCC has done an excellent job with implementing the new CAB program and they are well equipped to do so.   Dallas, ahem, not so much.