PDL Industry Blog for Payday Loan Lenders

Missouri rumbling about 36%

2010-01-04T18:50:00.002-06:00

State Rep. Mary Still, a Democratic, is trying to get payday loan legislation going again. She's calling for 36%.

Is there anything more annoying than the comparison between payday loan stores and McDonalds fast food restaurants. Who cares if there are more loan stores, anyway. So if McDonald's opened 1,000 new locations, it's all of a sudden ok to have 1300 payday loan stores in the state? It's just annoying.

What's going on in Virginia?

2009-12-30T20:40:00.005-06:00

The state of Virginia is now offering short term loans to it's 100,000 state employees at 25% annualized interest. There are other requirements and they're limited to two of these a year. Timothy Caine, the governor of Virginia, is pretty proud of this fund.

That's fine, but this article is bunch of self serving, pork for the governor, by the governor. I did like this comment by Robert Diedrich and I think it's worth sharing:

It is disingenuous and misleading to suggest that payday loans carry a "400% annual interest rate" when the average payday loan is repaid within 30 days for an interest rate between 10-20%. Here is another fine example of a politician talking a populist game by villainizing those who would put their capital at risk to provide a vital service; credit for those who can't get it anywhere else. I have no problem with sensible regulation of this lending market, but the Governor should at the very least recognize the service being provided, the risk to the capital providers, and stop demonizing an industry that generates tax revenue and performs a legitimate service to society. Socializing the credit risk of these borrowers is not the answer. By definition, "payday" loans are made to people with jobs, and they have to be greater than 18 years of age: responsible adults engaging in legitimate commerce on clearly identified terms. Stop trying to fix problems that don't exist, with other peoples money.

Payday Pundit also makes a pretty good point about Virginia's government loan program.

2009 better than expected for payday lenders

2009-12-26T17:33:00.002-06:00

Lynn DeVault, board chair of the Community Financial Services Association of America, says, "In the end, things have been relatively positive."

Currently, the CFSA is tracking about 178 bills in the states. It opposes 101 of those.

The states that will likely have a lot of attention in 2010 are: Arizona, Wisconsin, Colorado and Ohio.

You can read more details at Cheklist Magazine Online.

Credit card rate caps

2009-12-23T21:47:00.003-06:00

I left a comment for Curtis Arnold in his article titled, "Why Capping Credit Card Rates at 16% is Bad for Consumers".

I'll make my point first. Everyone in the financial industry should acknowledge the reality that no one knows the 100% best way. We can agree that the market will give us a better indication of what can and can not be done, rather than some politician.

He makes this hypocritical comment:

"Why not focus on payday lending, pawn loans, title loans or tax rebate anticipation loans? Some payday loans charge annual rates as high as 400%. That's right, four hundred percent! Makes a 30% credit card look like a saint, huh?"

Here's the comment I left:

"Curtis, you contradict yourself. You do not want rate caps on credit cards, but you do want the government to go after payday and pawn lenders.

Lending money is lending money. They have the same basic principles. The good customers pay for the bad customers.

I agree w/ the point you make about capping fees, but if you think credit cards are the lesser of two evils; compare the amount of credit card debt to other types of unsecured lending. Credit Cards probably are the biggest contributing factor in bankruptcies.

Besides, many people who do not qualify for credit cards, use payday loans. If you're for more credit available to more people, then you should not take a shot at these loan products."

Securing your network or computers on a shoe string budget

2009-12-21T19:19:00.004-06:00

Tom Deligiannis is an expert in computer security and serves small business. He currently administers multiple networks and shares his knowledge of free or close to free tools that can help protect your business computers.

Check out his blog post titled, "Securing your network and computers on a shoe string budget."

I, personally, use many of these tools. I'm not a big fan of "free stuff" b/c it's usually with strings attached, but I can attest to these products. I've been computer and virus free for over 3 years.

Off topic, but this in interesting

2009-12-18T16:26:00.004-06:00

Gambler Loses $127 million in Vegas. Terrance Watanabe inherited over a $100M fortune from a company his father started importing party favors. Makes me wonder if I'm in the wrong business.

After selling the company, Watanabe, took up a new hobby; gambling.

The tragedy in all this is that he may wind up going to jail. In Nevada, you can go to jail if you borrow money from a casino and do not pay them back.

Kentucky Gov. calling for a 36% rate cap

2009-12-16T23:40:00.002-06:00

Kentucky currently has 743 payday loan stores. Kentucky Gov. Steve Beshear wants legislators to cap the rates at 36%.

Kentucky current loan terms are:
Maximum Loan Amount: $500
Loan Term: 14-60 days
Maximum Finance Rate and Fees: $15 per $100
Finance Charge for 14-day $100 loan: $17.65
APR for 14-day $100 loan: 459%
Maximum Number of Outstanding Loans at One Time: Two ($500 aggregate loans outstanding to all licensees)

Canada's payday lenders have it pretty good

2009-12-15T20:32:00.004-06:00

Most of Canada's provinces have capped rates. The lowest cap is $17 per $100. That's pretty good if you're a lender.

Compared to the US market, Canada is pretty small. According to Wikipedia, Canada has about 35M residents compared to close to 325M for the United States.

It's almost official. We're turning into Europe.

2009-12-14T18:01:00.004-06:00

The CFPA is getting steam. The final vote, in the House, was 223 to 202. No Republicans voted for the bill and 27 Democrats voted against it. The legislation now heads to the senate.

Republicans Pat Tiberi made an good comment:

"This bill would do nothing more than make government bailout programs a permanent part of our economy, paving the way for more government control in our everyday lives."

You can read more in the Columbus Dispatch.

Washington state makes it tough to make money

2009-12-06T21:41:00.002-06:00

Check ’n Go spokesman Jeff Kursman said the company, which has 1,100 loan shops nationally, will close all its Washington locations by Jan. 1.

This is not as shocking as it may seem. They currently have 3 locations, but do not see the point in expanding in a state with heavy restrictions.

The state of Washington is limiting each citizen to 8 loans a year and capping those rates, not to mention; income restrictions.

Read more about payday loans in Washington.

Quik Cash has a fight in Arizona

2009-12-04T19:18:00.002-06:00

Quik Cash is accused of filing collections lawsuits in courts far from where debtors live or take out loans in the state of Arizona.

Arizona authorities think it made it easier to get default judgments in court b/c the court was far away from the borrowers.

They're looking for $5M in restitution.

Read more in ABC15.com.

25% of the population

2009-12-02T23:02:00.002-06:00

A journalist for the Washington Post estimates that 60 million people have limited or no access to banks or other traditional financial services.

The article is more of a call to arms for banks. It's titled "FDIC: Quarter of U.S. households have limited or no access to banks."

I think this journalist is backing into a belief that banks offer cheaper services than other financial institutions. This is not the case. Just yesterday, an op-ed in the Boston Globe ripped banks for charging excessive fees money order compared to check cashers. I also think a payday loan is cheaper than an nsf.

Just because banks offer free checking, does not mean they're some not-for-profit operation.

Banking on the unbanked

2009-12-02T01:04:00.002-06:00

Interesting op-ed about the check cashing industry in the Boston Globe titled "Banking on the Unbanked."

It basically praises check cashers and rips banks a new one. Take this quote for example:

"A recent study by the Pew Charitable Trusts found that the nation’s 12 largest banks, responsible for issuing more than 80 percent of credit cards, engage in practices that the Federal Reserve deemed “unfair or deceptive."

The article praises check cashing outlets for posting their fees upfront for their customers. For the record, payday lenders post their fees on the walls in their locations too.

The article does take a swipe at payday loans, but you can't blame the economic meltdown on payday lenders. Can't say that about our banks.

From politics to PDL Industry

2009-12-01T14:31:00.001-06:00

Rep. Brian Yates of Missouri is stepping down from office to take a position w/ payday lender QC Financial.

This, in of itself, is not big news; but I think it's showing that a cash advance is beginning to become mainstream.

You can read the full article in St. Louis Today.

Arizona Gov. sticks up for payday industry supporters

2009-12-01T00:32:00.002-06:00

Governor Jan Brewer is drawer criticism for some of his "associates" helping the payday loan industry.

Arizona Gov. Jan Brewer says "It's not inappropriate that some of her political associates are doing work for the payday loan industry that could result in controversial legislation reaching her desk."

That's more like it. You can read the full article in the Chron Business News.

Des Moines officials trying to keep payday lenders out

2009-11-29T17:24:00.002-06:00

De Moines public officials are trying to change zoning to stop more payday loan stores from opening. This is not new, but I took issue w/ this statement:

Meyer says "payday loan stores prey on poor people and set up in poor neighborhoods."

