Source: http://tofsc.org/blog.aspx
Timestamp: 2019-04-21 08:21:44+00:00

Document:
The bills, SB 2486 and SB 2488, will limit local government control over private businesses.
The Austin American Statesman put out an article this week ("Senate votes to limit city regulations on private businesses.") that discussed two bills in the legislature that were about to be passed by the Senate. The bills, SB 2486 and SB 2488, will limit local government control over private businesses. It appears the bills are directly focused on employer issues like hiring practices and break times.
After hearing some very familiar talking points that support the authority of State law over local ordinances, it stands to reason that the passage of bills like these could lead to better days for Credit Access Businesses offering payday loans, installment loans, and title loans in Texas.
Of course, an Austin City Council Member testified at a hearing against one of the bills. Greg Cesar said one of the bills "disgracefully" preempted local regulations. Let me remind Councilman Cesar of what a disgrace the attempted enforcement of the Payday Loan City Ordinance has been for the City of Austin. They have been involved in two lawsuits for 2+ years against Speedy Cash and Advance America. It has been a back and forth legal battle that has consumed City of Austin resources for far too long and even with all that money and time spent, no victory for Austin. I am sure the residents of Austin would rather have their tax dollars spent on more meaningful subjects. That is the disgrace!
Now that I got a good swipe in against the Austin City Council, I will get back to two strong talking points I saw used. Each of them can be used almost as a mirror image in the argument for preemption of the Payday Loan City Ordinance by existing Texas law.
"One comment dismissed concerns over water breaks and work environments, stating that the Occupational Safety and Health Administration already regulates workplace safety." (This is exactly the same scenario with Credit Access Businesses - we are already regulated by the Office of Consumer Credit Commissioner).
Senator Creighton said: "I believe in uniformity across the state for the applicant and also for the employer, and it should happen in this building." (This really applies to any business in Texas with more than one location. Operating Credit Access Businesses in a City with an Ordinance and one without an Ordinance causes operational confusion and customer inconvenience).
At this point I believe that many Cities in Texas no longer look at passing the Payday Loan Ordinance because they know if they pass it and enforce it they will be looking at allocating several years’ worth of time in lawsuits over it. So that addresses the further spreading of the Ordinance. In terms of rolling back existing Ordinances across Texas, perhaps there is some opportunity ahead where the passage of these two bills creates the precedent for leaders in our industry to get that done!
This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers. He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.
If your business does not have an online presence you are missing out on a lot of opportunity because your pure brick & mortar market is shrinking by the minute.
We have been hearing a lot lately about the continued decline of retail business in the US. Zales and Jared jewelry retail stores are the latest to announce closures of hundreds of locations.
Online is booming and it seems like Amazon rules the world. If your business does not have an online presence you are missing out on a lot of opportunity because your pure brick & mortar market is shrinking by the minute. Consumers are evolving and many low to middle income consumers are willing to do more and more to get access to credit at crucial times. How will you engage with this new dynamic?
Forbes.com featured an article that discusses how increased online markets are opening a consumer’s willingness to share their personal info online while also touting the strengths of today's alternative data. I included some excerpts below.
“People Are Plenty Willing To Share Personal Data To Get A Better Loan."
New research suggests that people are surprisingly comfortable sharing their data as long as it’s being put to good use, especially in the world of lending.
A recent Harris Poll found a surprising consensus among American adults — 71% of those surveyed said they would be willing to share more personal data with a lender if it led to a fairer loan decision.
More significantly, the Harris Poll shows that the majority of consumers feel unfairly treated by the current system. More than 80% of African-Americans and Hispanics – and 7 in 10 of all adults – say they wish there were a better way to prove themselves to lenders.
But in today’s era of large-scale data collection and unlimited computing power, the traditional credit score is showing signs of age and mathematical limitations.
Consider some of the things credit scoring excludes: your job history, your roots in your town and thousands of other bits of information that are left untapped. It’s no wonder 70% of people polled say it’s difficult to get financial institutions to see them as anything but a number between 300 and 850.
One-third of renters say credit scores have kept them from buying a home.
Alternative data simply means anything that’s not included in calculating a traditional credit score. It could include timely utility payments, history of holding down a job, even large debts you had years ago (outside of the traditional credit score models) that you successful paid off.
Bringing that added data into the credit scoring decision creates a more nuanced picture of borrower risk, helping banks spot worthy borrowers further down the credit spectrum (and flagging troublesome borrowers who look good on paper).
