The payday industry and uniformity of rules and and regulations
The payday industry and uniformity of rules and and regulations
Yesterday I read an article written by William Webster the former CEO of Advance America, it was published on www.AmericanBanker.com and titled “Forget Payday, It’s Time to Reinvent All Lending Practices.” The piece resonated with me in regards to local ordinances, and what I would like to see Credit Access Business stakeholders and lawmakers keep their focus on during this year’s legislative session. Mr. Webster stated that “First, the standards of disclosure for credit products’ fees and terms must be vastly simplified and uniformly applied.” I have to agree, if we can lighten the load on the operator, and simplify the kinds of things that they need to do to “be in compliance,” then I am confident the approach to a customer will be more simple and easy to understand.
For example, the OCCC Consumer Disclosure documents are 2 pages, those need to be provided in addition to a typical set of consumer loan contracts that are 10-15 pages, for one loan, and the same goes again for refinancing. Then, is there a payment receipt? Notice to co-signer? Privacy Policy? And, now we are looking at being required to have the documents in English, Spanish, and possibly Cantonese. Imagine the man hours in salary spent on just handling those documents. What about printers, ink, scanners, and paper? A year’s worth of all of those things adds up to a major expense. And, in the end, the customer rarely reads the disclosures. Customers want to know how much they are getting, what they are paying back, when its due, and commonly whether they have options versus a full payoff. Let’s start with what the customer wants and keep it simple moving forward from there. Competition and transparency would result, per Mr. Webster, and I agree. Companies would compete, fees would go down, service strength goes up, and the customer benefits on all sides.
Here is the link to the article in American Banker:
Mr. Webster was really thinking about the industry as a whole, but let’s apply his points to Texas in specific. Local ordinances in a state with licensed CAB’s are the exact opposite of uniformity. Consumers and CAB’s are having another layer of confusion jammed down their throats. Cities don’t know the industry, and don’t even have budgets to enforce ordinances for that matter.
The argument is against the payday industry is always the same: opponents talk about rates, limits, ridiculous APR%’s, use the term “predatory,” call people loan sharks, etc. It is a petty angle to take with name calling, and in the end it can actually creates more support for the industry when their representatives stoop that low. Texas CAB’s are open to improvements, so how can we set the standard, be forward thinking, and innovate with the long term in mind? The fact is that high risk consumers will always need money fast, and if you restrict legal access to those services then they will be left with less ideal sources. This is a fundamental truth! So, bright minds might say what Mr. Webster did, embrace the industry, simplify, create uniformity, and competition will force licensed operators to be the best they can be.
CAB Consulting has assembled a group of CAB stakeholders and retained a lobbyist for this year’s Texas Legislative Session. It is our goal to voice some of our perspective on the matters above, as well as offer our own specific “Borrow Smart” message. The “Borrow Smart” message is innovative and comes with a plan to deliver uniformity, transparency, and competition to the Texas payday industry. We have already begun to share details on Borrow Smart with industry stakeholders. Contact Michael Brown via phone at 214-293-8676 or send emails to Michael@CreditAccessBusiness.com.
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Use caution when accepting payoff payments on motor vehicle title loans
Use caution when accepting payoff payments on motor vehicle title loans
- Review your company policy regarding acceptable methods of payment for motor vehicle title loans in Texas as a Credit Access Business. With tax season upon us, there will be an increase in the number of folks paying off loans, especially motor vehicle title loans as the income tax refunds start to pour in over the next few weeks. For that reason, it is a good time to issue this reminder.
- Many seasoned companies choose to only accept certain forms of payment on the pay-off a title loan prior to releasing that title for certain reasons. For example, what if a paper check is accepted and that check bounces later? Your business could have released the title to the customer without being paid!
- Accepting debit cards without getting the consumer sign the debit card receipt could be viewed as a swipe transaction versus a signature transaction and it could result in “chargeback.” Days later this would occur which would also mean that your business could have released the title without getting paid.
- Allow several days to pass before relinquishing the title so that you are assured the payment has successfully cleared. (If you accept these payment types).