This is like saying restaurants prey on families b/c people can cook at home and save money.

Will Indian tribes get immunity on Internet payday loans?

2009-11-22T00:15:00.003-06:00

In Colorado, the state Supreme Court soon will take up a case where two online payday lending companies say they are immune to prosecution and state regulations because they are incorporated by sovereign Indian nations.

This is not new. We all know about Indian casinos. The casinos work b/c people enter the Indian reservation and gamble. Can these Indian reservations do business on the Internet? The gray area is this: the borrower applies for a loan on a computer outside the reservation. Is this considered the state, the reservation or neither?

There is a very long article in the Havre Daily News. You can read the full article titled "Online Payday Loans Lending practices spark nationwide concerns."

More on West Virginia prosecution of Internet lenders

2009-11-18T20:54:00.003-06:00

Yesterday we had a post about the Attorney General going after some Internet lenders. There's more:

The second suit filed by McGraw’s office asks the court to order four collection agencies, Capital Collections, LLC, Claims Investigators of America, Crime Monitoring Center, and Premier Recovery Group, to comply with his investigative subpoenas and to stop collecting Internet payday loans in West Virginia.

It looks like they're using these collection's companies to get to the lenders.

For the record, West Virginia has made 97 settlement agreements since 2005. I was a little surprised by that number.

West Virginia playing hardball w/ internet payday lenders

2009-11-17T20:39:00.003-06:00

Four Internet lenders are playing chicken w/ the West Virginia district attorney.

"The suit claims the companies, which do business under such names as "Cash Supply," "Web Payday," "Payday Services," "Payday Yes" and "Paper Check Payday," have ignored an investigative subpoena from the Attorney General's Office going back to 2007."

You can read the full article titled "Attorney general goes after four Internet payday lenders" in the Charleston Gazzette.

A big warning if you offer internet payday loans in New York

2009-11-17T20:28:00.003-06:00

"The two companies--County Bank Of Rehoboth Beach, Del., and TC Services
Corp., a Pennsylvania company that does business as Telecash--agreed to pay
refunds to New York consumers and another $300,000 in penalties and costs. In
addition, the two companies are prohibited from collecting on any outstanding
payday loans to New Yorkers.

According to the complaint, Telecash and CRA Services Inc., another
Pennsylvania company that operates as Cashnet, made thousands of illegal payday
loans to New York consumers under a fraudulent "rent-a-bank scheme" with County
Bank. Cashnet is now defunct and didn't contribute to the settlement."

The total settlement will be for $5.2M. You can read the full article in the Morningstar titled, "New York to Distribute $5.2 Million Payday Loan Settlement"

New York is not alone. In Wisconsin, there was a class action lawsuit settled for $432k earlier this year. In Wisconsin, payday loans are perfectly legal, but the company was not licensed.

Reps set hearing on payday loans in Missouri

2009-11-13T21:22:00.004-06:00

I hope some payday lenders show up to this to voice their concerns about the legislation. They're having a district legislative hearing to discuss payday loan reform at 6:30 p.m. Monday at the Columbia Public Library, 100 W. Broadway.

How naive is NPR

2009-11-12T20:40:00.004-06:00

I expect a little more from NPR. This reporter is pronouncing payday loans dead b/c the FDIC got banks to put $28M on the street and now no one's taking out payday loans?

That's like saying Pfizer is selling their prescription drugs direct, so Walgreens is going out of business.

Bank customers must authorize overdrafts on ATM purchases

2009-11-12T15:29:00.003-06:00

The Federal Reserve beat the Federal Government to the punch on ATM overdraft charges. Banks will have to secure their customers' consent before charging large overdraft fees on ATM and debit card transactions, says the AP News.

Payday Pundit makes a good insight on this move by the Federal Reserve:

"The Fed, of course, objects to the creation of the CFPA so is trying to demonstrate that it has teeth before Congress takes away some of its responsibilities."

Compete with payday lenders. Don't put them out of business.

2009-11-10T22:44:00.003-06:00

Legislators look for ways to make payday loans less profitable all the time. This is bad for the borrower b/c it makes the cost of doing business higher. This cost, ultimately, gets passed on to other borrowers.

In an article titled "Loan program helps 'unbanked' climb economic ladder: FDIC program aims to help low-income consumers avoid payday loans"; banks are getting into the small loan business. Consumer groups like this product b/c it helps build credit and is less expensive than a payday loan.

My feeling is that competition is good. Don't put handcuffs on payday lenders. Compete with them.

You can read the full report on the FDIC small loan pilot program here.

A rational comment versus a stupid comment

2009-11-09T19:14:00.004-06:00

Ohio payday lenders have been in a dog fight for years now. Consumers want payday loans while consumer groups do not.

I thought this article titled "Payday loans the only way to get by, some customers say" does a decent job of covering both sides.

Here is an example of a rational comment:

Ted Saunders, CEO of CheckSmart, said he wants customers to compare his product to their other choices:

"There is a bank right there," he said, pointing to a bank about 100 yards across the parking lot from his store. "They could go right there if they wanted to."

Bill Faith of COOHIO compares payday loans to subprime mortgages and says:

"People at one point also were excited about high-interest subprime mortgage loans that helped ruin the housing market."

Bill, the housing market crash happened b/c Wall Street lied to investors and the Federal Governent's monetary policy. Put more simply, the federal reserve and the greed on Wallstreet. So what does this have to do with payday loans?????? Nothing!

Credit Unions discuss payday loans

2009-11-09T19:03:00.005-06:00

In an article title, "What if Payday Loans Go Away?", Credit Unions discuss our industry.

For example, Jim Blaine, CEO of the $18 billion State Employees’ Credit Union, headquartered in Raleigh, N.C., said he looks forward to the day when payday loans go away and that this may mean credit unions go back to doing more of the sorts of lending they used to do.

Well Jim, why don't you offer short term loans today, if you want to help people so much? I suspect that you have easier ways of making money off of people.

I guess 48% is the new 36%

2009-11-09T11:41:00.002-06:00

Progress Illinois hates payday loans. They put a new article out there about Rep.l Gutierrez.

"Illinois Rep. Luis Gutierrez, a longtime foe of the payday industry, is considering offering a payday-specific amendment to CFPA legislation when it reaches the House floor that would cap interest rates on payday loans at 48 percent — and also force lenders to provide a 90-day fee-free repayment plan if a borrower couldn’t meet the original terms.

“We think it’s important that we give the clearest, most specific guidelines and instructions to our new consumer protection agency as possible. And we think that if there is an actor in the nonbanking financial institutions arena ... it is the payday lenders. Some of the most egregious violations in the consumer section occur under their watch,” Gutierrez said. "

Do they think that an additional 12% annual interest (48% minus 36%) is going make payday lenders profitable? That's rediculous. The payday industry can have a default rate of 20%. How do you cover these loans charging 48%?

Check 'n Go Online Videos

2009-11-04T13:36:00.002-06:00

Check 'n Go has a new video out about the perils of overdrawing your bank account w/ your debit card. There is also an interesting case study video titled "The Truth About Payday Loan Caps." It compares Oregon and Washington. Oregon has imposed a $10/$100 rate cap on payday loans.

I think they're well done and professional. You can view the videos here.

British Columbia new payday rules

2009-11-02T20:39:00.002-06:00

The new rules are effective Nov. 1st in British Columbia. Compliance and enforcement will be administered by Consumer Protection BC, a not-for-profit organization that operates at arm’s length from government.

Here are the rules in a nutshell:

Practices that unreasonably increase the borrower’s debt load, including rollovers that require borrowers to pay significant extra fees for extending the time to pay a loan.
Requesting an assignment of wages, or collecting from a borrower’s employer.
Charging more than 23 per cent of the amount borrowed in interest and fees.
Lending more than 50 per cent of a borrower’s take-home pay or requiring repayment before the borrower’s next payday.
Operating unless licensed by Consumer Protection B.C.

You can read more at the Canadian government website.

Advance America reports a profitable third quarter

2009-11-01T18:56:00.003-06:00

Advance America reported a 48.8% or $12.6M jump in net income from the previous year third quarter. This is despite closing stores in Arkansas, New Mexico, New Hampshire and Ohio. These difficult states did result in lower revenues of 5.4 percent to $474.4 million so far this year, compared to $501.5 million during the same period last year.

You can read more about their third quarter in the Sparatansburg Herald Journal.

Nevada Federal is Out Of Payday Loan Business

2009-10-22T19:30:00.004-05:00

Nevada Federal had been offering a loan called AdvancePay, which charged an application fee up front.

