I have touched on this subject before, and this morning I was reminded once again that banks are an easy target that the payday industry should exploit more.   Banks are lucky to have the payday industry – it deflects negative attention from the regulators and consumer advocates.  Some banks say they have launched innovative products that will compete with the payday or auto title loan.  Most who I speak to in the payday industry aren’t really concerned, the services don’t have the same flexibility or might not be enough to get the consumers fully taken care of.  And, banks aren’t really equipped to handle the short term loan needs of consumers.  Their mindset is much different, one based on volume and low servicing requirements.

About every month or two I see an article like this one titled “Fifth Third sued by payday advance loan borrowers” in the Cincinnati Business Courier.

Here’s the link:  http://www.bizjournals.com/cincinnati/news/2013/02/14/fifth-third-gets-hit-by-another.html

Basically, Fifth Third offers a payday product, they did a bunch of loans, and a class action lawyer sued them saying the bank really charged 900% APR on their payday product.  There are administrative fees on the service in addition to the APR % that spike the perceived APR of the entire agreement when days in the loan term are shortened due to early payoff.  That’s the argument, I have seen it many times in Texas with the Credit Access Business service fees, lien fees, and the 10% APR all being rolled into one finance charge and forced into an annual percentage rate.

So, industrious attorneys are realizing that banks are easy targets!  Banks are not equipped to operate in this sector of consumer need, so you can bet that they are going to have holes in their payday products that leave the door open for lawsuits. The payday industry needs to do the same and target bank liabilities in the same way.  Representatives of the industry should spend less time defending the payday products and more time highlighting the weaknesses of the banks.  So, let’s arm the readers of this blog with my all time favorite piece of data on the common bank NSF charge APR% a consumer will pay on a bounced check.

$100 Payday Loan (14 days) = $22.88 Fee (596% APR)
$100 Bounced Check = $54.87 Fees (1,431% APR)

Yes, a consumer will have to pay 1,431% APR if they write a $100 check that bounces at a local retailer, then have pay a $35 NSF fee to the bank, and the remainder in return item fees to the retailer.  In this case the bank is not even honoring the check and just charging a $35 overdraft fee!  The retailer is the one who ends up extending the credit to the consumer until they come back in and pay for the purchase, which is so much worse.  So, what is the bank’s purpose in that scenario?  The fact is that down deep, the banks do not want the middle and low income consumers who run into these problems, which is indicated by their decrease of deposit accounts and the increase in the size of the “non-banked consumer” market.

The payday industry is very pleased to offer the service and attention that consumers in this growing sector deserve.  Consumers who utilize Credit Access Business services in Texas have a 92% satisfaction rate.  JD Power and Associates’ 2012 Retail Banking Study arrived at a 75% consumer satisfaction rate in the sector.  So, Texas Credit Access  Businesses have 23% higher satisfaction rate, and in many cases charge fees that are 60% lower!  Whoa, let’s tell that story more…

CAB Consulting is headed by Michael Brown.  Please contact us anytime to discuss your involvement in the payday industry!   Email Michael@CreditAccessBusiness.com or call 214-293-8676.

I just about fell out of my Toyota Prius when I learned what the CFPB spends its money on.  Anyone who has been watching the CFPB has probably heard about how the expenses there are out of control, but this was a mind blower.  Come to find out, they have actually been getting looked at by the “Government Accountability Office” regarding the recklessness of their spending…

For starters – Advertising is the #1 expense at CFPB and this was discussed in a Wall Street Journal article awhile back.  Here’s that story: https://www.wsj.com/articles/report-on-government-ad-spending-highlights-pentagon-and-cfpb-outlays-1475691906

It is a shame to say that with all of that advertising budget they can only manage to give up 150 or so complaints per month from the entire country.  About 15 million people have a loan out at any given time during a month in the United States.  That’s a complaint % of .00001 (yes that is four zero’s on the right side of the decimal).  We have cited the statistics before from the CFPB Monthly Complaints report and the “Payday” Industry complaint percentages drop 15-2-% each month since they have been getting tracked!  So, needless to say the advertising dollars spent by the CFPB preying upon consumers and trying to coerce them into complaining have not been working.  Specific to our industry, this is particularly telling of the high level of satisfaction our customers actually have, and that the “payday loan” issue is highly politicized.

That brings me to payroll at the CFPB – it is incredible what these people are getting paid.  See below for some comments from an article that came out in The Washington Free Beacon on February 9th:

“Some of the larger salaries at the agency have eclipsed those paid to some of the country’s most influential lawmakers, such as Senate Majority Leader Mitch McConnell (R., Ky.) and House Speaker Paul Ryan (R., Wis.).

The Senate majority and minority leaders are paid $193,000 annually. Two hundred and one CFPB employees outdo Sens. Mitch McConnell and Charles Schumer in pay.

Speaker of the House Paul Ryan of Wisconsin receives $223,000 per year, but that’s less than what 54 CFPB employees are paid.

Another 170 CFPB employees earn more than the secretaries of defense and state, the attorney general, and the director of national intelligence. All Cabinet salaries are capped at $199,700, but not at the bureau. Thirty-nine CFPB employees earn more than the $230,000 paid to Vice President Mike Pence.

The in-depth analysis uncovered that over 449 CFPB employees make over $100,000 and 228 employees make over $200,000. Nearly 200 of these employees make more than their most senior boss, Federal Reserve Chairwoman Janet Yellin, who earns $201,700 a year.”

This information is eye opening needless to say.  I hope that President Trump is dialed in to the CFPB as he looks into Dodd-Frank!

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.

Dan Micawber at AF$PA / Payday Brokers has announced a Consumer Alert (and operator alert) regarding for a new round of Fake Debt Collectors circulating in our industry.  If you are a consumer who received a call from a debt collector that says you owe money to a “payday loan company” but will not tell you the name of the company or claims they are a member of the “Alternative Financial Service Providers Association” (“AF$PA”) – it is a scam.

All Debt Collections Agencies who comply with the Fair Debt Collection Practices Act “FDCPA” must follow a very long list of rules regarding how contact can be made with borrowers.  One very specific issue with the FDCPA that is not being followed by these current scammers is that they must be able to “verify the debt.”  If they will not say who the debt is from it is not likely they have a contract to collect on.  A collection agency must disclose the name of the company that the debtor owes money to.  If they refuse – it is a scam.  If they say they are sending the sheriff or police – it is a scam.  If they say they can have you locked up – it is a scam.

Our CAB clients and members should be concerned about this as well.  One of the biggest sources of complaints at the OCCC is this kind of problem.  As compliant CAB’s we often times are lumped in with unsavory characters out there who google their way into becoming debt collection scam artists.  A bad actor can simply google search for payday loan and run into the AF$PA website or maybe even grab larger CAB’s name off the internet and start calling people saying they owe them money.  It is only a matter of time before they trick an innocent consumer into running down to the corner store and loading some money onto a prepaid card that sends funds directly to them in an Indian call center.

I have helped consumers on this issue and even had one conference me in with the scam collections agent.  I was able to shut them down in less than 30 seconds and enjoyed it immensely.  Most TOFSC members have the TOFSC Comment / Complaint line posted in their store – if you have any customers telling you they are encountering this problem please have them contact me at 214-293-8676 and we will get them going in the right direction.

Also, the Texas Attorney General’s Office has a website complaint service – report anything that you see to them.  Go here to learn more information:

https://www.texasattorneygeneral.gov/cpd/file-a-consumer-complaint

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.