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Local Anti-Payday Loan Ordinances are popping up more and more.

Local Anti-Payday Loan Ordinances are popping up more and more.

by The CAB Man Texas on September 15, 2011

Many of you are aware that city councils are taking action against payday loan businesses by passing local ordinances that limit retail payday loan stores, regulate the businesses, and add another set of rules that we would have to abide. Some industry advocates are even saying that certain requirements could result in many businesses having to fold up shop.

Can you imagine the headaches these ordinances would cause in Texas if you have not just a CSO registration with a CAB license, but also city licenses with regulations in all the different towns you have stores?

Needless to say, the cities aren’t working together to create one unified set of rules that each are going to impose, which would result in the rules being all over the map. Companies will hire compliance teams and their costs will increase, attorneys will be along for the ride, and legal exposure will be increasing. (in Dallas the violations are $500 each). Think about a company like Advance America with locations all over the state, would you like to oversee different compliance programs for each city they are in? It can be done, but who wants to and it makes no sense. Cities need to let the State do the work. We need to keep these ordinances from spreading. An ounce of prevention is worth a pound of cure, and I think we all need to remember that fact right now.

Payday loan businesses have to fight to preserve their right to free commerce by becoming involved in these local battles. The cities need to defer to the State level where it is the proper forum for these matters. If we get that done, we can work alongside the State lawmakers to create more unified and dually beneficial regulations. As of now, I am not familiar with any cooperation between cities and stakeholders, and the cities are not getting feedback from business owners in a collaborative way.

In Texas, a week after bills 2592 and 2594 passed (both payday loan regulation bills), Dallas passed its own ordinance that went way beyond what these bills accomplished. Dallas added its own set of policy that includes regulation, registration and reporting guidelines above and beyond the state directives. Next, Austin stepped forward and proposed its own set of regulations. Is Houston next? Lubbock? Consumer Services Alliance of Texas (CSAT) filed suit and now the legal battle is underway.

This week, I heard from Max Wood in Birmingham, Alabama. Max has a number of payday loan stores in Alabama and is the President of Borrow Smart. As well, Max is a part of the Council for Fair Lending in Alabama. He let me know that Birmingham is the latest local municipality to throw its hat into the payday loan regulation ring. The folks at Borrow Smart and the Council for Fair Lending swiftly responded to the city of Birmingham’s efforts to put a moratorium in place. His group aims to stop this and other local ordinances from spreading. To find out more go to this link:

http://www.tggtest.com/cfl/Misc/bhammoratorium.htm

Looking forward to keeping stakeholders updated on developments. Feel free to reach out to me anytime.

Email Michael at cabconbrokerage@gmail.com or call me at 214-293-8676.

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New CAB rules on the way – so how are we not regulated?

New CAB rules on the way – so how are we not regulated?

by The CAB Man Texas on November 20, 2015

Adversarial media and consumer advocate groups like Texas Appleseed like to continually throw legislators and regulators under the bus for “turning their backs on Texas consumers” by not regulating payday, installment, and auto title lenders.  So, first of all let me come to their defense by saying I have worked with many of the good folks at the OCCC and they are extremely capable and very experienced.

Also, many of our legislators put a lot of time into this discussion every session.  So far they have felt comfortable enough to leave things they way they are for the last two sessions.  I mean, after all CABs do have a 97% acceptable level of compliance in Texas.  And the complaints per loan % is something like .000153%.  Yes, it is a crazy small percentage that makes one have to ask – so what’s the problem again?  There are probably more people on the payroll of consumer advocate agencies in Texas than there were complaints last year!

Anyone who takes a minute to investigate these cries of injustice by industry opponents would disagree after reading a typical CAB agreement with its accompanying disclosures and promissory note.

In those disclosures and agreements a reader will find language on UDAAP, TILA, Military, FDCPA, FCRA, OCCC rules, and on and one.  Many document packages are 15-18 pages for a $100 loan!  So, again, how are CABs not regulated?

All of that was true up until the latest rule changes were released in September, and put on a path toward being made effective in late December or early January 2016.

What occurred on Friday, October 16, 2015?  For the first time in over (4) years new changes were made to the rules that govern Credit Access Businesses in Texas. The amendments to current regulations include clarifying changes regarding definitions, license applications, and fees. New regulations were created that outline examination authority and record keeping requirements, including a list of documents that CABs are required to maintain and relate to separation of CAB and Third Party Lender. Briefly put, the OCCC now been equipped with broader authority that will give them authority to dig further into businesses.

Here are some comments on the rule change areas from a broad perspective:

CAB Definitions: The OCCC has released changes needed to existing contracts, advertising materials, and software. These change areas will need to be located and adjusted within your documents and processes.

Updating Application, Company Credential, and Contact Information: consistency across all Texas regulatory filings and agencies will be a new area of focus. Licensee credentials and contact data are to be updated and accurate in the OCCC’s “Alecs” portal, the Credit Access Business reporting portal, Texas Comptroller account status, the Secretary of State “SOS Direct” database, and the Credit Services Organization Search database.

Denial, Suspension, Revocation based on Criminal History: There are approximately (31) changes to this section. Certain new risks related to business and personal activities of company ownership must be made clear.

Examinations: There are approximately (14) changes to examinations. Those changes must be adapted to and your company should be run through the new checklist to look for potential issues.

Files & Records: There are approximately (74) new changes in this section. File samples will need reviewing to ensure compliance with new rules. A checklist of items needed for each consumer file to meet the standards of the new rule changes will be needed. Recommended “Best Practices” for CAB ownership and employees will be developed so record keeping changes can be communicated uniformly.

