I always look forward to the new CFPB complaint reports that come out each month around the 25^th.  Why?  Well as you will see if you follow them as well, the “Payday Loan” industry (this is the umbrella term used in these reports to refer to companies who offer payday loans, installment loans, title loans, cash advances, etc) has yet another double digit decrease in complaint volume versus the same 3-month period (July-August-September) last year.  This month showed a 21% decrease.

It is unfortunate that there were complaints, and I can tell you that our clients would be extremely concerned in the event any complaint was filed by their customer.  They would respond promptly and work to communicate with the customer to clarify any misunderstandings and work out a resolution.  Zero complaints – that is the goal.

As is the case with the other monthly reports – we are always the industry with the largest decrease.  There are 10 other industry categories and we are the only one with these giant drops in customer complaints, consistently.  Student loans are #1 and our bank friends are at #2 with a 37% increase.

I am aware that consumer advocates and others who are not so friendly to the industry visit this website.  I am wondering if they also view the CFPB complaints each month.  The story being told here is that consumers complain less about our services than any CFPB category.  I would recommend you shift your focus to the biggest offenders if you are currently hyper-focused on shutting down the “payday loan” industry.

After all the work you have done to work up complaints you have only mustered a double digit decrease in complaint volume, you may be able to do better somewhere else.  I think the banks are where you should go – they target our customers with abusive overdraft charges and NSF fees with astronomical effective APR’s (think 1,600.00%), and bring in about 4 times the amount of annual revenue that our industry does.

Here is the link to this month’s report (see page 4):

CFPB October 2016 Monthly Complaint Report

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.

LONGVIEW, Tex. – Spurred by the senseless shootings of police officers in Dallas and elsewhere and promoting strong support for local law enforcement, four members of the Texas Organization of Financial Service Centers (“TOFSC”) have donated $10,500 to the Longview Texas Police Association to purchase ballistic vests.

The four companies making the combined donation — Texas Star, CashMax, Texas Thrifty Loans and Rapid Payday & Title Loan — operate storefront businesses in Longview and appreciate the outstanding public service and professionalism of the Longview Police Department.

“We have been overwhelmed with the outpouring of support from our community here in Longview,” said Sgt. Jimmy Purdon of the Longview Police Department. “Ballistic plates are a necessity for law enforcement in today’s climate. Officers need the highest level of protection available so they can go home to their families and continue to serve and protect our great community.”

The Longview Back the Blue support group has been raising money for the vests. Christy Purdon and Scarlet Bird launched the effort following the tragic July 10 shooting of five police officers in Dallas.

“Watching so many suffer such great loss made it even more apparent that we as a community needed to step up and do whatever we can to protect our officers,” said Christy Purdon, who is married to Sgt. Jimmy Purdon. “It is my belief that every officer across the nation deserves to be protected in the line of duty. They protect us each and every day, so why shouldn’t we protect them, too?”

Jay Pruett, owner of Texas Star, helped spearhead the donation for the vests.

“What we’ve seen — not just in Dallas but in too many places around the country — has been the horrific targeting and shooting of police officers,” Pruett said. “The police in Longview literally put their lives on the line everyday for us. This is the least we could do for them.”

Longview Police Department Detective Chris Bethard said he is “humbled and in awe of the generosity and support for law enforcement in our community.”

“In my 18 years of law enforcement, the climate of this profession has changed dramatically,” Det. Bethard said. “Due to those changes, the addition of ballistic plates has become a necessary piece of equipment to keep officers safe and give us the best chance of returning to our families. My family and I want to thank you for the support and dedication you give us as we serve this wonderful community.”

Ballistic vests costs about $800 a piece. With more than 100 commissioned officers, the Longview Police Department did not have the budget to purchase vests for every officer.

“I would personally like to show my gratitude to this group of businesses that reached out to me to show their support,” Christy Purdon said. “Their care and love for the community and its officers is heartfelt and will never be forgotten. There are truly no words that could ever show this group of businesses how much this donation means to us.”

Before the Back the Blue effort began, Scarlet Bird had never met Christy Purdon. But like Burdon, she has a strong and emotional connection to the Longview Police Department. She is engaged to Sgt. Donald “Chip” Koepke. The couple met when Sgt. Koepke saved Bird’s sister’s life after she was in a car accident.

“Over the last several months, we have helplessly watched the countless attacks on law enforcement,” Bird said. “Innocent officers have lost their lives for no reason other than being a police officer. I felt the need to make a difference.”

With a goal of raising $80,000, Longview Back the Blue began selling t-shirts and offering the opportunity for businesses and individuals to “sponsor” an officer’s vest.

