Author: admin

  • Payday loans in TIME magazine

    In an article titled “Six Problems the Consumer Financial Protection Bureau Should Tackle First” payday lending made the cut.

    The problem w/ these fixes is that it puts people with good credit on the same plane with people with bad credit.  Basically, it creates a much bigger problem than it solves.

    Here is their solution:

    Consumer advocates would like the CFPB to push for a rule that would limit the number of times a payday loan could be flipped into a new loan. After that, the lender would have to work out a payment plan that capped the loan’s final fees, or convert the loan into a typical installment loan with minimum monthly payments that could be made penalty-free.

    Here’s the full list:

  • How would you catch a fake contract

    This applies more to brick and mortar payday loan operations.  How would you catch a fake contract in one of your stores?  Can you answer that questions?

    Most owners don’t want to think about this, so they don’t.

    The issue that I have w/ owners is that if they have very loose policies, they’re actually creating an environment that promotes fraud.

    When they do catch their employees, it usually too late.  Their defaults are way up and they start to investigate.  At that point, it’s too late.

    This issue was the topic of Jer’s Newsletter.  You can find Jer at the PaydayLoanIndustryBlog.

  • Comment of the day

    This comment came out of Yahoo.  The article is “Obama calls for bank tax as next step in reform.” User “G” is credited w/ this comment.

    “The democrat view of the economy: If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.”

  • Illinois Gov. signs payday loan bill

    Gov. Pat Quinn signed into law a bill that will cap rates for installment loans in Illinois.  The new law caps loans under $4k to 99% and over $4k at 36%.  The way Illinois works, a law goes into effect 9 months after it’s signed.  This would make this bill “live” on April 21, 2011.

    What the article directly from the state of Illinois website does not say is that another alternative product is being allowed under the PLRA (payday loan reform act).  This product will charge around the $15 per $100 price point.  It will be tied into the Veritec state database.   Although $15 per $100 sounds pretty good, the problem is the limit on loans that an individual can take out.  Small mom and pop operations feel like they’re at a disadvantage b/c they do not have the marketing, locations and cash to compete with large national chains.

    Consumer groups have fought for this reform for quite a while.  One of the hold ups, was that any rules imposed would step on the toes of other lenders like American General and HSBC.   The payday industry is not happy with the new law, but fought pretty hard for the alternative product.

  • Cheklist article about installment lending

    Just read a new Cheklist magazine article titled “Installment Lending: The Next Step“.  It has some good information about Illinois, Wisconsin, CFPA, class action lawsuits and Internet lending.

    Bob Wolfberg of PLS Financial makes a good point.

    “Unfortunately, our story relates to the old saying, a truth takes longer to explain than a lie.  Our harshest criticism has come from officials from states that don’t even allow payday lending, such as in the Northeast, or from the people who don’t need it. I find it very condescending.”

  • NPR and Payday Loans

    Though provoking piece on NPR about payday lending in Ohio.  You can hear the entire podcast at NPR.  The article is speaking out against the state government’s intervention and rate caps.

    Good excerpt:

    “Everything else equal, suppliers of goods would rather collude with each other to set a high price,” DeYoung says. The cap basically does that for them, DeYoung says. “The government has handed them a tool for colluding.”

  • Illinois has new payday loan laws

    It’s official.  Illinois has a new consumer loan laws.

    The House voted 108-1-1 to pass House Bill 537.

    The governor has 90 days to sign it, so we should be looking at this bill becoming effective in about one year (between April 1 – May 1, 2010.)

    We have 3 products today:

    1. PLRA 14-day product
    2. Payday Installment Loan (new product)
    3. Title loan installment product.

  • The truth about payday loan alternatives

    I read about this in the PaydayLoanIndustryBlog and you can find the full text in American Banker titled “Study Cast Doubts on Payday Loan Initiatives.”

    Here’s the conclusion:

    “The survey evidence paints a negative picture of how consumers view credit union payday loans,” the report said. “Most payday borrowers indicate a strong preference for a less restrictive but high-price standard payday loan; very few prefer the credit union version of a payday loan. Borrowers’ distaste for the credit union payday loan is driven most strongly by credit unions’ shorter hours of operation, a lack of privacy conferred because credit union payday loans do not ‘keep my payday borrowing separate from my other banking, for personal reasons,’ and the fact that defaulting on a credit union payday loan harms one’s credit score.”

  • Payday reform bill on verge of passing statehouse

    This comes from Crain’s Chicago.

    “Compromise legislation to overhaul two state laws—the Consumer Installment Loan Act and the Payday Loan Reform Act—cleared the state Senate last week on a 58-1 vote and is pending in the House. Representatives of both consumer groups and lenders, which have battled for three years to close what critics have called a loophole in the payday loan law, expect the House to send the bill to the governor’s desk when lawmakers return to Springfield later this month.

    The compromise, negotiated by bill sponsor Sen. Kimberly Lightford, D-Maywood, would impose a cap of 99% on consumer installment loans under $4,000 and 36% for those above that threshold. Previously, interest rates under the consumer installment loans were unregulated, leading payday lenders subject to rate caps to offer slightly longer-term loans in order to fall under the less stringent law.

    Lenders operating under the consumer installment law charge rates as high as 700%, consumer advocates say.

    The Payday Loan Reform Act, meanwhile, would be amended to increase the allowed terms of the loans to six months from four. Remaining the same is the limit of charging no more than $15.50 per $100 loaned out every two weeks.”

    There are many unknowns, at this point.   The good news is that a bill does not become a law until 9 months after the governor signs it.

  • Quiet in Illinois

    HB 537 has until tomorrow to pass.  This bill will cap rates on installment loans to 99% among other things.

    This bill is not supported by the CFSA or ISLA in Illinois.

    If the bill passes, all cash advance lenders will have to start offering payday loans, which are regulated to allow.

    Loan Terms:
    Maximum Loan Amount: lesser of $1000 or 25% gross monthly income
    Loan Term: 13-45 days
    Maximum Finance Rate and Fees: $15.50 per $100
    Finance Charge for 14-day $100 loan: $15.50
    APR for 14-day $100 loan: 403%

    Debt Limits:
    Maximum Number of Outstanding Loans at One Time: Two
    Rollovers Permitted: None (cannot rollover)
    Cooling-off Period: 7 days after 45 consecutive loan days
    Repayment Plan: Yes

    Collection Limits:
    Collection Fees: One $25 NSF fee (Presentment limit = 2)
    Criminal Action: Prohibited