Third Party Lender and CABs: It will be necessary to conduct and review of the Special Limited Agency Agreement between the CAB and the Third Party Lender. Accuracy of document to actual operating history will need to be assessed. Flow of funds and monies collected by each party will need to be scripted and the process will need to be cited in written form with accompanying reports.

License Transfers, Disclosures, and Reporting Requirements: This is slated for February 2016. There is a second phase of rules that will be presented for public comment prior to the next Finance Commission meeting in December 2015. This second phase of rules will cover “License Transfers, Disclosures, and Reporting Requirements.” CAB Consulting, as part of this CAB II engagement will continue to participate in the pre-comment / comment period for these matters on behalf of its clients so that feedback is given and precise knowledge on the second phase of rules is maintained. As this phase progresses, the information will be disseminated to clients and implementation will begin in same fashion as with Phase 1.

If this is not being regulated, then what is??  I would hate to see what the Texas Appleseed people would call “regulation” if this isn’t it!  They will not be satisfied until loans are free and guess who is the only entity out there that will make “free loans” or “loans” that lose money?  The U.S. government.

Thank you for taking a few minutes to hear a little truth about payday!  For additional information or further comment, please reach out to Michael Brown at 214-293-8676 or Michael@CreditAccessBusiness.com.

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Everything is bigger in Texas!

Everything is bigger in Texas!

by The CAB Man Texas on October 27, 2016

Howdy folks – I saw this really great article in the Houston Chronicle titled “FDIC: Texas leads the country in ‘unbanked’ households.” This was another reminder that we are in one heck of a strong market.  Yep, everything is bigger in Texas!

This article tells me many things, but my first instinct is that it likely banks have made it so unattractive to work with them in Texas that many people (“unbanked” or “under banked”) simply prefer to go another route versus the traditional bank.  And, banks actually turn away many of the customers we serve for what I think are unfair reasons.  Many of our clients are very pleased to work with these customers and would like to ask for their business.  Whether the clients offer payday loans, cash advances, title loans, installment loans, or check cashing…it is quite likely they can suit the needs of the consumer.  Banks are lazy; customers in our industry typically need some above the norm assistance while carrying higher amounts of risk. Our clients understand this and will do the work with the customers seven days a week, in-store, online, via phone, email, or text!

Despite the fact that banks are being shunned for their unfair treatment (ahem, Wells Fargo) of U.S. consumers, and despite the fact that more consumers are saying “no thanks” to the local bank branch, the banks still make 4-5 times more revenue on overdraft / NSF charges than the entire “payday loan” industry makes in annual revenue last I checked.  Perhaps the CFPB should spend less time on our industry and more on the banks!

Using 2015 data, the FDIC measured “economic inclusion,” which is the term they use to label families who use mainstream financial institutions.

The study estimates how many households are unbanked, or don’t have bank accounts, and how many are under banked, or may periodically seek financial help from services such as title loans, payday loans and pawn shops despite having bank accounts.

Here are some statistics cited in the article:

  • 9.4 percent of households, or about 967,000, were unbanked in 2015.
  • 23.7 percent of Texas households were under banked.
  • Income of less than $15,000 per year: 25.6 percent unbanked, 29.5 percent under banked.
  • No high school diploma: 28.8 percent unbanked, 26.7 percent under banked.
  • Ages 25-34: 13.8 percent unbanked, 27.1 percent under banked.
  • Ages 35-44: 12.8 percent unbanked, 27.7 percent under banked.
  • About 16 percent of African American households were unbanked and 30 percent under banked.
  • About 18 percent of Hispanic households were unbanked, with 30 percent under banked.
  • In Texas, unbanked households logged the lowest savings rates at 17.7 percent.
  • Savings rates rose to 49.5 percent for under banked households and 59.5 percent for those considered “fully banked.”

What should business owners in our industry be thinking as they read the article?  What are the behaviors/traits of our customers?  How do we mold our services so they are in line with the behaviors/traits?  What services should we add and evolve into?

http://www.chron.com/business/retail/article/FDIC-Texas-leads-the-country-in-unbanked-and-10049320.php

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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El Paso December 18th City Council Meeting will no longer address Payday Loan Ordinance

El Paso December 18th City Council Meeting will no longer address Payday Loan Ordinance

by The CAB Man Texas on December 18, 2012

Looks like the Payday Loan ordinance conversation on the City Council in El Paso will potentially resume on January 2nd. Initially, it was proposed that City Attorneys draft a final version of the ordinance and have it ready for review today. However, that has changed since. Perhaps the El Paso City Council has spoken its opinion and now they are ready to let the Legislature address the matter…

Since the December 6th news came that El Paso was now supporting local ordinances, I have been speaking with many operators about how to participate in the upcoming legislative session. The State of Texas should be the one who governs Payday and Auto Title Loans, not individual cities, and that point needs to be made in a new bill or amendment to an existing one. So, let’s all show our support and get involved in Austin. I am considering a plan to get involved and if you would like to know more, please contact me!

Last week I spoke with Cindy Ramirez at the El Paso Times and she quoted me effectively. We offer a much needed service, consumers respond to convenience, we intend ntend to operate legally and fairly. Here is the link to the El Paso Times article from yesterday: “Title-loan lenders will fight efforts of El Paso City Council to regulate”

http://www.elpasotimes.com/news/ci_22205745/title-loan-lenders-will-fight-efforts-regulate

As always, I am pleased to take your phone call at 214-293-8676. Or, email Michael Brown at Michael@CreditAccessBusiness.com.

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