Author: admin

  • Are City Zoning Laws Becoming a Trend?

    Not municipalities are getting involved in payday lending regulation. Casa Grande in Arizona is trying to change their zoning laws to limit payday loan stores to establish distance requirements for payday loan stores.

    The article also goes on to state, “the city cannot pass laws that would put an operation out of business just because it is not wanted there. Any change to the zoning laws would affect only new payday loan stores. The hope is to control their proliferation, given that more and more of the stores have been popping up.”

    This is worth noting because we’re seeing it more and more around the country. For example, in Peoria, Illinois that is trying to pass a 180 day moratorium on new building permits for payday loan companies.

    Many critics like to blame payday loan stores for hurting real estate in an area. Personally, I think it would be deceptive to control what people see and don’t see, when it’s legal to give a payday loan.

    Less competition can only hurt the consumer and help the lenders that are already in place.

  • Arkansas Lenders Holding Strong

    101 payday lenders in Arkansas are gone since the beginning of ’08. Of the 237 operators 136 are still offering loans. 55 (I counted 54) of the lenders are operating “in defiance” of the attorney general using various methods. The other 81 lenders are operating outside of state regulation and will face “potential” scrutiny, whatever that means:

    Here’s a breakdown of what payday lenders are doing:

    • 40 lenders are selling money orders and charging a 10% fee under a different law.
    • 8 are CSOs (Credit Service Organizations).
    • 6 are operating under a South Dakota lending license.
    • 81 are allegedly noncompliant of which 55 lenders send borrowers over the border into Texas to complete the transaction.

    The remaining 26 lenders are a mystery to me.

    It’s very interesting to see which model will win out, if any; AND which model gets attacked next.

  • The Deep Pockets of the Payday Loan Industry

    The Arizona Republic wrote an article titled “Where the money comes from“. According to this article, payday lenders contributed $8.7m to campaign finance for the first half of 2008. The next largest donor was The Realtors Issues Mobilization Fund, which contributed a measely $1.4m.

    The alleged goal of the payday loan industry is eliminating a scheduled 2010 deadline at which time it will discontinue operations unless it receives some kind of state extension. They are also looking to impose new consumer protections.

    This doesn’t sound unreasonable. I think it’s a good idea because the industry expiring because of inaction does not seem fair.

    The general public needs to realize that short-term capital is in high demand. The PDL industry wants to work with the state government and regulate this industry.

    Getting rid of the industry, just gives people fewer options. If better alternatives were available, you would be hearing about them.

  • Limits on Title Loans in Illinois

    Most title lenders in Illinois give loans of atleast 61 days or greater. The new rule would will not except these lenders from refinance limitations and instigate a cool off period. I have no idea how they’re going to enforce this. How does a lender know if someone else gave a person a loan less than 15 days ago?

    Regardless, these rules have to get through committee. This Blog does a very good job of explaining the process.

    The Chicago Tribune also published the story, “Limits on title loans called a ‘Good Start’“

  • Payday Lending Has An Image Problem

    We attended the CFSA meeting in Las Vegas this past year. One of the initiatives was the ability to put together statistical reports that support the availability of payday loans.

    I found this article because I subsribed to the PaydayLoanIndustry.com newsletter.

    Donald Rieck just put out an article, “Predatory Reporting? On Payday Lending“. It’s basically saying that in states where payday lending was eliminated, over draft fees have shot up and filled the income gap left by payday lending. Someone is still making money out there at triple digit APRs and consumers have less choices now.

    In a report issued by Moebs Services, they estimate overdraft protection fees can account for up to 60% of net operating income for a credit union.

    I think the point is that if you’re going to allow over draft fees, why not give the consumer a choice to get a cash advance from a payday lender if they choose. The reality is that overdraft fees are forced on the consumer and a payday loan is a choice. Let’s be adults about this.

  • Illinois Senator Dick Durbin is Wants a 36% Cap

    If the government capped mortage rates at 5%, how many people would own a house?