After receiving this letter from the National Credit Union Administration (NCUA) chairman, Michael Fryzel; Nevada Federal decided to stop offering their payday alternative product, even though they believed the product was cheaper than other alternatives.

What I think happened is that the NCUA considers the application fee part of the finance charge. This makes their loan product above the 18% max APR ceiling allowable by an Federal Credit Union Act (FCUA).

So why does the NCUA think that an application fee that is charged, regardless, of whether or not a loan is provided considered part of a finance charge?

Advance America's Jamie Fulmer speaks out

2009-10-20T20:34:00.002-05:00

The payday loan industry is very misunderstood. Most people just take knee jerk reaction to the industry.

Jamie Fulmer speaks out against and article that distorts some fines placed on the company.

"...the editorial inaccurately described many of these violations and failed to acknowledge that they were documented during store audits conducted by BFI before the new short-term lending law took effect in January 2009.

The editorial pointed to 38 instances of taking "a borrower's property" to secure a loan, for example. This citation had nothing to do with property, but instead amounted to checks not properly made payable to Advance America."

You can read the full letter here.

Where do payday lenders get financed?

2009-10-13T21:33:00.002-05:00

At IowaPolitics.com, we know that Wells Fargo does business with 9 substantially large lenders including: including Advance America, Ace Cash Express and Mister Money.

Capital is a rarely discussed subject among lenders, although it's probably the most important component of the business. You can't get big without financing, whether it's bank money or investor money.

Some negative PR in Wisconsin

2009-10-13T02:01:00.003-05:00

Patricia Nelson of Waukesha was borrowed $550 and paid $2,700 over the next 22 months. This is what we call, in the business, a good payer.

The problem is that it does not look good for the payday loan industry when this happens, especially when she introduces President Obama the day he wins the Nobel Peach Prize.

What people do not realize is that Patricia was paying for all the people that did not pay back their loan. That's how risk pools work. I don't know the answer.

You can read more in the Milwaukee Journal Sentinel blog.

Wisconsin 36% bill stalls

2009-10-09T13:43:00.002-05:00

43 of 99 Assembly members have signed onto the Milwaukee bill that could cap interest rates at 36%. This is almost enough to pass the bill, but it's in committee and may not make it out. Committee members are skeptical about the plan.

Assembly Speaker Mike Sheridan (D-Janesville) said recently that the bill to cap lending rates at 36% goes "too far."

He's right. You can read more in the Milwaukee Journal Sentinel.

A lot of information about the national payday landscape

2009-10-08T22:03:00.002-05:00

This article is out of Colorado, but it touches on the legislative battles payday loans are taking on in different part of the country and at the Federal level.

A good read if you do business in multiple states. The article is titles: "Payday lenders prep to battle reform in Colorado"

Payday loans are easy to understand

2009-10-06T13:16:00.004-05:00

If you think that bank overdraft fees are a necessary evil, you should be able to understand the need for payday loans.

Both products carry similar APRs, but different stigmas. Overdraft fees have no disclosure and the bank customer has absolutely no say. Payday loans, on the other hand, are a very straight forward and easy to understand product. With a payday loan, rollovers can extend the loan to about 8 weeks, if it's not paid in full.

If you give a choice to borrowers between overdraft protection and a payday loan. I bet most people choose a payday loan. If anyone can think of a reason, not to, let me know.

Wow, 893 comments

2009-10-06T12:35:00.002-05:00

Banks run lots of fancy commercials that contributes to their image, but when it comes to working their system, they're near the top.

This USA Today article titled Anger at bank overdraft fees gets hotter, bigger and louder is all over the Internet. What I think is remarkable are the 893 comments that have been posted. You don't have to read long, before you run into this one:

"I am disgusted with BofA. Just recently I knowingly used my debit card for a transaction that would overdraw my account, because I believed that the transaction was worth the $35 overdraft fee. It was $115 charge at a pharmacy for liquid Tamiflu. My 8 yr old daughter had a raging fever, and had tested positive for H1N1. What choice did I have?? I didn't. Little did I know, that BoFA handles transactions from highest to lowest. So, the $115 was taken out first & then the previous 7 very small transactions from earlier in the week. Sadly, I had cash ($789) at home to well cover the expenses, but with the urgent trip to the doctor, missing work, etc, I just didn't have time to get it to the bank. I did manage to get it to bank 3 days later when my daughter's fever finally broke. Well, then I have bills hitting my account, water, phone, electricity. This activity turned me over. So, my trip to the pharmacy turned out to be $595 in late fees all within a matter of 7 days. Now, would I make that same decision to make that transaction at the pharmacy that day, yes. Will I continue to bank with BofA. No. I even went to the branch to dispute some of the fees, and the customer rep couldn't make sense of some of the fees."

You wonder if banks can make money if overdraft fees are taken away? Wouldn't that be a a dirty little secret?

Some politicians stand up to bad legislation

2009-10-05T20:11:00.002-05:00

Assembly Speaker Mike Sheridan, in Wisconsin, went on the record to oppose the recent bill to cap payday loans at 36%.

In a pre-fall session recent interview on WisconsinEye, Sheridan also took a controversial position -- no! - on the bill of fellow Democratic Rep. Gordon Hintz, of Oshkosh, that would clamp a 36 percent interest rate on payday loans. In remarks that surprised Hintz, Sheridan said the Hintz bill goes "too far."

It was a public signal to Hintz that he better start looking at other ways to regulate the $700-million-a-year payday loan industry. Although it was the kind of signal that Assembly speakers have given for decades, it was unusually blunt talk from the new speaker.

Veritec moving forward in South Carolina

2009-10-05T14:02:00.002-05:00

The Payday Loan Industry Blog writes:

"South Carolina has turned down an appeal protesting its previous decision to award a contract to Veritec Solutions for the establishment of an online database system for tracking payday loans applied for by residents of South Carolina."

We've, personally, worked with Veritec. They're pretty good to work with. What I don't get is all this Big Brother stuff that the states are doing. For example, in Illinois, they're adding title loans to the state database. All I can say is that things are going in the wrong direction.

Arkansas still chasing payday lenders

2009-10-05T09:16:00.005-05:00

Arkansas ran the last of its payday lenders out this past year. Now they're setting their eyes on Internet lenders. Their district attorney has sent out over 30 warning letters to Internet lenders.

It will be interesting to see how this plays out. I'm sure many of these lenders are off shore companies or Indian reservations. These lenders thought they were immune to local laws, but recentl, a British Internet lender paid $1M in fines to the FTC and state of Nevada.

Today, they're just telling Arkanasas borrowers to close their bank accounts and sending a letter to the lender to cancel the loan.

The big question is what can they do about it? Are offshore Internet lenders immune from state law enforcement? I guess we'll see.

Here's what the Deputy Attorney General of Arkansas had to say: “Sometimes you try to trace them and they end up being in the Philippines or Botswana or somewhere like that, to the extent that you can even figure out where they are,”

It looks like payday lending is going the way of Internet gambling. Internet gambling's major blow was a federal law named the "Safe Port Act". This made it illegal for financial instiutions to transfer funds to an Internet lending site.

You can read the story in full here.

Wisconsin Update

2009-10-01T00:41:00.002-05:00

Check out Payday Pundit for all the breaking news on Wisconsin's battle.

A Look at Consumer Borrowing

2009-09-29T23:22:00.015-05:00

Critics of payday lending make the mistake of not looking at the big picture when it comes to credit. Instead of looking at the lending ecosystem, they get caught up in sensationalizing the APRs.

The cost of credit has to do w/ the credit worthiness of the individual and the to some degree the amount being borrowed and the term of the loan.

The biggest mistake they make is not understanding what lending options exist out there. Let's see what the cheapest forms of credit are, up to the most expensive. We'll order them from least expensive to most expensive and let's just stick to unsecured.

Here's the point, all these products are connected. They make up the unsecured credit ecosystem. If you get rid of one, it will affect the other. It's not the product that's good or bad, rather it's how you use that product. This is also known as personal responsibility.

Capping rates or commoditization of the payday product is the worst thing legislators can do. This just makes things less competitive in the long run and leaves borrowers worse off.

Most people's solution to the payday loan issue is that each person has an idea of what is "fair". At the end of the day, fair or foul does not matter. I can't say it better than Ayn Rand does in Atlas Shrugged, "In a capitalist society, all human relationships are voluntary. Men are free to cooperate or not, to deal with one another or not, as their own individual judgments, convictions and interests dictate."

Please feel free to suggest any improvements to this post. It's definitely a work in progress.

