Now they have $73M to play with.  I bet they spend the $23 million on lead acquisition and the $50 million to back loans.  Is this huge news?  I think for a couple of reasons:

1. The cash advance industry has an image problem.  When high profile people get involved ( Montel Williams shout out?) it brings a higher level of legitimacy.
2. They’re not Advance America $600M + revenues, but it will be interesting to see what happens.

Here is what I found interesting:

1. The founder is a Google guy, but he site has very little SEO.  They rank in the top 5 for very few keywords (see below).  This means they’re buying leads.
2. They’e in four states— Utah, Idaho, Missouri and South Dakota.  I’m surprised that when you place an application from another state, they just say something like, sorry, we’re can’t give you a loan.  They’re not selling unused leads.  They make it clear that they’re going into other states.
3. They’re not payday loans.  Allegedly, they let you select how much you want to pay?  It’s on their website HERE.

So does partnering with a Native American tribe provide immunity to your payday loan business.  The answer is:  It depends.  You will need to get the right advice from the right attorneys.  I’ve had the pleasure of working w/ Blake on two occasions and he’s great.  Unfortunately, I have not have the opportunity to do a deal for the Sovereign Nation Model.  I hope I get that opportunity.

Want to read more.  Here is an article about the “FTC Investigates Native American Tribe Payday Loan Operation.“

Not sure why the FTC would get involved, but they are.  What is noteworthy is that the Colorado AG claims that the operation is bringing in $16M to $20M per month.  The tribe gets 1%, which equates to $160k-$200k per month.

Paying out 1% to the tribe makes a lot of sense, when you do not have to follow state law.  I don’t blame lenders for partnering with tribes, although it is unfair to the licensed lenders that have put up with all the legislative BS.

ZestCash, a next-generation loan service for the underbanked, has raised $19 million, including an $8 million line of debt financing, to expand its data-driven approach to offering short-term loans. The company, led by former Google CIO Douglas Merrill, received $11 million in Series A funding from Lightspeed Venture Partners and GRP Partners with participation from Flybridge Capital Partners. Lighthouse Capital Partners has added $8 million in debt financing that will go toward offering more loans to customers.

Here are the basics according to the FTC:

1. Don’t use false or misleading header information. Your “From,” “To,” “Reply-To,” and routing information – including the originating domain name and email address – must be accurate and identify the person or business who initiated the message.
2. Don’t use deceptive subject lines. The subject line must accurately reflect the content of the message.
3. Identify the message as an ad. The law gives you a lot of leeway in how to do this, but you must disclose clearly and conspicuously that your message is an advertisement.
4. Tell recipients where you’re located. Your message must include your valid physical postal address. This can be your current street address, a post office box you’ve registered with the U.S. Postal Service, or a private mailbox you’ve registered with a commercial mail receiving agency established under Postal Service regulations.
5. Tell recipients how to opt out of receiving future email from you. Your message must include a clear and conspicuous explanation of how the recipient can opt out of getting email from you in the future. Craft the notice in a way that’s easy for an ordinary person to recognize, read, and understand. Creative use of type size, color, and location can improve clarity. Give a return email address or another easy Internet-based way to allow people to communicate their choice to you. You may create a menu to allow a recipient to opt out of certain types of messages, but you must include the option to stop all commercial messages from you. Make sure your spam filter doesn’t block these opt-out requests.
6. Honor opt-out requests promptly. Any opt-out mechanism you offer must be able to process opt-out requests for at least 30 days after you send your message. You must honor a recipient’s opt-out request within 10 business days. You can’t charge a fee, require the recipient to give you any personally identifying information beyond an email address, or make the recipient take any step other than sending a reply email or visiting a single page on an Internet website as a condition for honoring an opt-out request. Once people have told you they don’t want to receive more messages from you, you can’t sell or transfer their email addresses, even in the form of a mailing list. The only exception is that you may transfer the addresses to a company you’ve hired to help you comply with the CAN-SPAM Act.
7. Monitor what others are doing on your behalf. The law makes clear that even if you hire another company to handle your email marketing, you can’t contract away your legal responsibility to comply with the law. Both the company whose product is promoted in the message and the company that actually sends the message may be held legally responsible.

This information is mainly for Internet lenders. It’s a common practice to buy lists. That’s very risky, so you should consult an attorney before you buy a list.  This is the first draft of this post.  More to come…..

It goes on to say, “For example, Teletrack sold lists of consumers who previously sought payday loans to third parties that wanted to use this information to target potential customers.”

Now, were they selling your payday information to other payday lenders or were they selling this data to other industries?  Does not say.  In Teletrack’s defense the fine was for sharing consumers personal data.  I’m not sure how it harmed lenders.

You can read the full article at the FTC’s website here.

Wells Fargo’s calls it a Direct Deposit Advance.

“This is a line of credit, not a loan. You may make advances as often as you like in increments of $20 up to your available credit limit.”

• You have to have direct deposit
• $7.50 per $100 borrowed.
• Up to $500
• No cool off period.
• Repayment Plan:  Pay the loan off $100 at a time, until paid in full.  Once paid, the lower the amount you can re-borrow.
• Charge a $35 late fee (no grace period), if the loan is not paid in full on time.  That’s appr. $9 per $100 on a $300 loan.
• Can collect collection costs an reasonable attorney’s fees as allowed by state law.
• Not offered in all states (CT, FL, MD, NY, NC, PA, SC, VA, DC).

The product is a lot cheaper than a conventional payday loan, but the bank is not taking a large risk (compared to payday lenders) and cherry picking the good customers.

The huge advantage is that banks have deposits and they get bailed out by the government.  We don’t.

Here are their full terms and conditions.

53rd also has a product called Early Access.  This product is $10/$100 for 30 days.

US Bank’s product is called Checking Account Advance.  This product charges $10/$100, but is due on your next pay date.  This makes it the most expensive of the three banks.

Here is the borrowers side:

Consumer: Mount filed a counterclaim alleging the loans violated the Wisconsin Consumer Act because the interest rates were unconscionable. La Crosse County Circuit Judge Ramona Gonzalez agreed with Mount and granted her summary judgment.

Here is the Lenders side:

Payday Loan Store of Wisconsin: The loan company contends on appeal that a judge can’t find a particular interest rate is unconscionable because the consumer act expressly permits any rate or charge. The company goes on to argue that the Legislature, not judges, should determine what interest rates are too high. If judges start making those decisions, their rulings will vary and lenders won’t know what interest rates are acceptable, the company maintains.

Currently, there is a new law on the books that took effect on January 1, 2011.  The above case stems from a 2009 case that has made its way up to the Wisconsin Supreme Court.  The industry is at stake here b/c we’ve managed to promote laws that are diplomatic between borrower and lender through the legislative process.  If this ruling goes bad, it would erase all the lobbying for the payday loan industry in Wisconsin.

I also asked if they get sued all the time.  Yes, they get sued all the time.

“The Joint Finance Committee voted 11-5 this month to add the proposal to the budget.”  Here is the source.