“We are proud to be part of a community that supports our officers and their needs,” Bird said. “As we continue to work toward our goal, we strive to let the community know that no donation is too small; no act of kindness goes unappreciated. Along with contributions from other groups, we are just shy of the halfway mark in raising funds to outfit Longview’s patrol officers.”

The contribution from these companies is a strong example of how TOFSC members support communities across Texas, said TOFSC President Michael Brown.

“Our members are active in their communities,” Brown said. “They know their customers and they support and respect the job done by all law enforcement officers.  TOFSC is proud to be part of an effort that protects those who protect us.”

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.

See below for a recent email sent out to OCCC stakeholders:

“On December 9, 2019, at 2:30 p.m., the OCCC will hold a stakeholder meeting on credit services organizations and attorney general opinion KP-0277.

A stakeholder meeting notice is available at: https://occc.texas.gov/publications/attorney-general-opinions. On this webpage, click the link labeled “Stakeholder Meeting Notice.” The meeting notice provides additional details and questions on which the OCCC is seeking input.

Stakeholders are invited to attend the meeting in person at the Finance Commission Building, or to listen and participate through an online webinar. To listen or participate online, please follow the instructions available at: https://attendee.gotowebinar.com/register/3659168503230489611

The OCCC will accept comments and suggestions on the questions in the meeting notice until December 12, 2019, at 5:00 p.m.”

OCCC is asking stakeholders for comments and suggestions on the topics below:

1. Does the opinion’s analysis affect the regulatory landscape for CAB transactions (i.e., deferred presentment transactions and motor vehicle title loans)?

2. Must persons engaged in non-CAB transactions comply with all requirements of Chapter 393 other than those that apply specifically to CABs (i.e., Section 393.201(c), Subchapter C-1, Subchapter G)?

3. Are persons engaged in non-CAB transactions subject to the enforcement authority of the attorney general under Section 393.502?

4. Are persons engaged in non-CAB transactions subject to local ordinances and the enforcement authority of local governments?

5. Are persons engaged in non-CAB transactions subject to federal law and the enforcement authority of federal agencies (e.g., the Consumer Financial Protection Bureau, the Federal Trade Commission)?

6. Sections 14.101 and 14.201 of the Texas Finance Code give the OCCC authority to investigate and enforce violations of Chapter 393 with respect to a credit access business. What is the proper role of the OCCC in light of the opinion?

7. Section 393.602 of the Texas Finance Code says a person may not use a device, subterfuge, or pretense to evade the application of Chapter 393, Subchapter G. Under the opinion, what would constitute a device, subterfuge, or pretense to evade the application of Chapter 393, Subchapter G?

8. Section 393.303 of the Texas Finance Code says a credit services organization may not charge or receive from a consumer valuable consideration solely for referring the consumer to a retail seller who will or may extend to the consumer credit that is substantially the same as that available to the public. Under the AG opinion, what would constitute a violation of Section 393.303?

9. Does the opinion’s analysis raise other significant policy issues? 

10. Should the OCCC and the Finance Commission engage in rulemaking related to any of these issues? If so, what is the statutory basis for the rulemaking?

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 “Lend 360” Conference is coming up in Dallas, September 25-27.  Since it is in our back yard versus Florida or California wanted to discuss it a bit and give you some information for you to better decide on whether you will or will not attend. 

Many of our vendor and TOFSC sponsor companies will be there so that is a great reason to go out of the gate. (Microbilt, Clarity, Leads Market, Factor Trust Trans Union, Dot 818, Payliance, Repay, Zero Parallel, Infinity, and Loan Payment Pro) along with many others.

Looking at the schedule over the 3-day period…it starts at 1p on Wednesday, goes until 5p. Thursday is 8a-5p, and Friday is 8a-1130a.  The format appears to be traditional conference presentation style, in 8-10 different rooms of the Fairmont Hotel in downtown Dallas along with a larger vendor / sponsor booth gathering area.

Summary of presentation topics:

• Federal law – conversation around lending.
• Small business customer acquisition (could be very relevant to our group).
• All parts and pieces of the “FinTech” industry – this is the major component of the conference.
• 2020 election impact on FinTech.
• Investor outlook on Fintech.
• Conversation on moving into “alternative credit market” and products / services in the “non-prime market.
• How FinTechs work with banks, there is more than one of these, so it appears to be a big part of FinTech operations…interesting.
• How to use multiple domain names for your business online to drive traffic to your business (could be very relevant to our group).
• Staying ahead of fraudsters (could be very relevant to our group).
• Data security.
• FinTech investors and other capital providers will be in attendance and will speak.
• Advertising and marketing round table (could be very relevant to our group).
• Making your business recession proof.
• Optimizing debt selling and collections strategies.

