One week Senator Dodd is raised more than $44,000 from pawnshop owners and payday lenders. The next week, he joins Senator Durbin on the “holier than thou” bandwagon and supports a bill that’s trying to cap rates at 36% across the board.
This does not make any sense. I can see two scenarios:
There is a bill before the Senate judiciary committee that would make it harder to collect on high risk loans, among them are payday loans.
The bill would limit creditors from collecting on high-interest rate loans in bankruptcy court and may give consumers leverage to negotiate better terms.
I don’t think this is a bad thing for a couple of reasons:
Let’s face it, there are a lot of loans that never get paid, expecially on the Internet.
You can read more about this article in Bloomberg.
Here is the email. I think it’s worth sharing.
WHAT IS THE CHANGE?
Last week, the National Automated Clearing House Association (“NACHA”) announced an amendment to the ACH rules that enhances the requirements for consumer debit authorizations.
Under the current rules, before using an ACH entry to debit a consumer bank account, an originator (e.g., a lender) must generally obtain the written authorization of the consumer. Each authorization must comply with several requirements, including a general requirement that the authorization must “clearly and conspicuously” state its terms. If an authorization does not comply with these requirements, a debit is considered to be “unauthorized” and subject to return.
The revised rule expands the requirements of the current rule. Now, each ACH authorization must be “clear and readily understandable,” instead of “clear and conspicuous” as to its terms. This suggests that a “plain English” standard now applies to authorizations.
Moreover, the authorization must also address the amount and timing of debits. According to the new rule, “[a]ny purported authorization that is not clear and readily understandable as to its terms (including the amount or timing of debits), or that is otherwise invalid under applicable law, does not satisfy the requirements of this subsection 2.1.2.” This change represents an expansion of the existing rule, which requires only that the “terms” of the debit be stated.
Finally, the new rule expands the definition of “unauthorized entry.” Now, an ACH debit will be “unauthorized” (and subject to return by the consumer) if (i) the consumer’s authorization does not include all of the information required by the revised rule, above, or (ii) the debit amount is either higher or lower than the amount authorized by the consumer. This represents a change from the prior definition, which prohibited only debits in an amount greater than the amount authorized. In explaining the change, NACHA stated that “[a] transaction in any amount other than that authorized by the Receiver is unauthorized. As a result, this amendment revises the definition of an unauthorized entry to refer, instead, to an amount “different than” the amount authorized by the Receiver.” Undoubtedly, this expanded definition will have the effect of increasing the potential number of debits that are considered “unauthorized.”
WHEN DO THE NEW RULES TAKE EFFECT?
The new rules take effect on March 19, 2010.
WHAT THIS MEANS FOR YOU:
If you use ACH debits to collect loan payments, these debits will be considered “unauthorized” if your authorization language or collection procedures do not comply with the new requirements. This may result in a substantial increase in returned debit entries. We also expect enhanced regulatory scrutiny of ACH procedures, including authorization documentation, and an increase in litigation exposure.
WHAT SHOULD YOU DO:
1. Have legal counsel review your existing ACH authorization language for compliance with the new rules. Work with legal counsel to tailor a solution appropriate for your situation to maximize collections and minimize risks.
2. Review your ACH procedures to ensure that they are consistent with the rules and your authorization language.
We ( IntroXL.com) worked with Cliff on some TILA and APR issues. I don’t like throwing around the word “expert” too much, but I will here. I highly recommend him.
You can find his contact information here.
Here are the facts: it includes $27.5 million in cash, $43 million in forgiven debt and $30 million in credits – is approved by the court, the average payout will be about $380.
Lawyer Harvey Strosberg played it cool in this statement: “We think it’s fair and reasonable and in the best interest of the class members,”.
Yah, right Harvey. You just got the biggest payday of your life.
Dollar’s CEO Jeff Weiss said in a statement: “While we admit no wrongdoing … this settlement will allow us to avoid the continuing substantial litigation expense that would be expected.”
You can read more details in this article titled “Payday loan victims get $100 million.“
Rep. Luis Gutierrez will likely bring his Payday Loan Reform Act of 2009 up for a committee vote this session. This bill his getting a lot of heat from both lenders and consumer groups.
Personally, if the industry can get a favorable law, they should jump on it. Rate caps scare me.
This was taken from a radio interview in Ohio. Here are the parties involved:
Ted Sauders is the CEO at Checksmart.
Lundy is the Ohio Rep that’s sponsors the new bill that will put lenders out of business.
Rick Jackson is the interviewer.
Jackson: What happens to you and your company if 209 passes?
Saunders: We leave the state
Jackson: That cut and dried? We leave the state?
Saunders: We’ll pull out all of our stores, and I’ll have to let go all
those people, and I’ll find
something different to do with my life.Checksmart operates over 90 stores in Ohio. Representative Lundy
says the legislation is not meant to destroy the industry, but to make lenders
comply with the mandate previously set by Ohio voters.Lundy: We’re just simply trying to enforce issue 5, the 28% cap, and I
would suggest that the industry change its business model to make things work
because that’s where Ohioans want to be.
Check out the full article here.
A dollar today is worth less than a dollar tomorrow. The big question is “How much?”. The answer is context. How bad do you need that dollar?
I think this article is extremely judgmental. It completely lambastes an internet lender. The writer should find a way to help the people that use this product and still squeak out a profit.
What’s remarkable is that it’s in Business Week.
Ok. I get it. Ohio voters voted to stop payday lending. Is this fair to the 20% (I’m pulling this number out of the air) of the population that use the payday product? Absolutely not.
Voters unloaded on the industry b/c of the bad PR payday lending gets.
Read this editorial, if you want to be annoyed. They don’t even have the cahonees to put a name next to it. The writer is “the editors”.
Head over to Payday Pundit and find out why a woman paid $37 for a Starbucks coffee drink.
Lundy’s bill is missing a Republican co-sponsor in a largely Republican Senate. Its a very ticky-tack law, so any legislator with common sense would stay away.
Here are some of the low-lights:
You can read more about Ohio here.