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
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.
CFPB Payday Rule lawsuit regarding the payments provision takes another turn
CFPB Payday Rule lawsuit regarding the payments provision takes another turn
On August 28th, CFSA and CSAT filed “Amended Complaints” that were focused on the payment provisions of the CFPB rule. I read a thorough summary from Jeremy Rosenblum at Ballard Spahr. This is some good stuff! I mean, who doesn’t love when someone uses the terms “arbitrary and capricious? That’s when us laypersons really know there is some serious lawyer-ing going on!
The amended complaints have some teeth which were good to see strike home and sink deep. And, the inclusion of debit card debiting in the payments provision got its fair share of attention. I for one hope that continues, maybe even gets put at the top of the list. Without thinking deeply, I can say that if that facet were removed from the rule I would be breathing easily on the entire topic. I know that others with a different business model may differ, but it is by far ours and our customer’s favorite payment method for convenience reasons, and also because it does not cause NSF charges if the payment returns. It does not seem likely that the industry will have to “go live” with these provisions as they are now, by November. There is still much to be worked though in this legal process which has been long and winding. With all of the questions at this point how can it be known what the rule will look like anytime soon? Operators still need fair time to install the proper procedures and notifications and that window is now far too tight for a November go live date.
See below for some takeaways from Jeremy’s blog post:
“Trade Groups File Amended Complaint In Texas Lawsuit Challenging CFPB Payday Loan Rule.
In the Amended Complaint, the plaintiffs (our industry) allege that the Rule violates both the Constitution and the Administrative Procedures Act (the APA). Starting with the Supreme Court’s decision in Seila Law that the Director of the CFPB who adopted the Rule was unconstitutionally insulated from discharge without cause by the President.
The Amended Complaint argues that a valid Rule requires a valid notice and comment process from inception and not mere ratification of the final result by a properly serving Director.
It further asserts that ratification of the payment provisions is arbitrary and capricious because the payment provisions were based on a UDAAP theory expressly rejected by the CFPB in its revocation of the underwriting provisions of the Rule and the CFPB has failed to explain how a lender can commit a UDAAP violation, consistent with the theory of the revocation of the underwriting provisions, when the consumer is free to eschew a covered loan based on a generalized understanding of the risk of multiple NSF fees.
The Amended Complaint takes issue with the payment provisions based on a number of additional alleged infirmities, including the following:
The CFPB provided a lengthy period for the industry to comply with the original Rule but failed to provide any compliance period for the ratified Rule. Thus, the current Rule differs from the original Rule it purports to ratify in a key respect.
The 36% APR trigger for covered installment loans is fundamentally at odds with the provision of the Dodd-Frank Act explicitly prohibiting the CFPB from establishing usury limits.
The alleged harms the payment provisions are designed to forestall are caused by the banks holding the consumers’ deposit accounts and not by the lenders who initiate payments declined due to insufficient funds.
The Bureau acted arbitrarily and capriciously in extending the payments provisions to multi-payment installment loans, where consumers have lengthy periods of time between installments to respond to failed payment-transfer attempts (and where, we would note, consumers are already free under the Electronic Funds Transfer Act to decline to authorize loan payments through recurring electronic fund transfers).
The Bureau also acted arbitrarily and capriciously in extending the payments provisions to debit and prepaid card transactions, where failed payment-transfer attempts typically do not, if ever, result in fees. (We have repeatedly expressed the view that this key aspect of the Rule is indefensible.)
The CFPB evidence supporting the payment provisions was insufficiently robust and reliable, especially with respect to storefront and installment loans since the CFPB relied upon evidence about online single-payment loans.
The timing requirements for notices under the Rule arbitrarily prevent consumers from scheduling earlier payments.
The CFPB did not consider whether enhanced disclosures could have adequately prevented the perceived consumer injuries.
We believe that the Amended Complaint represents a powerful attack on the payment provisions of the Rule.
We have only one point we would emphasize to a greater extent: There is no apparent link between the UDAAP problem identified in Section 1041.7 of the Rule—consumers incurring bank NSF fees for dishonored checks and ACH transactions after two consecutive failed payment transfers—and the burdensome notice requirements in Section 1041.9 of the Rule.
To our mind, these elaborate notice requirements are arbitrary and capricious for this further reason.”
Here is a link to the article – thank you Ballard Spahr! https://www.consumerfinancemonitor.com/2020/08/31/trade-groups-file-amended-complaint-in-texas-lawsuit-challenging-cfpb-payday-loan-rule/
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Ordinance Activity Continues in spite of Legislative Session
Ordinance Activity Continues in spite of Legislative Session
Looks like Houston is now jumping on the bandwagon with a payday and auto title loan ordinance of their own. It is a bit longer than the payday and auto title loan ordinances that I have seen in Dallas, San Antonio, Austin, and El Paso. Gets very much into specifics on the procedure side and is more realistic than other ordinances when it comes to rates, loan amounts, and re-finances.
I have been heavily involved in the topic of payday and auto title loan ordinances lately, and have been working with clients and other industry stakeholders on a lobby effort in Austin this session. In September, the Texas Finance Commission asked the legislature to consider the burden that multiple local ordinances place on businesses who operate in multiple locales. The Finance Commission requested that the legislature “consider amending the Texas Finance Code to more clearly articulate its intent for uniform laws and rules to govern credit access businesses in Texas.”
If this issue is important to you, let your State representatives know and don’t hesitate to check in with us!
Michael Brown of CAB Consulting can be reached at 214-293-8676 or via email at Michael@CreditAccessBusiness.com.
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Back to School is here is your small business ready?
Back to School is here is your small business ready?
Did you know that for many the Back to School season each August is the second highest seasonal demand period for the payday industry? Only the Christmas and New Year Holiday time frame beats Back to School in terms of seasonal demand. For Texas Credit Access Businesses offering cash advances, payday loans, or title loans, now is the time to invest in marketing to new and existing customers. It is imperative that all of your marketing, promotions, social media, and referral programs are firing and connected. Campaigns started as early as July 28th and are pushing hard until at least the first day of school. In Texas most have that date set at August 15th.
Revenue and payment wise, many Members of our group still recall August of 2018 where we had (5) Fridays in the month and also with the way the calendar fell the 1st & 3rd pay dates fell in August, for August in September! So those things alone meant a record number of payments due and a record revenue month for many. While we do not have the same thing happening this month with the pay dates, we still have the increase in demand to focus on, so make that marketing happen now! Don’t forget to keep your teams happy, motivated, and focused this month as the workload can increase with higher demand and payment volume.
One great idea to for blog readers that is happening in Central Texas is doing back pack give-away promotion where new customers are entered for a chance to win back packs filled with a variety of much needed school supplies. This has been warmly received by customers. Social media has been showing the love with lots of shares and likes of the images we posted of the backpacks so that is very good.
How do we know Back to School demand is here? There are a number of criteria that paint a very clear picture, for starters lead conversions were up, we saw 12% on one source versus mostly having been in the 5-10% range in prior weeks.
Another sign – loan volume is way up August 1st to 8th versus July 1st to 8th:
- Funding volume is doubled.
- New Customers doubled.
- Online applications up 38%.
- Reloans doubled.
- Increases tripled.
- Denials down 10%.
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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