Many of us are using "alternative data" with Factor Trust and Microbilt (often referred to as "Credit Reporting Agencies" or “CRA’s”). If you are not, get on it as soon as possible!
It was in the news over the last 24 hours that Mick Mulvaney and the CFPB will be centering the focuses around Debt Collectors who have traditionally been in the #1 position as far as complaints go. For over two years it was discussed by the payday industry that our group was month after month, year after year, the industry with the biggest drops in complaint percentages. The question was always asked: "Why would the CFPB invest so much time on an industry where the complaints are decreasing and are at a much lower level than many others?" Now that we have a level headed individual heading up the CFPB, we are now seeing some very practical moves being made to re-focus the CFPB's priorities around the source for the biggest complaints. Along with that, it does appear that the CFPB is lessening its focus on the so called "payday loan industry." That is a good thing for Texans, the Office of Consumer Credit Commissioner is an experienced agency that is more than capable of regulating our space in Texas.
• The Consumer Financial Protection Bureau will team up with the Federal Trade Commission to police debt collectors as it shifts to a gentler form of enforcement under the Trump administration.
• Mick Mulvaney sees debt collection as an enforcement priority because the CFPB gets many consumer complaints about that industry, even as the bureau begins to ease its grips on other sectors such as payday lending.
• “In 2016, almost a third of the complaints into this office related to debt collection. Only 0.9% related to prepaid cards and 2% to payday lending. Data like that should, and will, guide our actions,” Mr. Mulvaney wrote.
One popular counter to the CFPB and it's regulation of the payday industry is that oversight should be shared with or even shifted more so to State regulators versus the much maligned federal agency.
In the case of Texas, that means our friends at the OCCC would be that ideal option. The highly experienced leadership at the OCCC has been overseeing various consumer lending industries for decades. This agency without a doubt is much more qualified to license, regulate, and examine Credit Access Businesses offering cash advances, installment loans, and auto title loans to Texas residents.
For years many small business owners, clients of CAB Consulting, and Members of the Texas Organization of Financial Service Centers have wondered what the CFPB truly knew about the payday industry other than what told to them by consumer advocate groups who despise the industry. Then when the CFPB Payday Loan Rule was finally released it was again evident that that CFPB knew nothing about the industry...other than they wanted to kill it! Just like many "CABs" in Texas, Mick Mulvaney wants to shift the responsibility in the direction of State regulators.
"At a recent gathering of states attorneys general, Mick Mulvaney, Acting Director of the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) indicated his preference that they take the lead on the enforcement of consumer protection laws along with state regulators. According to Acting Director Mulvaney, “States know best how to protect their own consumers."
OCCC and Finance Commission Report Info.
OCCC and Finance Commission Report Information, Meeting is Friday 10/20 and will summarize data from September 0f 2016 to August of 2017.
CAB Examinations: Down from 707 in 2016 to 652 in 2017 (-7%).
CAB acceptable level of compliance: 98.93%.
Complaints processed payday: 208 in 2016 and 148 in 2017 (-28.8%).
Complaints processed title: 198 in 2016 and 147 in 2017 (-25.7%).
Unsecured installment and payday loans have been almost exactly flat in the last (4) years going back to 2014, hovering in the 1.044 to 1.1 million loans range for the Jan-June periods.
For comparison, the highest year was 2013 with 1.2 million loans and 3,176 locations reporting activity. In 2017 the locations totals are 1,817 – this is a new number I have been seeing 2,200-ish.
Title loans in the last (2) years are hovering flat in the 129,000-133,000 range, with a steady drop from 2013 when there were 241,000 in the same six-month period.
Repos – steady in the 15,000 range the last (2) years.
CFPB Rule came out today. It is 1,600+ pages and I am hearing from folks on it but no one knows a lot at this point. I need to start reading and as I connect with others to learn more I will of course relay what people are saying.
Effective date is 21 months after date of publication in the Federal Register. I do not know when it was or when it will be in the Federal Register. As far as who it covers and what kinds of loans it applies to, I need to look.
So much time and effort is spent on attacking the "payday loan industry" it is baffling. Why do consumer advocates and the CFPB refuse to make the banking industry Public Enemy #1 instead?
$15 billion in NSF/Overdraft fee revenue in 2016.
That comes to $41,095,890 in fees earned every day for 365 days.