    I think you can call it politicians being politicians. It sounds very noble to try and help people. Dick Durbin wants to cap rates at 36%. I would prefer if he would just say, we’re trying to close the industry down.

    The problem with this argument is that people hear 500% interest and are shocked. Would you take a $2,000 taxi to NY from Chicago or would you buy a $200 plane ticket.

    Think about it, would you give $300 to a person with a credit score in the 400’s and only make $4.14. It costs atleast $12/hour for just one employee, not to mention rent, utilities, advertisment, liscensing and everyone needs a manager. The loan itself would take 20 minutes to process. They can’t break even operating in their current state.

    In the end, the politicians are just going to make consumers less able to make a decision for themselves, which ultimately leads to increased financial illiteracy. Instead of making consumers smarter, more experienced; we just make the lenders unprofitable.

    If they shut down the industry, the world will go on. I would like to see the government offer $300 at 36% to anyone who needs it. If they shut down the industry, they should step up to the plate and fight the demand for short-term money.

  • 14-Store Chain fined $1.3 Million

    The Arkansas regulatory body of payday lenders fined a 14 store chain owned by Dennis Bailey of fordyce more than $1.3 million.

    Matson was operating as a Missouri lender in Arkansas. Missouri law does not allow Missouri payday lenders to operate outside that state.

    It is still unknown if the 14 store operation will close it’s doors. Attempts have been made to contact the stores with mixed answers. Petitions have been filed by the owner, but no hearing dates have been set.

  • Arkansas – 101 Payday Lenders Closed

    The Attorney General, Dustin McDaniel, is playing hard ball with payday lenders in Arkansas. Arkansas payday lenders were operating under the Arkansas Checkcashers Act, which passed in 1999. This act allowed a payday lender to cash a check and hold it for for a period of time, typically 14 days.

    It is alleged that 101 out of 156 payday lenders have closed since March 18th.

    This action by the Attorney General was spurred by a Supreme Court Ruling that companies are liable for paying bonds to partly cover judgments against payday lenders. The bonds are currently set at $50,000. The Attorney General is trying to force the hand of the bond companies, making it too risky to post a bond.

    Critics are accusing the Attorney General and his office of “defending the constitutionality of the Arkansas Check-cashers Act before the Arkansas Supreme Court.”

    The Arkansas Supreme Court must still rule on the Arkansas Check-cashing Act in the summer of 2008.

  • Renting versus Owning Software

    We had a customer that made a lot of money in this business. Back in 2003, we structured a deal to sell our system to him for $75k. The system was about 20% of what it is today.

    I think everyone is familiar with the phrase, “Don’t count your chickens before they hatch.” What we probably should have done is gave him the payday loan software for free and signed a $150k two-year contract to modify and maintain the system.

    This payday business was very profitable, but they never spent money on IT employees. It was incredible what they were able to accomplish with 2 $40k/year employees and about 30 $10/hr employees.

    This experience is why the On-demand, subcription software, software as service (SaS), started to make a lot of sense to us. The cost was not in the payday loan software. The cost was finding the people that could get the results that lenders are looking for.

    For example, we have an attorney that costs us $375/hr. Personally, I think we got a deal. This service costs us about $5-10k per year. This is a deal in comparison to paying a mediocre attorney $75k to make non-profit related items seem important because they want to justify their pay.

    Let’s face the facts, no software is going to make you successful. The successful businesses have good locations, good managers, get their customers to come back more than once and (especially in this industry) don’t let their employees steal from them.

  • CSO Resources

    http://www.sos.state.tx.us/statdoc/faqs.shtml
    FAQ on Texas state website.

    A short article and manual for purchase:
    http://www.paydayloanindustry.com/texas-cso.html

    http://www.pdlcapital.com/services.html
    Consultants and 3rd party lender

    http://www.introxl.com/
    Software for payday, installment, title and CSO lending.

    http://www.trainingmanuals.net/texas-cso.html
    Training manual from Trihouse.