Internet lenders pay a cool million to stay in business

2009-09-23T13:45:00.004-05:00

We discussed this story back in February. The FTC and state of Nevada were all over a few internet lenders titled "Nevada Internet Lenders Under Fire". A few days ago, they settled for a cool $1 million. The split was around $30k to the state of Nevada and $970k to the FTC. I guess the FTC is ordering sushi this week.

The Internet payday lenders were accused of violating multiple TILA (Truty in Lending Act) rules, in addition to Nevada's Deceptive Trade Practices Act.

The lenders are: "Cash Today, Ltd., and The Heathmill Village, Ltd. (both registered in the United Kingdom); The Harris Holdings, Ltd. (registered in Guernsey, an island between England and France); Leads Global, Inc., Waterfront Investments, Inc., ACH Cash, Inc., HBS Services, Inc., Rovinge International, Inc.; and Lotus Leads, Inc., and First4Leads, Inc. (both now dissolved); each doing business as Cash Today, Route 66 Funding, Global Financial Services International, Ltd., Interim Cash, Ltd., and Big-Int, Ltd. The settling individual defendants are Aaron Gershfield and Ivor Gershfield. A separate settlement has been reached with Jim Harris, who managed the Nevada side of the operation."

Here's what the Internet lenders need to start doing, in addition to "cough, cough" pony up a $1M.

"The order bars the defendants from violating the Truth in Lending Act and Regulation Z in extending closed-end credit by requiring defendants to make the TILA disclosures mandated by law, and by failing in any other manner to comply with TILA and Regulation Z. The order also requires the defendants to disclose clearly, in writing, in a form consumers can keep and before a transaction is made, the interest rate and other key terms of their loans; a repayment schedule showing dates when consumers’ bank accounts will be debited for the loans; payments and fees for late or non-payment of the loans; and a statement that payday loans may be limited or prohibited in some states. The defendants must obtain consumers’ written confirmation that consumers have received the required disclosures before making a transaction and, when collecting debts, the defendants must provide consumers, upon request, a written statement of amounts and fees paid and due.

In addition, the order prohibits the defendants from violating Nevada state consumer protection law when conducting business from the State of Nevada or when selling goods or services to Nevada residents, including failing to be properly licensed, failing to provide notice and disclosure of all material facts as state law requires, and failing to comply with any state or federal law in selling goods or services. The order also contains recordkeeping and reporting provisions to allow the FTC to monitor compliance."

So what does this all mean? Being off shore is no longer a safe alternative.

You can read this article in its entirety at Mesquite Local News.

Hearing on Ohio lenders this week

2009-09-21T21:18:00.002-05:00

There is a hearing scheduled this week for the remaining 835 lenders. Since the state capped interest rates at 28%, lenders began to operate under an alternative law.

Since this law, almost 50% of lenders in Ohio have stopped giving loans.

You can read more in the Dayton Daily News.

Payday Pundit shines light on payday alternatives

2009-09-18T11:37:00.005-05:00

The Payday Pundit shines a light on payday alternative loans. The blog is titled, "$120 for a $100 Loan."

Note to legislators: It costs money to do business. The people that pay, pay for the people that don't pay.

I don't see payday lenders getting government bailout money. Payday lenders know the true cost of sub prime credit. That's why they charge the fees they do.

More good comments

2009-09-18T11:30:00.005-05:00

These comments come from the Canton Rep.

"The only difference I see between Pay Day lenders and loan sharking is the latter is illegal and the former should be. If you can't make a decent profit off of a 28% rate of interest you're obviously in the wrong business." Retired Banker

________

"Retired Banker: I'm surprised with your 'banking education' you dont realize what a 28% APR is on a 2 week loan. There is no decent profit. 28% APR on a two week loan is $1.07. It costs more to print the contract. Payday Lenders have overhead like any other business. These are high risk loans, loans that banks won't give. These loans are needed by consumers with less than fair credit for emergencies. I work for a lender, and am proud of the business. I know the behind the scenes workings of the company and feel the media/blogs have made a poor representation of what a payday loan was. The payday loans charged 15% of the loan as a fee. Thats IT, but when you take that figure and multiply it to appear as a ANNUAL rate, it looks ridiculous, just like 28% APR divided down to a 2 week loan is ridiculous to believe any business could survive." taramapes

I'm a little surpised at Retired Banker. Maybe he's just a Monopoly Banker and not a real one.

Wisconsin payday law too extreme to pass

2009-09-18T11:21:00.002-05:00

36% has come to pass in a few states. In Ohio, they're fighting for their lives with Ohio HB 209.

Wisconsin is doing the 36% dance.

Here are some good comments from New bill confronts payday loan industry:

"This story does not share the argument of payday lenders, who favor reform in Wisconsin. The problem is the 36 percent rate cap, which is a ban of the payday loan product and strips citizens of a needed short-term credit product." Ryan 458

"Put this kind of business back in the hands of those who know how to get those loans paid - the loan sharks. The loan sharks can charge lower rates since they collect a greater portion of the debts. It make take a beatdown, a missing finger or busted kneecap to ensure that those debtors make their payments, but it’ll be better for them in the long run AND they will learn to be more responsible with their credit!" Anonymous

Just for fun, let's take a shot a ObamaCare:

"If you “really don’t appreciate big brother making my decisions and dictating” then I don’t think you’ll like Obamacare or much else of the coming Obamanation." Anonymous

Have a question about the payday loan industry?

2009-09-17T10:44:00.003-05:00

If you have a question about the industry, we can try and answer it.

Just leave your question in the the comments section of this post.

Veritec deal held up in South Carolina

2009-09-16T10:09:00.003-05:00

The Prism Group, a Columbia based company, is holding up the deal to award Veritec Solutions the contract for The South Carolina payday database. Similar databases are already in use in states like: Illinois, Florida, Michigan and Indiana.

The Prism Group thinks the deal is worth up to $15m over 5 years and does not think the state got this right.

You can read the full story in The State.

Banks and Payday Loans

2009-09-10T09:44:00.005-05:00

Minneapolis-based U.S. Bancorp, Wells Fargo & Co. of San Francisco, and Fifth Third Bancorp of Cincinnati -- are now marketing payday loan type products, with triple-digit interest rates, to their checking account customers.

"Banks are in a strong position to steal a big chunk of the $35 billion-a-year payday lending market -- with its estimated $7.3 billion in fees from borrowers, say industry analysts."

The banks are charging $10 per $100. These fees claim to be half (for the record, they're not) of what a typical payday lender would charge. They estimate the typical payday lender charges about $17 per $100. Banks fees should be lower. They incur less risk than traditional payday lenders. Banks own the checking accounts and may additionally run credit reports for approval. Of course, they will have lower delinquencies due to smaller risk pool and full access to the borrowers checking account for collections.

When banks offer payday loans, the "on the fence" general public will start to accept the payday loan product. Let's face it, the industry is never going to change a self righteous, bleeding heart liberals' mind. All we can do is go after the middle 80%.

The only issue I have today is that banks don't operate under state law. They can offer payday loans in the 15 "black out" states like New York, New Jersey, North Carolina, Georgia, Arkansas among them. These states should open their doors. It's discrimination, otherwise.

I think the industry should use this as a sounding board. Let the banks offer payday loans. Let anyone offer cash advances.

You can read the full article in Minneapolis Star Tribune titled "Biggest Banks Stepping into the Payday Loan Arena".

Most rediculous statement of the day

2009-09-09T10:09:00.002-05:00

"these are toxic loans, just like those in the disastrous subprime mortgage industry, because they are made knowing that desperate borrowers cannot repay the loans when they become due."

Do they really think lenders do NOT want to get paid back?

This rediculous comment was brought to you by Legal Aid Society's litigation director Peter M. Koneazny.

You can read more about Wisconsin and payday loan battles in the WisBusiness.com.

Wisconsin legislature entertaining 36%

2009-09-07T22:25:00.003-05:00

Same story different state. I guess we'll see what happens.

I thought this was worth sharing:

Payday lenders have seen an explosive growth of 391 percent in Wisconsin over the last ten years, rising to $723 million in loans in 2008 from $147.2 million in 1998.

There's lots of demand out there. You can read the full article in the Wisconsin State Journal.

Who is Charles Horton?

2009-09-07T22:16:00.004-05:00

A 40-year-old "self-made multimillionaire" with more than 50 "retail financial outlets" that will help you walk on burning coals.

I secretly love this "mind over matter" stuff.

Here is an excerpt from the Dallas News article titled, Can a walk on hot coals lead you to enlightenment?

