CFPB Basics

If you have not already, many of you may begin to hear about the “CFPB.”  The “CPFB” stands for Consumer Financial Protection Bureau.  This is a federal agency that was created in the aftermath of the US Economic Meltdown in 2008-2009.  The government felt that it was necessary to create this new bureau to monitor a broad range of businesses that contributed to the problem by not behaving in an appropriate manner, violating the law, or taking advantage of consumers.

“The central mission of the Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.”The 3 priorities of the CFPB will to be Educate, Enforce, and Study.”

The scope of the CFPB will include the Payday Loan and Auto Title Loan industries.  It is a possibility that our industry will be faced with regulations on local, state, and federal levels.  The CFPB held a field meeting in Birmingham last week and has released an “Examination Procedures”document that illustrates how they plan to go about reviewing industry businesses.

If you would like to review the Examination Procedures document, it is available online, or you may request a copy from CAB Consulting and Brokerage.  Also, if you would like to view an intro to the Field Meeting last week, you can do so here: http://www.consumerfinance.gov/getting-a-complete-picture-of-the-payday-market/

Right now we are all focused on getting our new CABs off the ground and implementing new notices and disclosures.  Set your sights on the CFPB next quarter and take some time to become familiar with it.  CAB Consulting and Brokerage is gathering facts and will continue to provide information as it becomes available.

If you have questions, please feel free to call Michael Brown at 214-293-8676, or email cabconbrokerage@gmail.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.

Many of you know there have been some recent ACH payment processor problems that have developed in our industry. In particular, online operators are being hit the hardest. I had (2) clients check in with me this morning regarding the shutdown of their ACH capabilities.

I was surprised to see them shutdown, as clients of CAB Consulting are licensed businesses. It has been my understanding that only unlicensed and unregulated online payday loan companies were the targets of these shutdowns, not compliant and legal licensed operators. It appears ACH companies are having a knee-jerk response and are suspending services first, then asking questions later.

If you have been impacted by this, there are some options in the market that I can tell you about. Also, check in with your ACH provider to to make sure you are informed about where things are now, and to avoid being blindsided.

Contact Michael Brown at CAB Consulting, 214-293-8676, or Michael@CreditAccessBusiness.com.

With over 3,000 registered payday loan businesses and an overall population of 25 million people, Texas represents one of the most prolific markets for payday lenders in the industry.

Not only that, but there are many large metropolitan clusters in Texas surrounding the large cities Dallas, Ft. Worth, Houston, Austin, and San Antonio.  There’s a saying in Texas that when the weather is hot, there’s nothing else to do but shop and eat. A typical street corner in Dallas has at least two banks and two fast food restaurants, so consumers are invited to get money and spend money just about every waking moment. Texas highways and byways are set up to prime the capitalistic consumer engine and breed success in the retail business. Intercity freeways are gigantic advertising corridors for anyone who wants to hang out their shingle, making this market a hotbed for business owners.

One such business that has been the beneficiary of that formula is the payday loan industry.  What formerly was a little known product based in check cashing stores or pawn shops, has grown into a professional, regulated, and mainstream industry.  In 2010, it was at $40 billion.

With all the instability in traditional cornerstone investments like the stock market and real estate, many investors have taken a look at the payday loan industry as an option.  The industry is tuned to adapt to the idiosyncrasies of the cash strapped, credit challenged consumer.  Payday loan businesses were built by adapting to many of the problems that Wall Street cannot.

Are you looking for something new?  Are you growing weary of the daily picture that CNN shows you of the beleaguered NYSE trader looking down at his desk after yet another hard plummet of the market?

Consider becoming a lender in the Texas payday loan business.  Reach out to C.A.B. Consulting and Brokerage if you would like to look into it.  We would be happy to tell you what we know and connect you with businesses looking for people such as yourself with money to invest.

Contact C.A.B. Consulting and Brokerage at cabconbrokerage@gmail.com or call us at 214.293.8676.