The Wisconsin DFI has established new rules for the recent payday loan law. Here is the pdf:
What’s important to note is that loans more than 180 days are pretty much except from the Veritec database. This is a big deal that the industry and the Wisconsin DFI hammered out.
I’ve noticed that when I ask lenders about their APR calculation, they assume it’s correct. We used to think that way too. Calculating APR’s for single payment loans is easy. It starts to get complicated when you do installment lending, different frequencies, odd days, rolling back/forward due dates.
I’d like to do a free webinar about APRs. Like how to test APRs and what variables to use and why. If I can get enough lenders to join up, I’ll do a Webex. Additionally, if you like, I can also take a look at a loan agreement and give you some feedback. I’m not a TILA expert, but a play one on television. You would be surprised at how many attorney’s we deal either miss this stuff or don’t really understand it.
Please contact me below.
Unlike a store front, where state regulators can walk in, the Internet is more like outer space. If someone wants to hide, they can. So what’s it going to be?
Here are the options:
Here are some of the problems:
The “licensed” lenders can only compete up until a point w/ offshore and choice of law models. Something as little as a cool off period, puts a licensed lender at a huge disadvantage.
If you’re Offshore, good luck selling your business. Besides, who wants to get arrested at the airport?
Does “choice of law” make you an easy target? Seems like a logical first choice for Attorney Generals.
Sovereign Nation? I don’t know about you, but I’m just not that connected.
Cowboy model: Get a lawyer.
What does help is information. The CFA (Consumer Federation of America) put together this study titled Consumers at Risk from Online Payday Lending CFA Survey of 100 Internet Payday Loan Sites. The study is 6 years old, so take it with a grain of salt. Here is what they found from 100 sites surveyed and how they operate:
Lead Generators vs Direct Lenders
Licensing:
If you’re an attorney and have experience with this, let me know. I have a lot of people that want to speak with you.
Mississippi House Bill 455 has moved onto the Senate. The bill will extend the minimum period that a borrower can pay back a loan. Instead of making loans that land on a borrower’s pay date, the new law would require a minimum of 21 days ($20 per $100) for loans less than $201 and 28 days for $201 ($21.95 per $100) and higher.
This will lower the APRs drop from around 523% to 347 % (for $200 or less) and 286% (for $201 and up).
The industry is in support of a new bill b/c if nothing passes, the current payday law will sunset in 2012 and rates will cap at 36%.
South Carolina limits borrowers to one payday loan at a time. When your choice is going of business or offering a product that consumers like and making money, the answer is clear. You offer installment loans.
Check ‘n Go just opened 25 new locations offering installment loans. These installment loan products are typically 12 months and can be cheaper than a traditional payday loan, if used responsibly. Technically, they’re not new. I know lenders that have offered this product for almost 2 years.
If you’re current payday loan software does not offer installment loans, there are many other systems that can get you started.
You can read the full article here titled “Payday Loan Restrictions Could Backfire.“
There are some proposed rules. These rules are designed to clarify the new law.
They have until Dec. 22nd to ratify these rules: http://www.wdfi.org/_resources/indexed/site/fi/lfs/ProposedRulePaydayLendingUpdate.pdf
Here is the full Wisconsin payday loan statute.
One thing that’s giving lenders problems is putting together their new loan agreement. One area is the size and font of specific disclosures.
The following needs to display in Times New Roman font in a 12 font for the following disclosures.
138.14(9g)(a)1.
1. Disclose to the applicant the total amount of all fees and costs, in dollars, to be paid by the applicant for the loan assuming that the loan is paid in full at the end of the loan term.
138.14(9g)(a)2.
2. Disclose to the applicant the annual percentage rate to be paid by the applicant on the loan assuming that the loan is paid in full at the end of the loan term.
138.14(9g)(a)3.
3. Provide to the applicant a copy of the written informational materials specified in sub. (9r).
138.14(9g)(a)4.
4. Disclose to the applicant that he or she has the right to rescind the loan transaction as provided in sub. (11r).
138.14(9g)(a)5.
5. Disclose to the applicant the service charge that may apply under sub. (10) (b) 2.
138.14(9g)(a)6.
6. Disclose to the applicant the payment requirements that may apply under sub. (11g) if the loan is not paid in full at the end of the loan term.
From the Wisconsin DFI.
Proposed Payday Lending Administrative Rules
The Senate Committee on Small Business, Emergency Preparedness, Technical Colleges, and Consumer Protection has objected to the proposed Administrative Rules for Payday Lending and referred them to the Joint Committee for Review of Administrative Rules (JCAR). The JCAR has until 4:30 p.m. on Wednesday, December 22, 2010 to review the rule; however, that period may be extended for an additional 30 days.
Please note that 2009 Wisconsin Act 405 is effective January 1, 2011 regardless of the status of any Administrative Rules. You will need to be in compliance with the statutes created in the Act. If you accept an authorization to initiate one or more electronic fund transfers from a customer’s account and wait a period of time before initiating the electronic fund transfer or if you accept and hold one or more checks for a period of time before negotiating or presenting the check for payment, you must be licensed as a payday lender under s. 138.14. Unless Administrative Rules for Payday Lending are approved by January 1, 2011 that contain the language proposed in s. 75.02(2), which excluded from the payday loan definition certain loans with voluntary electronic fund transfers, any transaction that involves an electronic fund transfer will be considered a payday loan.
The application form and instructions and the required Payday Lender Bond form are available in a fillable format on our website at http://www.wdfi.org/fi/lfs/forms.htm#pdl. Any payday lender not licensed on January 1, 2011 will be subject to the zoning restrictions set forth in ss. 59.69(4h) and 62.23(7)(hi), Stats.
Statewide Payday Lender Database
Section 138.14, Stats., requires a single statewide payday lender database. The target date for a fully implemented database is March 1, 2011. We previously announced that an Intent to Award letter was sent to Veritec Solutions LLC that would allow Veritec to develop, implement, and maintain the database. The contract with Veritec has not yet been finalized.
If you have questions, you may contact Lisa Lee at 608-267-1708 or lisa.lee@dfi.wisconsin.gov or Janell Fibikar at 608-266-8891 or janell.fibikar@wisconsin.gov.
Wisconsin has new rules coming into effect January 1st. They have selected Veritec as their state database.
If you need software help or have a question, please do not hesitate to contact Nick Sparagis of IntroXL.com at nick.sparagis@introxl.com.
Excellent article by the Wall Street Journal titled Tracking Your Federal Tax Dollars. I’m a little pissed off. You’re telling me a family of 4 making $200k a year should be subsidizing this many tax payers. Democrats get mad b/c Republicans vote the line, but how can you argue w/ lowering taxes? This is does not include state tax, sales tax or property tax.
HINT: Click on the image and it will enlarge to full size.
Do you notice when these class action law suites happen, and the lawyers fees or what they stand to gain is never monetized?
They’ll tell you that borrowers will get $14m or $80 a piece and never tell you what the law suit is really about, which is the lawyer fees and expenses. It would be nice to disclose that amount. They’re too busy doing a marketing job on the general public. They’re not exactly Robin Hoods.
Here is the latest, so to be settled class action lawsuit involving Advance America as seen in Business Week.