- There is no right or wrong way of doing this. We cannot hold a consumer’s title for an extended period. (10) Days is what we have seen as the norm for an acceptable amount of time of holding on to the vehicle title. In some cases, where if a check is used, the title will be released after the check clears. This normally takes 3 to 5 business days. Other cases involving a debit card, the store-front requires the consumer to do a signature transaction where the consumer signs the receipt as they would at a restaurant. Of course,
- Cash is always ideal for Credit Access Businesses in these situations, but not everyone uses it and consumers may not prefer it when amounts are larger.
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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House Bill 2315
House Bill 2315
This bill was authored by Villarreal, and is “relating to authorized charges for certain consumer loans.” The first section of the bill addresses loans under Chapter 342. This is an intricate bill, with many components that are outside of the traditional CSO-CAB environment. Considerable dialogue with operators, lawmakers, advocates and regulators would be required to make first make an apples to apples comparison to the proposed measures in HB 2315 and its alternatives.
The first proposed Section 342.201 would establish a maximum interest charge for certain loans in certain amounts, as dictated by Chapter 341, subsection C.
There would be limits on interest charges at certain tiers and loan amounts, and the specifics are difficult to understand with a close review of Chapter 341, subsection C. More information is needed in order to accurately report on this section.
Villarreal moves on to a recommended amendment of Chapter 342.252 that appears to coincide with SB 823 and micro loans. In this section, acquisition charges and installment account handling charges are outlined, however they appear to be incomplete as critical items have been lined out that site certain rates.
Acquisition charges:
$29 or less, an acquisition charge of ??? (“not more than $1 for each $5” was lined out)
$30 or more, an acquisition charge ??? (“that is not more than the amount equal to 1/10th of the amount of the cash advance” was lined out)
$100 and up, acquisition charge ??? (“not more than $10” was lined out)
Installment account handling charges:
$35 or less, not more than $3 per month
$35 to $70 cash advances, $3.50 per month
$70 to $99, $4 per month installment account handling charge
$100 and up, not more than $4 per month for each $100 of cash advance (aka 4% per month)
The Texas Finance Commission would need to prescribe by rule the maximum amount of an acquisition charge. And, this bill states that an acquisition charge under this subchapter is not to be considered interest.
The final section of the bill offers “Section 342.259(a),” an amendment to Chapter 342. This section provides for an “acquisition charge” (no amount named and “that is not more than $10” is lined out), and an “installment account handling charge” that is not more than the ratio of $4 a month for each $100 of cash advance.” This appears to repeat some of the same criteria as cited earlier in the bill. More correspondence is needed with Representative Villarreal’s office in order to fully grasp this bill.
This bill would go into effect on 9-1-2013.
Click here for a PDF of HB 2315! HB.2315
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Credit Access Businesses offering payday, installment, and title loans help US consumers avoid padding the banks fat pockets
Credit Access Businesses offering payday, installment, and title loans help US consumers avoid padding the banks fat pockets
So much time and effort is spent on attacking the “payday loan industry” it is baffling. Why do consumer advocates and the CFPB refuse to make the banking industry Public Enemy #1 instead?
See below for a shocking breakdown of how banks target and abuse US Consumers with un-godly annual revenue via Overdraft and NSF Fees:
- $15 billion in NSF/Overdraft fee revenue in 2016.
- Average fee is $35.
- That comes to $41,095,890 in fees earned every day for 365 days.
- That comes to 428,571,428 individual fees at $35 each.
- That comes to 1,174,168 fees charged every day for 365 days straight.
- Said for many, that comes to $442 per year – at that rate that comes to 34 million consumers each year.
- Our industry serves about 15 million people per year and makes $10 billion in fees and interest.
- Studies show that when applying the same APR% calculation to the typical $100 returned item that a 1600% APR figure is arrived at! (See FISCA).
Why then are the consumer advocates and CFPB so focused on little old us? Why aren’t the Cities in Texas passing ordinances to restrict bank abuse of low to middle end consumers? Your guess is as good as mine!
What I do know is that our payday, installment, and title loan services in Texas are directly combating the bank revenues by helping consumers avoid those charges by getting a short term loan cover pending items on their bank account. Consumer choose our services because we are fair, we are fast, and we understand their needs. We are 100% upfront (ad nauseum) about the costs and terms of our services. Banks, not so much…and can you believe those numbers????
Here is a link to this information – from USATODAY.com:
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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