"How many of you were raised with the concept that 'money is the root of all evil?' " he asks with a voice that could have inspired Ian Fleming "My belief system says that's absurd." Horton fills us in on his mobile-home childhood with a dad on the run from the IRS. Starting a check-cashing business as a teenager, he went on to make some major money with a payday loan company and attended seven Tony Robbins seminars. Throwing in a quote from Donald Trump, he promises we can achieve Black Card status, too, and we need only work 15 minutes a day for $1 million a month. He does. I see dollar signs in everyone's eyes.

This is a PDL forum. Does anyone know Charles?

Personal responsibility and the CFPA

2009-09-03T13:31:00.006-05:00

Payday Pundit shares a very intelligent article about the CFPA (Consumer Financial Protection Agency). I would like to add my $0.02.

Start by reading this blurb from the article by Megan McArdle:

"For some people this is an argument for laws that make it unprofitable to loan money to people who are likely to default, aka those living on marginal incomes. The problem is, there are two groups of people among the poor: those who will be made better off by credit, and those who will be made worse off. Judging from the bankruptcy statistics, the former group is larger. And there is no way to distinguish between them. The alternate forms of credit that poor people have traditionally used, like pawn shops and loan sharks, are worse than Bank of America."

My opinion is that as long as the government and press baby people who make bad financial decisions for themselves, it's going to be hard to lend money to people that need it. Instead of looking at payday lenders as part of the credit cycle. They want to demonize them and make them as unprofitable as possible. The problem is that this inevitably lets irresponsible borrowers off the hook (in their own minds), and the cycle continues.

I just don't get the insanity of all this. If you ate liver and didn't like it, then you stop eating liver. If an adult takes out a payday loan and does not like it, then they don't have to borrow again.

Here's the full video:

The Cash Store acquires 10 store chain

2009-09-02T19:39:00.003-05:00

The Cash Store bought Affordable Payday Loans, a 10 store operation in Ontario and Edmonton for an undisclosed amount.

Three of the locations will be consilidated with nearby Cash Store or Instaloans branches.

You can read the full article in RTT news.

The most ignorant comment of the day

2009-08-30T11:55:00.005-05:00

In Missouri, Deputy General Counsel Mike Dandino said:

"customers who most often used payday loan services were poor, elderly or living paycheck to paycheck. Many of the same customers either face threats of disconnection or have fallen behind on bills, making them easy targets for high-interest loans."

I find it hard to believe that a highly educated person would stereotype these people. New flash: people that use payday loans, use them b/c they can't pay their bills on time.

In an article titled, "Public Counsel targets utility billing, payment practices", some Missouri legislators want locations that offer payday loans to stop offering payment services for utilities.

Richard J. Mark, senior vice president of energy delivery at AmerenUE, said,

"the utility tried to provide customers as many options as possible, including payment centers spread across its 25,000-square-mile service area."

Dandino also says:

"It is not in the interest of consumers to have utility companies steer customers to these predatory lenders,".

Great! We have another Elliot Spitzer on our hands. Hey Dandino, just do you're job and leave saving the world to to someone else. Ask the people who use payday loans properly, if they're bad.

Payday loan investors beware

2009-08-28T21:56:00.005-05:00

Payday loan scheme nets prison term for Clarksville securities broker. Alvin Allister Ambrose received 6 months in prison and is being forced to pay back $602k of $5m that was misappropriated. He had 180 investors at the time.

I'm sure he'll file bankruptcy and the $602k will go away.

My question is how did he get 180 people to buy into this? I guess if it sounds too good to be true, it probably is.

Another highly publicized ponzi scheme was reported here at PDL Industry back in June titled: Payday loan ponzi scheme .

National Arbitraion Forum Fallout

2009-08-24T15:14:00.010-05:00

This is older news, but I think it's worth discussing b/c the fallout is starting. The National Arbitration Forum is voluntarily ceasing consumer arbitrations. You can read an in depth article titled "National Arbitration Forum to Cease Administering All Consumer Arbitrations in Response to Mounting Legal and Legislative Challenges."

Why are arbitration agreements important? I'm not an expert, but it does limit a borrowers ability to start or potentially participate in a class action lawsuit.

What should you do? Every payday lender should also make sure to remove National Arbitration Forum (1-800-474-2371) from their arbitration agreements. I'm just guessing, but having a defunct arbitration company may void your arbitration agreement.

A few that you can probably still use are: the American Arbitration Association (1-800-778-7879) http://www.adr.org/ or JAMS (1-800-352-5267) http://www.jamsadr.com/.

Ohio lenders hanging in there

2009-08-23T20:31:00.002-05:00

Ohio has been a pretty hairy situation. An article in Cleveland.com titled "Democrats seem in no rush to fix Ohio lender loophole." by Thomas Suddes. Among other things, he had this to say:

"Lenders say they told legislators in 2008, and legislators understood, that lenders would indeed substitute mortgage and small-loan borrowing for the banned loans. (But lenders also claimed Widener's bill would run them out of Ohio altogether.) Then there's a "fairness" argument: Payday lenders argue the General Assembly won't clamp down on banks' bounced-check and cash-advance fees. (One reason for that: For most purposes, Congress monopolizes banking law.) Also on the table: The "use" or "market" argument: If no Ohioan ever needed a payday loan, the lenders would vanish. That is, unless Ohio assures poor Ohioans more credit options, Ohio should let lenders be. "

The Ohio lenders are definitely making their case.

City blocks EZ Corp location

2009-08-19T22:18:00.003-05:00

If the state and national government are not enough, now payday lenders have the local city counsel to deal with.

The city of Wauwatosa (Wisconsin) has stopped EZ Corp from moving in. A state appelate court is holding up the decision that was made three years ago. In the meantime, EZCorp has 30 days to request the state Supreme Court review the decision.

Wondering what the reasoning was for this decision?

"Residents and city officials spoke out against the proposed store, claiming the business would draw crime to the neighborhood. Many also criticized the high fees and lending practices employed by the quick cash loan industry, calling them predatory."

I hope Lawrence Myers is reading, so he can rip this town a new one.

You can read the full article here.

Getting philosophical on payday loans

2009-08-19T22:10:00.003-05:00

If you're in the payday loan business, you should read this opinion titled "Community Conversation: Payday lenders do a needed service" written by a credit counselor named Kenneth King.

I got a kick out of this statement: "Payday borrowers often are portrayed as victims. I think "victim" is a strong word; a better term might be "maker of poor consumer choices."

Another bad payday loan alternative article

2009-08-19T09:00:00.004-05:00

I'm all for payday loan alternative products. There is room in the market for anything that customers demand, but some of the things these articles allow to print are rediculous.

For example,

"It's a high risk to the consumer," Carrol says. The Better Business Bureau says when you see a triple digit interest rate, beware. "Let's say you default on a loan like this, 500%," Carrol says, "it can ruin your life, it's huge."

"Ruin your life"? I find that hard to believe considering payday loans:

Do not report to the 3 major credit bureaus, so they can't hurt your credit.
It's not like you borrowed $500 from your brother-in-law and did not pay him back. Now, you have to face him at Thanksgiving.
Most, if not all, payday lenders will allow you to enter into a payment plan.

Here's what the article leaves out (I went to the credit unions website):

They run a credit report. "...this is one of several determining factors in the decision of your application." (from their site)
They may require a co-borrower to sign.
You must attend mandatory monthly financial coaching classes once a month for the term of your loan.

Sometimes, I think society wants lenders to give away free money. Even when interest rates are low, they use the term free money; but they expect you to pay back the amount you borrowed. People do not realize how many borrowers take out a loan and never make a single payment. This is why the fees are where they are.

You can read the article titled "Non-Profit Offers Payday Loan Alternative."

Missouri is number 2 in payday loan fees

2009-08-17T20:34:00.005-05:00

Missouri made the news in an article titled, "Nursing home payday lenders scrutinized."

The article is about a two companies that own 62 nursing homes and offer their employees payday loans. The payday loans are then deducted from their paycheck.

Personally, I don't see what the big deal is, if they're licensed.

The big news is that a lender can make good money in Missouri. Missouri lenders charge about $317M in fees. This is second, only, to California in payday lending. Missouri is also very favorable when it comes to car title loans and signature, installment loans. It's also home to 34 online payday loan companies.

Payday loans wiped out in Arkansas -- is this a trend?

2009-08-13T20:29:00.002-05:00

"Payday loans wiped out in Arkansas -- is this a trend?" is the title of a Mitch Lipka article at WalletPop.com.

The article, itself, does not have too much meat. This is a compelling question.

PaydayPolitics.org

2009-08-12T12:38:00.003-05:00

I just noticed a new payday political blog at Payday Pundit.

