Did you know that Payday and Title loan business owners in Texas have rules that dictate where services can be marketed and advertised?
Did you know that Payday and Title loan business owners in Texas have rules that dictate where services can be marketed and advertised?
We are at a point in the year when many Credit Access Business owners who offer payday, installment, or title loans to Texas consumers increase their marketing and advertising efforts in hopes of serving those needing an extra financial cushion to get through the Holidays. It is important that readers know there are some restrictions around off-site advertising.
Per Texas Finance Code Chapter 393, a Credit Access Business may not advertise on the premises of a nursing facility, assisted living facility, group home, or intermediate care facility for persons with mental retardation, or other similar facility subject by regulation of the Aging & Disability Services.
It is my opinion that many of our clients and members would not intentionally advertise or market to these consumer groups. But, we should all be aware that employees who are out and about hanging door hangers, passing out flyers, etc may not think about it while they are on the premises of such facilities. So, just head’s up and let’s all make sure we are thinking a few layers deep while we are working through a high demand higher action period of our business cycle.
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.
OCCC will be reporting to the Finance Commission Friday, October 18th.
OCCC will be reporting to the Finance Commission Friday, October 18th.
The quarterly Finance Commission Meeting will be this Friday, mostly information will be reported for September to August 2018 vs. 2019…that is their fiscal year.
OCCC will report that:
· Examinations were down in 2019, went from 638 to 475.
· CABs went to the bottom in terms of acceptable level of compliance…due to lower examination volume. This likely means they will get back to CABs soon with a increase in examinations for us.
· Zero investigations were done in the last year, versus 3 in the prior year.
· Complaints for payday: down, from 114 to 97. (down 15%!)
· Complaints for title loans: down, from 85 to 59. (down 30%!)
Market Trends for Q1-Q2 of 2019 vs. 2018 were reported versus the fiscal calendar info above:
· Repo totals are trending upwards and it is thought by the OCCC to coincide with longer payment terms. This was a specific comment, outside of the charts provided and that makes the topic significant.
· The OCCC is monitoring this issue to see if it levels out or needs compliance emphasis so head’s up there. Repo is precarious and they do tend to look deeply into it. Be 100% dialed in with your compliance measures on this topic, make all of the proper disclosures, send the notices at the correct intervals, and maintain records with excellent organization.
· # Customers obtaining unsecured loans went up! In 2018 it was 787,700 and in 2019 it was 799,292 or 1.5% increase.
· # Customers obtaining title loans went down. In 2018 it was 135,619 and in 2019 it was 129,163 or 4% decrease.
· Repossessions went up 32% to 22,005 from 16,620. These have been hovering in the 16-18k range since 2015 but 2014 had 20,879.
· There are now just 1,756 locations reporting activity. Down from 1,832 which is a 4% decrease.
Here is a link to the packet (go to page 249): https://www.fc.texas.gov/sites/default/files/2019-10/101819-fc-packet.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.
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CAB-New Way
CAB-New Way
The Credit Access Business (CAB) is the new model in Texas for payday loans. In 2011, the Texas State legislature was embroiled in a battle to pass legislation to regulate the payday loan industry. Legislative sessions occur every two years in Texas and for at least the last three sessions, lawmakers and payday loan industry advocates have engaged in heated debates that did not produce any laws or regulations. The 2011 session finally produced two bills that were passed into law, House Bills 2592 and 2594.
With the passage of these laws, the official Credit Access Business license stepped in front of the once all encompassing and vague Credit Services Organization (CSO) model. The CSO model, registration, and need for a Third Party lender still remains, but, in 2012, the Texas government will close a once wide loophole with CAB regulations.
House bill 2594 requires that CSO’s who want to operate in the payday loan space now be licensed as a Credit Access Businesses (CAB) effective January 1, 2012. The new licensing process will consist of a thorough review of the former CSO by the new governing body of the payday loan industry, the Office of Consumer Credit Commissioner, or the OCCC. Applicants will undergo reviews not just of their business operation, but also of the principals involved in the CAB whose personal and business background will be requested. In addition, H.B. 2594 added more fees that licensees will be required to pay versus the past CSO registration. Lastly, quarterly transaction report filing is required by the OCCC, the first of which will be due in April 2012.
House Bill 2592 outlines new requirements related to notices and disclosures to maintain compliance as a CAB. Integration of new notices and disclosures are outlined for both retail and online marketplaces. Changes to customer documentation and procedures related customer communication are part of this bill’s intent, which is to clarify facts, monetary figures, and educate all consumers about the business arrangement. For example, CABs will need to cite other financial resources for customers beyond the payday loan option, discuss these options with customers, and post alternative lending choices in stores or online.
There are many details to discuss to fully understand the broad intent of the bills before January 1, 2012. The OCCC hosted several collaborative stakeholder meetings in the summer of 2011. Business owners, consumer advocates and those who will govern the industry all participated in collaborative conversations about the bill’s intent and real world implementation of new rules. The final version of rules related to the new laws is due to be released in October 2011.
Bank Fees are rising and so is use of Alternative Financial Services – coincidence?
Bank Fees are rising and so is use of Alternative Financial Services – coincidence?
I was reading this CNN Money.com article today: http://money.cnn.com/2012/08/13/pf/bank-fees-rise/index.html
This is an issue that I am very familiar with and the result is more customers for Texas Credit Access Businesses.
Monthly service fees on accounts with balances below $5,000 are the banks targets for the monthly service charges, which certainly fits the low and middle income profile of the typical payday consumer. And, don’t forget that NSF and Overdraft fees at many banks are have drifted up into the $35-$40 range.
Options like pre-paid debit cards are becoming more attractive compared to the bank branch, and in many cases the pre-paid cards offer more ideal online account management and smart phone capability, all with lower monthly service charges.
Consumers are learning there are more convenient and less costly options out there, and a migration towards cutting edge alternative financial services is happening. Shape your business accordingly, get creative, and stay convenient!
I refer to the information below very often in conversations – it is published by FISCA and illustrates the real deal on banking related charges versus payday advances – the APRs are less in many cases! Be sure and have these statistics ready the next time the APR topic comes up – and then nail it.
$100 Payday Loan (14 days) = $22.88 Fee (596% APR)
$100 Overdraft Protection = $29.00 Fee (756% APR)
$100 Bounced Check = $54.87 Fees (1,431% APR)
Sources:
(1) Bankrate.com, 2007 Courtesy Overdraft Study – based on average first draft
(2) Average NSF fee $28.23 (Bankrate.com, 2007 Checking Study), based on average first NSF charge, and average merchant return check fee of $26.64 (2006 CFSA fee survey).
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August 22, 2012 at 8:07 pm
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Michael,
You made some great points in this piece. Too bad the regulators are not informed. Not only do bank NSF fees translate into higher APR’s than payday loan products but additionally, more than a few banks (Wells Fargo for example) are offering products that compete directly with payday loans. The banks debit these customers the moment their customer’s payroll check is deposited; NO RISK to the bank!
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