Costs $2,600 to attend and here is a link to more information:  https://www.lend360.org/schedule/

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.

Seems like over the last year that the industry buzzword has been “FinTech.”  According to BuiltIn.com “”Fintech” is a portmanteau (combination of two words to create a new one) of financial” and “technology.”  It is the application of new technological advancements to products and services in the financial industry.”

For those of us in business in Texas, “FinTech” is a term that is slowly evolving away from a vague Silcon Valley-esque concept to something that is becoming more clear and accessible by the week.  It seems like that with the conclusion of the Lend360 Conference last week in Dallas that the buzz around the term hit an all time high.  A few weeks ago I shared summary details about the upcoming event, talked about some of the topics, sessions, etc.  Turns out that it was heavily FinTech oriented for sure.  Many of my “google alerts” lit up with FinTech stories and articles after the Conference and it turns out that many friends of CAB Consulting and TOFSC attended as well.  

On September 26th one particular article on Banking Dive.com really hit home and painted a very clear picture of what FinTech is and how it is playing out in the personal loan marketplace.  The article was titled “FinTech leaders have doubled their market share in 4 years” that commented on a recent study done by Experian.  See below for some of the more interesting comments and findings:

• Fintechs are providing 49.4% of unsecured personal loans as of March, according to a study released Tuesday by credit reporting agency Experian, more than twice the 22.4% share they held in 2015.
• In 2019 there were 1.3 million new loan originations through March, compared with 656,000 through March in 2015.
• The loans are getting smaller…the average fintech loan was $5,548 in 2019, less than half the average amount of a fintech loan in 2016, when it was nearly $12,000.
• The loans are also smaller than the $7,383 traditional bank loan averaging.  (Comment: It is very possible that the average was driven down by smaller loan amounts in our CAB sector and in other payday loan State markets…for example we know that 26 out of State CABs (most of which are FinTechs) now own 50% of the entire Texas CAB installment loan market per the OCCC Q2 2019 reports, with an average loan amount of $740.  This is really astounding as it seemed like very recently this was 1/3).
• Customers may be increasingly relying on fintechs because they’re able to approve and fund a loan more quickly than traditional lenders or perhaps because, with a digital lender, borrowers don’t have to leave their house.
• Fintechs were quicker to recognize that consumer lending niche and improve the customer experience with pre-approvals and quicker funding of the loans.
• We’re seeing fintechs create digitally streamlined, customer-focused experiences, which may be the key contributor to their substantial growth in the personal lending space,” “Fintechs may be gaining traction as they are eliminating potential barriers consumers may face and are creating a more convenient experience.”
• Millennial consumers (age 20-37) accounted for 34.9% of fintech loans, compared with 24.9% for traditional lenders.
• Baby boomers (AGE 55-73) accounted for 33.5% of traditional loans, compared with 21.9% for fintechs.”

Here is a link to the article: https://www.bankingdive.com/news/fintech-lenders-double-market-share-in-4-years-experian/563793/

There should be plenty of inspiration here for the forward thinking Texas CAB that is operating in the brick & mortar environment.  How can brick & mortar stores emulate a FinTech?  Of the techniques employed by FinTechs we can do much of the same see below for how you can take one step closer to being a FinTech too by “adding new technological advancements to your products and services.”

• How can you fund loans remotely because borrowers don’t want to leave their house? Do ACH credits and also debit the customer payments from their bank account.
• Do you have e-signature capability? Have customers sign their documents online without coming into your store (also opens up your market to borrowers who would not come in due to privacy concerns).  
• How can you increase processing speed to fund loans quicker? Smart phone app! Send texting with links! Prompt calls from your team to guide the process. What barriers slow your process down?
• What does your website look like? Have it designed professionally and use FinTechs as a creative example fr the look and feel.
• Search Engine Optimization. Are you investing in this every month? Do it.
• Utilize data from Credit Reporting Agencies that allow decision making within seconds.  If you are not with Factor Trust and Microbilt this is them, sign up!
• Access banking activity with instant bank verification tools from Decision Logic and Microbilt.

So there you have it…a road map to becoming a small business FinTech without all that Silicon Valley capital raising and no high dollar public relations firm.  From my perspective we are really all just that close.  The numbers do not lie and as said earlier, the picture is very clear.  The lending market has evolved and if your business has got to evolve too.  

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.

Some stores need deeper assessment and others do not because they are excellent performers.  Let’s look at one store and with the desire of loosening up in some areas where perhaps underwriting is too tight.   Dylan and Jeremy at Cashmax call it “turning a knob” or “moving a lever.” Let’s move a knob or lever with this one store and see what happens.