It's called PaydayPolitics.org.

Here is a taste of some of the good stuff:
"The only people that benefit from unreasonably restrictive regulation of payday loan companies are criminals like "loan sharks" who would see their own share of the market grow." Lance Weber

"Loans to people with bad credit records are inherently risky. The solution to interest rates that are "too high" is more competition, not more regulation." Michael Munger

The last Arkansas payday lender closes

2009-08-12T12:27:00.003-05:00

Arkansas payday lenders operated under a check cashing law since 1999. Last year, the Arkansas Supreme Court overturned it's original ruling putting 275 lenders more of less out of business. A few are still around offering check cashing and phone cards.

In this AP article in Forbes, the last of the Arkansas lenders has closed.

Could the lenders have worked w/ the legislature? It's all academic now.

If you're curious about the last year in Arkansas, PDL Industry was following the store. Here is the archive.

Phony debt collectors

2009-08-11T18:18:00.002-05:00

Allegedly, there are phony debt collectors trying to get money out of consumers.

The Better Business Bureau thinks it's a data breach. I'm not saying that this is not going on, but can they confirm that victims do not have any payday loans currently outstanding. Regardless of the validity of this claim, the collection tactics are totally out of bounds:

"...accuse the victim of defaulting on a payday loan and claim they are being sued. The phony debt collector threatens that, if the victim doesn’t pay as much as $1,000 immediately via wire or by providing bank account or credit card numbers, he or she will be arrested and extradited to California within the hour to stand trial. The scammers often have the victim’s Social Security, old bank account numbers or driver’s license numbers as well as home addresses, employer information and even the names of personal friends and professional references."

Payday loan leads, more than any other lead, are being resold. What's the solution? I don't know.

Payday loans are regulated

2009-08-11T17:10:00.002-05:00

A major misconception of the payday loan industry is that it's not regulated. Consumer groups want to undermine payday lenders, so they really don't mention this to their readers.

In Colorado, the regulatory body, refunded around $1.8M to borrowers.

Basically, how it works is that if a lender makes an error, they reimburse the borrower. This is how it should work. Don't get me wrong, I don't like frivolous rules, but if someone deserved a rebate and did not get it, they should.

This should be handled by your payday loan software. If it's not, you should find a new system.

Payday Alternative Loans or PALS

2009-08-05T12:02:00.004-05:00

Credit Unions are getting into the payday loan business. Not all PALs are a cheaper alternative to payday loans.

Actually, it's against the law for federally chartered credit unions to charge more than 18% on loans. Credit Unions may brag about their 18% interest rate, but they still charge other fees that put the APR into the triple digits to make these loan profitable. USAToday brings some light to this in an article titled "Some short-term credit union loan rates may be high."

One Credit Union in California reponded this way to an inquiry about their 275% APR. Kinecta spokeswoman Laura Oberhelman said

"the credit union's loan is competitively priced and in compliance with federal regulations governing such loans. In many cases, a short-term loan is less costly than paying overdraft fees on a checking account or re-establishing service with a utilities provider."

Of course, the news rarely tells you that. They also don't make a stink when banks, like Fifth Third, get into the payday lending business.

So we have payday lenders, credit unions and banks all saying the same thing: You can't make money at 36%!

Payday Loan Franchise

2009-08-02T12:13:00.000-05:00

Recently, I had a customer that got into the payday loan business through a payday loan franchise. He opened a second store and decided that the franchise, outside of sounding like a good idea, really was not.

First, a payday loan franchise should give you a brand advantage over other lenders. Unless you can get a recognizible brand (Advance America, Check n Go, Check Into Cash, The Cash Store, a few more), why would you buy a franchise?

The payday loan industry is not like the fast food industry. Every loan, customer or location are not the same.

So is it worth it to buy a payday loan franchise? I don't think so.

I can't say no, without making a suggestion. So, what should you do if you want to get into the business? There is no black or white answer, but you want to work with people or organizations with a reputation.

Personally, I think you would gain more "doing it". What I mean by this is going to work at a payday loan operation. Now, you should not deceive them. Find a mid size operator outside of your demographic and make a deal with them. You may have to sign a non-compete within 10 miles of a list of locations (current locations).

Work for free. Committ six months to working part or full time. The operator will save a few bucks and you will get the invaluable experience you need. There is no substitute for doing it. Besides, if you have good character, you may get an investor or make a friend in the process.

From my experience, serving the payday loan industry, is that the best business people make the most money. This starts with management. So, before I would pay a payday loan consultant $20k, I would get a business and management consultant.

My name is Nick Sparagis and I'm one of the owners at IntroXL.com. We offer payday loan software.

PALS or just payday loans

2009-07-31T22:41:00.002-05:00

Payday Alternative Loans or PALs are a buzz word in the credit union industry.

Some credit unions are advertising a 0% APR on their PALs, but charging a 20% documentation fee.

“The 20% fee does not accurately reflect the costs of processing applications so the fee should be considered a finance charge under Reg Z and be included in calculating the APR. This would raise the APR above the 18% ceiling,” the agency wrote.

If this proves anything, it's that you can't make money below 36%. Read more at Credit Union Times.

Wisconsin strikes again

2009-07-30T22:14:00.002-05:00

If you're an Internet lender in Wisconsin, you better keep your head on a swivel.

Although Arrowhead Investments admits to no wrong doing, they settled the class action law suit. The agreed to forgive all the debt and pay back $180k.

"The Justice Department said approximately 1,300 consumers could receive relief. The settlement covers Wisconsin consumers who received a loan from Arrowhead Investments between Dec. 1, 2001, and Dec. 21, 2007, and who paid more than their principal loan amount to Arrowhead. They will receive a cash payment.

Arrowhead will also close all outstanding loans with a zero balance, totaling more than $432,000 in loan, cost and fee forgiveness, and also agreed to no longer solicit loans to Wisconsin consumers for five years, among other settlement provisions."

You can read the full article in BizJournals.

Beware of the payday loan alternatives @ credit unions

2009-07-28T13:08:00.003-05:00

It's not new for Credit Unions to try and offer a PAL (Payday Alternative Loan), but beware.

For example, this article in the Channel 11 News says:

Another pro is you build credit with this program. "If someone is using a payday lender they're not necessarily able to build credit with it even if they always pay it on time. It's not a positive reflection or any reflection on your credit report," Natasha explains.

If it can help your credit score, it can also hurt it. Payday loans can not hurt your credit score. That's a very big deal for many borrowers. Also, being able to ding someone score is a great collection tool. I don't mention that in the article.

Internet Payday Loan Mess

2009-07-23T23:17:00.004-05:00

The Little Loan Shop has a big problem (badabing). They're filing for bankruptcy protection claiming that it owes more than $100M to 1,300 investors.

Many investors are accusing the principal, Doris Nelson, of running a ponzi scheme.

The deal is just a mess. How do you turn $100M into $2.7M in accounts receivable?

I feel for the investors, but when someone guarntees you a return of 55% per year, run like hell.

You can read more about this story in the Spokesman review.

Taking a different angle on payday loans

2009-07-23T11:01:00.006-05:00

Ray Fishman writes a thought provoking article in Slate Magazine about the psychology of payday loans titled "400 Percent APR—Is That Good?"

What I like about the article is that it approaches payday loan abuse from the correct angle. Basically, he says that most people using payday loans do not understand the true cost of the transaction and the the APR actually is not a good metric.

I know this isn't going to be popular, but I want to see this industry continue. Quoting a payday loan as a daily rate $2.35 per day, is a bad idea. Trying to make an expensive product look inexpensive is why most people turn off when the industry talks.

Payday loans are expensive because many people do not pay. The people that pay have to cover the losses for the people that don't pay. This is why 36% does not work. Every lender would go out of business.

Legislators, instead of limiting rollovers, should demand another, more practical, method of disclosure. Create an schedule for a loan that is rolled over 3 times and show the nominal cost of the loan.

Anyone that's been successful in this industry knows that if the borrower needs the money, they're going to take it. Maybe this type of disclosure could be used to build credibility for the industry.

As far as I'm concerned, providing clearer disclosure will win over the people that are on the fence with payday loans. That's what the payday lending side needs to do. Get people that don't care, to care; and be on our side.

Payday loans Internet Fraud

2009-07-22T11:31:00.003-05:00

This is a follow up on an a story from a week ago, in the Chicago Tribune. Here are the facts:

Contract worker at AT&T steals 21,000 employees identities.
Gets $70k in payday loans.
Payday One and QuickClick are the victimized online payday lenders.

