There’s talk of a few bills out there that would make a cash advance even tougher to give the Columbus Dispatch reports, “Bill planned that would target payday lenders’ loopholes.”
Rep. Matt Lundy is proposing a bill that would make loans less than 90 days impossible to give.
Any proposed bill will stop lenders from cashing their own checks.
Here’s the deal. If lenders can’t make money, they’re just going to close shop and no one gets a loan. They need to realize that the demand exists.
Laura Onstot’s article titled, “Key To Payday Bills? Make Sure Both Sides Hate It” is pretty funny. I’m also giving Laura some credit for giving the facts and offering a balanced synopsis of the payday industry in Washington.
The reality is that people don’t want payday lenders to go away, just like they don’t want oil refineries to go away. They just don’t like getting fleeced.
If people can acknowledge that there is a demand for a convenience, short-term loan product, fighting these legislative battles will be a whole lot easier.
In this open letter to the Hudson Hub Times, Tim Miller equates a payday loan to an annualized interest rate or APR to staying in a hotel room for one night compared to a 1-year lease.
His point is that most people do not rent hotel rooms on a monthly or yearly basis, so quoting the room as such would not make sense.
That’s been the flaw of the of the consumer groups. Most of them just try to inflame the public into feeling guilty. That’s how they win votes.
What they don’t realize is that financial literacy does not get taught in the classroom. You learn it on the streets. The hard way. The good news is once you know it, now you can move to the next level.
Cash Net USA is the largest online payday lender. Crain’s magazine highlights the Subprime Millionaire, Al Goldstein. It looks like Al is hanging up the online payday business to become a landlord.
Mr. Goldstein is reportedly going walk away with $70M at the age of 28 after paying out his investors. Considering that Cash Net USA started in 2004, it does not make a lot of sense. That would have made Al fifteen at the time. If this is the case, it’s even more impressive, but these facts do not line up because he also worked on Wallstreet for a breif stint.
Regardless, for the PDL Industry, it does not get any better than Mr. Goldstein’s story.
I’ve also included an interview done by Mr. Goldstein by BizTech Magazine. He pretty much attributes all his success to their superior technology.
I like his advice:
Every single mistake that we’ve made — not only in IT but companywide — always has to do with being shortsighted, whether it’s not spending the right dollars, or making a decision that will only last for a month because it’s easy today but then you have to spend twice as much or three times as much money down the road.
If you lend in Illinois, the new title loan rules go into effect on April 1st. Here are some relevant points with regards to the new laws.
Some of this is systems based while other parts is operational.
As far as your contract requirements, there are some disclosures that will need to be added to your loan agreements.
If you want to join a group to get and share information on the new law change, please go to: http://groups.google.com/group/illinois-lenders .
Please note that you must be a lender to join this group.
I thought this was an interesting quote in the Hudson Hub Times:
A Democratic state lawmaker who sponsored legislation last year to limit
high-interest payday lending said March 11 he was embarrassed that the
storefronts continue to operate throughout Ohio.
Why would a state government want to put an industry out of business? Why stop at 28%? Why not make the interest rate cap at 4%? My point is who has the right to set interest rates? The answer should be no one. It’s called a free market.
Now, if they really wanted to help people, they would regulate the collection practices. Borrowers should just get locked out of the system until they pay. This should not be driven by a state database. It should be left to the private sector by companies like Teletrack and CL Verify.
Can anyone say payday loan alternative product? It looks like the industry will soon be heading for one in South Carolina.
The Associated Press reports “A Senate subcommittee on Thursday approved a bill that requires a seven-day cooling off period between taking out the loans. It also restricts the loans to a maximum of $600 or 25 percent of a borrower’s income.”
Jamie Fulmer, spokesman for Advance America, says “the bill now heading to the Senate Banking and Insurance Committee will put payday lenders like the Spartanburg company out of business.”
With all the legislation news, we forget about all the fraud that goes on in the cash advance industry.
Rotunda Skinner claims she did not benefit personally from the $6000 in fraudulent loans ;). Talk about a good Samaritan. The fraud was identified through an internal audit by the district manager.
I wrote a very basic article about theft and payday lending. You should check it out here. It’s a very short read.
Most companies have insurance to cover this type of loss, but it’s still a little unnerving, especially with all the other B.S. owners have to deal with.
As of right now, Check n Go has stopped writing loans in Virginia. They are contemplating closing 68 stores in Virginia writes Forbes magazine.
On the surface, it does not make a lot of sense considering that the new payday laws allow a 20% fee plus 36% annual interest. The caveat is that it’s for a 30 day loan. Check n Go operates at around 6-8% net revenue, so they feel the extended period makes it tough to turn a profit.
It makes you wonder whether it’s worth operating in a state that has you on perpetual life support. Ironically, I bet lenders in Ohio would love to be in this situation.
Washington state by vote of 84-10 is trying to put a limit on the amount a person can borrow to the lesser of 30% of their monthly income or $700, which ever is less. They also are requiring a mandatory payment plan.
This is better than 36%. I believe borrowers are locked out of the system until they payoff, so loan losses should go down.