Doing an assessment and would love TOFSC opinions.  First, we are looking back at recent leads that have been sold through a lead buying network, what are others paying (we are going to assume it is a “FinTech”) for the leads they buy from you? After studying the sold lead what are your takeaways? If the smart FinTechs with all the “AI” and “Machine Learning and “Data” who own over half the Texas market are going for approvals with these customers who apply through you, then how can you learn from that and instead approve more for yourself versus letting go of potentially good paying customers?  See below for some key data points from three recent sold applicants.

$88 – Customer A:

No FT ran.

Online app – Google

Time at address: 5yrs

Time at bank: 2yrs

Bank: Bank of America

Time at employer: 7yrs

Employer: Filtration Group

Income: $6,594.77

**Customer was denied for having too many open loans and frequently being negative. He has loans out with Lend nation, Cash Store, Check n Go, TX Car Title & Payday, World Finance, Integrity Funding, and Easy Financial.

Comment: long time at address, bank, and employer, strong income over $6k, tons of loans out and the buyer did not care.  Also, did not care about account being so far in the negative. 

$83 – Customer B:

FT: 111

Online app – Google

Time at address: 2yrs

Time at bank: 2yrs

Bank: A+ FCU

Time at employer: 5yrs

Employer: Travis County

Income: $3,600 (per app)

Comment: customer was denied for having too many open loans. FT shows loans with a total of $4,508 in outstanding balance. On her banking it shows Credit Ninja ($700 borrowed on 09/14) and Cashnet ($800 borrowed on 08/03).

$18.50 – Customer C:

FT: 111

Online: Google

Time at address: 3yrs

Time at bank: 8yrs

Bank: United Heritage CU

Time at employer: 3yrs

Employer: HCA Healthcare

Income: $2,500 (per app but it was verified at $1660.91)

Comment: FT denied due to having too many open loans and too many loans in collections. FT shows 5 loans totaling $897 outstanding balance and 3 loans in collections. However, we cannot find any loans in her banking history.  Lower income and thus a lower sale amount.  But address, bank, and employer were in the same ranges as the other two customers above.  So, is the income the key factor here? Does that trump all other concerns?

Another one of our generous members shared his opinions on lead sales and how quoting lower first-time loan amounts can hinder growth”

“Typically, a loan selling for greater than $50.00 is auto approved with VERY little underwriting with Fintech. The issue you may run into is loan amount. The consumer most likely will not be interested in a loan less than $500, and sometimes the amount of fees will drive them away. But I would most definitely always reach out to them. Sometimes a local company makes them feel more comfortable, and you can close the deal. Regardless, a lead that sells for greater than $50.00 is a very good lead and most definitely worth your time to reach out.”

Going further with the assessment: pull the last (3) months of denial reasons, break that out by month, by store.  Look at what the largest set of denial reasons is per store.  Perhaps loosen up in one of the largest areas of denial.  Maybe go one or two layers on the 2^nd and 3^rd most common denial reason and.  Loosen slightly implement the lever move with the lowest perceived risk.  Might that lever be “too many loans out” if the income is there? How far will you go on a negative balance?  Also, per the comments above, go back and look at the leads that have sold over the last (3) months over $50 to study again and see what patterns exist.   

Would love to hear from our clients, TOFSC members, and industry friends on this.   Send feedback where you can!

We are nearing the end of the Holiday Season’s high demand period that coincides with the beginning of Tax Season.  Many CAB Consulting clients and TOFSC Members offer Tax Preparation services, and some will be doing it for the first time this year.   I know many who are ready to get after it so let’s go!

Here are some things every business needs to know about 2020’s Tax Prep Season:

• IRS is expecting more than 150 million tax returns expected to be filed.
• W2’s are already going out, all must be out by end of January.
• Tax filing season is Monday January 27th through Wednesday April 15th.
• Refund advances are happening already.
• Expect heavy loan payoff trends to start mid-February.  
• In 2019, we saw largest payoff week of entire year fall on the week of February 24th to March 2nd which was the exact week when the Earned Income Credit consumers got their refunds and paid off.
• Earned income credit / additional child tax credit – consumers who seek these credits will get their refunds later.
• In 2020, this means that refunds for these consumers will not happen before February 15th.  In, 2019 it was February 27th so it is good that it is 12 days sooner.
• This is the 4th year where there has been a delay on tax refunds for those where the “PATH Act” applies (Protecting Americans from Tax Hikes Act). 

With the key information above you should be able to forecast where loan volume will go, when demand will wane, etc.  The Tax Prep market is very competitive but if you are committed it is a nice way to expand services to your existing customer base and grow an attractive additional revenue stream for your business.  If you have interest in adding these services, reach out to CAB Consulting for assistance!

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.