Here's what's wrong w/ the article:

The Chicago Tribune reporter blames the bank and the internet lenders. "more restrictions on online payday loans. Some banks also need to tighten their rules, he said. Some allow checking accounts to be opened online without running credit checks or verifying addresses, he said."

Hello? Anyone home? What about AT&T? Didn't they give access for all this data to a contract worker?

Obviously, there were some Internet lenders that said "no", while others said yes. So how does the industry prevent this in the future?

There should be a better way to verify the identity of a bank account. Unless the identity thief opened the online bank accounts in the name of the ATT employee.
Next question: Can you open up an checking account in another person's name? If so, what banks are these. This is a big red flag.
Payday loans do not affect your credit rating. This article claims that they can. To my knowledge none of the big 3 credit bureaus take this data.

Wisconsin battle heating up over payday loans

2009-07-21T13:43:00.003-05:00

Wisconsin is turning up the heat on payday lenders. Today, Wisconsin, does not set an interest rate cap. Some legislators are talking 36%.

Nothing new here except for this comment:
In 2004, $500 million in loans were made by payday lenders in Wisconsin, with 80 percent of that revenue leaving the state because most of the establishments are owned by out-of-state investors.

I understand their point, but don't really agree with it.

You can read the full article at HTR News.

Virginia is getting into the emergency-loan business.

2009-07-13T21:47:00.002-05:00

The Virginia State Employee Loan Program will offer small loans through the Virginia Credit Union and allow state workers who are members to borrow up to $500 twice a year.

The loans will be 6 months and carry a 24.99% APR.

I guess we'll see what happens. Personally, I'm fine w/ this if they leave the payday loan industry alone. Competition is better than legislation.

You can read the full article in the Richmond Times Dispatch.

Major Internet lending ruling handed down in Pennsylvania

2009-07-11T23:39:00.003-05:00

The state of Pennsylvania ruled 4-3 against Cash Net USA. I smell an appeal.

What's interesting is Cash Net USA's defense, which I think is very clever. Attornies for Cash Net USA argued:

Pennsylvania's 72-year-old banking regulations could not anticipate the advent of the Internet, and thus make no mention of out-of-state lenders.

You can read the full article in Pittsburgh Post Gazette.

Bankrate.com's poorly written article

2009-07-10T23:32:00.002-05:00

Article titled "4 alternatives to payday lending". This is one of those gee wiz articles b/c it's so naive.

Let's face it, if these four options were a better alternative, people would be using them.

Credit union loans.
Small bank loans.
Credit counseling help.
Other options.

Bankers weary of consumer watchdog agency for financial products

2009-07-08T21:31:00.003-05:00

President Obama wants more watch dogs. The financial community does not agree. The agency would oversee just about every available consumer financial product, from payday loans and credit cards to loans from banks and nonbank mortgage lenders.

Answer this much, "How effective is the SEC?" Hello Bernie Madoff. We don't need another straw man.

Anyway, there is some good banter on this proposed agency here.

Atleast $70k fraudulent Internet loans

2009-07-08T21:24:00.003-05:00

"A temporary employee for AT&T was arrested today on charges she stole personal information on 2,100 co-workers and then pocketed more than $70,000 by taking out short-term payday loans in the names of 130 of them."

That's pretty scary. I wonder what the lenders could have done differently. Didn't they realize that all the money was going into just a few accounts?

I think matching a person's name with a bank account is a great service. Can anyone recommend one?

You can read the full article in Chicago Breaking News.

Let's Treat Borrowers Like Adults

2009-07-08T12:27:00.004-05:00

Payday Pundit found an excellent opinion, written by Todd J. Zywicki, professor of law at George Mason University, in the Wall Street Journal titled, Let's Treat Borrowers Like Adults.

The opinion is a great read, but I seem to be enjoying the comments these days. This one is hilarious:

Darren Keenan wrote:
Hear hear, yes. Let's treat adults like adults. When it comes time for me to pull some of the equity out of my home, I want all the options I can get. If those options are too complex for me to understand, then I (and by "I", I mean everyone) shouldn't be looking to use those products. "A man has to know his limitations" someone once said.It would be nice if we had the option of signing a piece of paper declaring our adulthood so we could take advantage of programs outside the government's purview. While removing risk usually lowers rates, in this case, the cost of risk removal would lead to higher rates. Can I (being a mature adult) decide for myself what risk/rate I find acceptable?That would be a nice change from where things are headed.

Is St. Petersburg mayoral candidate Deveron Gibbons in the predatory loan business?

2009-07-08T11:55:00.003-05:00

The short answer is: NO. Payday loans are filling a need. The first half of the article disucsses Deveron Gibbons, who is a good lobbyist and running for mayor. He works for Amscot.

Here is what CEO MacKechnie had to say:
"There is a demand and need for these services. We have never taken advantage of a consumer and never will,"

Here is what Jean Ann Fox of the Consumer Federation of America said:
"They drain a lot of money out of the community and put a lot of consumers in a debt trap," of "payday lenders" like Amscot.

Ms. Fox's statement is rediculous and it shows her true colors. The woman is a communist. You can say the same thing about Starbucks. She obviously does not want anyone borrowing money, anywhere. Hey lady, it's a free country, get with the program. Who made you president?

Comments in California

2009-07-07T20:47:00.003-05:00

Lately, I'm more interested in what people are saying and not the media.

Here are some comments from an opinion in the Merced Sun-Star. Legislators are looking at increasing the check value of a payday loan to $500 from $300. Personally, I think it's a good idea.

zaphoid wrote on 07/07/2009 01:03:35 PM:
If you don't have access to legitimate credit, you have no business borrowing money. If you are desperate... you planned poorly. Mr. Example should have been putting some of the 150$ away every month for car repairs. If he can't afford to fix it, and screwed up his credit to the point that he has to get a loan with a 400% annual interest rate... well... so sorry. As far as I have seen these places are pretty darn up-front about how much you are paying. You write them a check.... and they give you cash. How much more obvious can the cost of the money be made?
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Joan wrote on 07/07/2009 11:50:46 AM:
A sharp auto repairman would work with you on the family car costs and reap the profits as well as the work. If I pay 1/3 of the bill up front, 1/3 on pay day and the final 1/3 the next pay day or something similar. It's pretty close to bartering, but not quite. It's good to have tangible collateral to hold. Has anyone compared the pawn shops to the payday loans? Nobody says anything about pawn shops.
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righttochoose wrote on 07/07/2009 10:30:59 AM:
In your words "So when the family car breaks down and needs repair, he takes out a two-week payday loan for $300, paying a fee of $45." He has choices; overdraft his bank account that will be $35 plus everyday the account is overdrawn a daily fee that will easily exceed $45, bounce a check to pay for the repair, $35 to the bank then $25 to the auto shop = $60, or not pay for the repair and lose his job.36% eliminates payday lending, but it does not eliminate the need for the service. Customers should have the right to choose what financial products they use and should get full disclosures of the fees. Payday lenders already do that but you have to read the fine print on a bank statement to get the same understanding of account fees.
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realsolutions wrote on 07/07/2009 08:21:20 AM:
First of all, these are private transactions between consenting adults, and if the pay-day loan outfits were not filling a need, they would not exist. What right does the state have sticking its nose in this situation? If the state intervenes, some of these outfits might go out of business, and then where will their customers go? There could be unintended consequences, such as more robberies and thefts.But secondly, does anyone else find it strange that a legislature that has spent California into bankruptcy is trying to "fix" a business arrangement between willing borrowers and willing lenders? I think it's a hoot. The legislature needs to get its own house in order before it tries to "fix" other businesses.
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Joan wrote on 07/07/2009 07:30:44 AM:
Loan sharks have existed since the beginning of civilization. It will cost you to try to get rid of them.
Recom

Credit Unions competing with payday lenders

2009-07-02T20:06:00.003-05:00

Credit Unions offering some type of payday loan alternative is nothing new. What I think is worth sharing are the comments left on this article titled N. Texas credit unions plan to compete with payday lenders.

rgvcowboyfan wrote on 7/2/2009 4:21:43 PM:
Credit unions do not lend you if you have had a tough financial time in the past even though you may be working on improving your finances. Pay day loan companies do not look at your credit score, only at your current ability to pay.

valtwin wrote on 7/2/2009 1:14:11 PM:
Two totally different clienteles. The CUs will only be in competition amongst themselves.

We provide payday loan software for many lenders, and I find payday lenders are much more leniant with, not to mention forgiving, of their customers. This goes a long way. Payday lenders are open to re-lending to customers that have been a late payers are delinquent in the past. I don't think credit unions or banks are like that.

The point is that you can make a cheaper product, but is it necessarily better?

Obama's plan

2009-07-01T11:15:00.002-05:00

"President Barack Obama asked Congress on Tuesday to create a new agency to police the fine print on credit card bills and mortgage documents and determine what fees, penalties and interest rates are fair."

Unlike mortgages and credit cards, I think payday loans are very straight forward. If you have not figured out that rolling over a payday loan more than 3 times is a really bad idea, then payday loans are not your biggest problem.

Now, I believe the payday loan industry should provide complete disclosure. For the most part, I believe it does. For example, it's common for the promissory note to display:

CUSTOMER NOTE: Payday advances should be used for short term financial needs only, not as a long term financial solution. Customers with credit difficulties should seek credit counseling.

OR

YOU CANNOT BE PROSECUTED IN CRIMINAL COURT TO COLLECT THIS LOAN.

Everyone should read this article in the Associated Press titled "Administration sends Congress consumer legislation."

Study: Payday loan users say they have no other options

2009-06-29T22:13:00.005-05:00

How do consumers win, if the legislature gets rid of all the competition? Everyone wants banks to offer payday loans. Some do, but most stay away from it b/c of the stigma and they can't charge what they need to.

This Kentucky study is basically saying that people that use payday loans do NOT have any other options. Once again, supply and demand collide.

This study is not pro payday lender, but there are some good facts.

A survey of low-income families in nine Kentucky counties showed that many turned to payday lenders because they couldn’t access traditional loans or other banking services.

You can read the full article at mcclatchydc.com.

PLS Financial Services offering payday loans to the unemployed

2009-06-29T21:10:00.006-05:00

PLS is 28th on the Crain's Fast Fifty list of fastest-growing local companies, although revenue is down this year. In 2008, this privately held company did $218M in revenues.

President Bob Wolfberg says:

"If you believe there's nothing wrong with (this type of) loan, why should (the unemployed) be any different from someone who has any other form of income?"

I would not give a loan to an unemployed person, b/c I don't think they can pay it back. Bob does make a pretty good point. For the record, these loans to the unemployed account for less than 1% of their portfolio. Almost jokingly, "I don't think we've paid for the cost of the banners" in PLS storefront windows proclaiming that unemployment benefits qualify.

You can read the full article in Chicago Business magazine.

The Bite of Bank Fees

2009-06-29T11:37:00.004-05:00

Banks are raising their NSF fees. The average fee increase $2.50 to $27.50 this year.

The thing with NSF's is that since banks charge them, they're ok or acceptable. I wonder why that is?

Here is a NSF horror story.:

Bank customer Laurie Harris:
Early last month, she deposited money into her Bank of America checking account, but the check did not clear before several charges were posted. Each time Harris overdrew her account, she paid $35, totaling nearly $300 in fees in May. That set off a chain of events that has left her with about $600 in overdraft fees this month.

You can read the full article in the Washington Post title The Bite of Bank Fees.

Guilty plea in payday loan scheme

2009-06-27T07:59:00.002-05:00

"Alvin Allister Ambrose, 37, the owner and operator of First Cash Express, faces up to 8 years in prison and fines of up to $75,000 misuse of over $5,000,000 solicited from 180 investors to provide "payday" loans to borrowers with high rates of return to the investors."

A lot of the money was misappropriated for personal use for real estate speculation business, a Carribean cruise, diamond rings, furniture and his wife's law school tuition.

You can read the full article here.

The (alleged) real history of payday loans in Virginia

2009-06-25T10:28:00.002-05:00

This article is a response to an article that hammered Republican Del Oder of Virginia. He's largely responsible for putting 35% of Virginia payday lenders out of business.

Just curious, how does that help borrowers?

He's basically saying that the payday law passed in 2002 was in response to the bank rate export model where lenders would rent a bank charter to get around state laws.

Anyway, the article is worth reading.

Virginia editorial just wrong

2009-06-25T10:22:00.004-05:00

An article out of Lynchburg, VA had this to say about the payday loan industry:

"... (General Assembly) failed to take the step that would put them on the same playing field with other financial institutions that loan money on a short-term basis to those who need it. That step, of course, is the 36 percent interest rate cap on an annual basis — the same cap that applies to other lending institutions."

And who are these institutions that are offering short-term cash at 36%? There may be one or two, but that's it. I don't know how to sugar coat this, but this type of statement is a blatant lie.

You can read the full article here.

New California bill tries to raise loan amount to $500

2009-06-24T13:49:00.002-05:00

Currently, you can only get a loan for up to $300 in California. Actually, that's the face value of the post dated check. The reality is that the advance amount is typically $255.

A new bill AB377 will try and raise this amount to $500.

If you would like to read more about this developement, you can go to the Payday Loan Industry Blog.

Lawrence Myers is Right

2009-06-24T13:41:00.005-05:00

If you get a chance, read Lawrence Myers blog post titled Payday Loans: Calling out Josh Kalven.

Besides the fact that Josh Kalven doesn't know what he's talking about, Lawrence basically gives the borrowers' options. I think these are excellent (excerpt from his blog) and worth sharing:

Options are limited, and payday loans (and installment loans) are neither the most nor least expensive.

A) Borrow from friend/relative/employer Cost: Zero   Risk: Complication of important relationship, embarrassment
B) Credit Card Cash Advance    Cost: About $1 per hundred every two weeks   Risk: Fail to pay; credit rating is damaged
C) Pawn something   Cost: $9.50 per hundred every two weeks   Risk: Fail to pay, you lose the personal item.
D) Payday/Installment Loan   Cost: Averages $16 per hundred every two weeks   Risk: A collection agent tries to recover what’s owed; no damage to credit rating; no personal item at risk; no personal relationship at stake.    Myth: “Cycle of Debt” - 94% of loans are paid back on time — that statistic is available in every single SEC filing of all public companies.
E) Online Payday Loan  Cost: $25 – 30 per hundred borrowed every two weeks  Risk: Same as regular payday loan, but industry is unregulated and identity theft is easier.
F) Bounce a check   Cost: Averages $45 per hundred borrowed   Risk: As soon as you bounce one check, you risk creating a domino effect, causing other checks to bounce and running those fees even higher.

Virginia payday loans down 84%

2009-06-22T09:46:00.002-05:00

This is a bit misleading. Many companies, like Advance America, are offering revolving lines of credit secured by an auto title loan.

The new payday loan laws essentially doubled the amount of time borrowers had to pay and limited borrowers to one payday loan at a time.

The big question here is: Does legislation work and does it help or hurt the consumer?

One borrower Sheila Woods said that she preferred the original payday loan because she always knew what she would owe, although she admitted they can be addictive. She said she's gotten away from the dangerous "vicious cycle" of relying on payday or open-end loans.

Payday loans are a simple product that consumers understand. Isn't that what we're going for?

You can read the full article in the Daily Press.

New Mexico installment lenders under fire

2009-06-19T22:15:00.003-05:00

New Mexico's attorney general is going after installment loan lenders.

Payday loans by New Mexico State Law can charge $15.50 per $100, but there are no rollovers and a 10-day cooling off period. The law did not address loans longer than 35 days.

A spokesman for Attorney General Gary King said:
"We're more interested in these type of companies not doing this again than we are trying to get money out of them."

You can read more in the Daily Times.

Attorney Sues Americash for PayDay Loan Hell

2009-06-18T22:18:00.004-05:00

It's no secret that the current payday loan laws in Illinois, for lack of a better word, suck. Every cash advance lender, to my knowledge, is offering installment loans; which makes this class action law suit seem pretty silly. Americash is getting singled out for providing installment loans, under a completely different law and license.

Enter Tom Geoghegan; a Harvard educated lawyer.
“The fact that Americash has changed the loan terms to a loan greater
than 120 days doesn’t make it any less a Payday Loan; in fact it makes it a more abusive loan because they are by definition for very short term needs at very high interest rates. Americash is extending it to unconscionable lengths locking people into these very high interest rates,” says Geoghegan.

You can read the full article in Lawyersandsettlements.com.

Payday loan ponzi scheme ring leader disappears

2009-06-18T09:59:00.004-05:00

David Hernandez has a warrant for his arrest. The charges are for mail fraud, but the bigger picture is a payday ponzi scheme he operated.

What's worth mentioning about this story is that if someone offers you "guaranteed investment contracts" at rates of 10-16% you should run. It's too good to be true.

The FBI made this statement:
"Deposits from investors were "frequently followed by issuance of checks payable to a variety of individuals who previously provided funds to Hernandez and NextStep," the affidavit said.

You can read more about this story in the Chicago Tribune.