That comes to 428,571,428 individual fees at $35 each.
That comes to 1,174,168 fees charged every day for 365 days straight.
Said for many, that comes to $442 per year - at that rate that comes to 34 million consumers each year.
Our industry serves about 15 million people per year and makes $10 billion in fees and interest.
Studies show that when applying the same APR% calculation to the typical $100 returned item that a 1600% APR figure is arrived at! (See FISCA).
Why then are the consumer advocates and CFPB so focused on little old us? Why aren't the Cities in Texas passing ordinances to restrict bank abuse of low to middle end consumers? Your guess is as good as mine!
What I do know is that our payday, installment, and title loan services in Texas are directly combating the bank revenues by helping consumers avoid those charges by getting a short term loan cover pending items on their bank account. Consumer choose our services because we are fair, we are fast, and we understand their needs. We are 100% upfront (ad nauseum) about the costs and terms of our services. Banks, not so much...and can you believe those numbers????
Our friend Rob Norcross at CSAT sent over some really good details that he had gathered in response to the OCCC issuing advisory bulletins to licensees on how to remain in compliance while dealing with Harvey aftermath. I scraped some of those details and organized them below for CAB stakeholders in Texas, and business owners in general that were affected by Harvey.
CAB Consulting and TOFSC have clients and Members in the Coastal region and many were impacted - see below!
"The Texas Office of the Consumer Credit Commissioner issued an advisory bulletin reminding pawn shops of their obligations in statute and rule about safeguarding pledged goods, record retention requirements and relocating to temporary locations (see link in the email below).
There are no similar provisions in Texas Finance Code Chapter 393 for credit access businesses. Sections 83.308 (b) and (c) in Title 7, Part 5 of the Texas Administrative Code addresses the relocation of transactions from one store to the other Section (c). Section (b) contains the notice requirements for customers and to the OCCC. Section (c) also provides for a waiver of the 5 day notice period by the Commissioner in cases of emergency.
If one of your stores is damaged, and you choose to send customers to other nearby stores, please take care to follow these procedures. The provisions of your contracts with your customers will govern issues related to due dates, fee calculations, etc.
The Code prohibits the relocation of a CAB store unless 30 days’ notice is given to the OCCC. There is no waiver provision for an emergency. However, if one of your stores --- that is not near another store --- is damaged, please contact the OCCC if a temporary location is the only reasonable solution to protect your customers. Despite the absence of a waiver provision in the statute, the OCCC has made reasonable accommodations to protect consumers with all types of licensees in the case of emergency.
If one of your employees has a question about local hurricane relief activities, law enforcement procedures during/after a hurricane, customers applying for federal assistance, shelter availability, etc., please do not hesitate to contact the local county sheriff’s department. Sheriff’s offices are a critical source of information during disaster recovery efforts. They are trained to navigate the varying levels and overlaps of local, state and federal bureaucracy and often serve as a counties’ switchboard during disaster recovery.
The Internal Revenue Service is giving Hurricane Harvey victims extra time to file individual and business tax returns and to make certain tax payments in 18 Texas counties because of the “devastating storm.” Businesses and individuals affected by making quarterly estimated tax payments on September 15th and January 16th now have until January 31st to file tax returns and pay taxes that were during those times.
Texas residents in counties impacted by Hurricane Harvey will not have to worry about vehicle titling and registration requirements for the next 45 days. Governor Greg Abbott suspended certain statutes related to the enforcement of title and registration laws in the 58 counties included in the state’s disaster declaration.
We are working closely with the Office of the Consumer Credit Commissioner to help them process questions received from customers efficiently. Every CAB transaction contract, and most disclosures, include the name, telephone number, and the email address of the OCCC.
Every time a consumer makes a complaint to the OCCC, the agency is required to open a file, contact the consumer, contact the CAB/lender, make a determination about a resolution for the complaint, and notify both parties in writing before closing the file.
However, after natural disasters, the agency typically receives questions from consumers in addition to complaints. If your company would like to designate a point person to address questions the OCCC may receive from your customers, please let me know.
We will give the OCCC the name, telephone number and email address of your designee so the OCCC can refer questions directly to you. We want to give the OCCC every incentive to treat as many inquiries as questions, and not complaints (and staff prefers to open as few complaint files as possible).
TAB has established a hotline for businesses to connect to the resources they need as rebuilding begins. The hotline number is 512-637-7714. The hotline is available to all businesses. It is not limited to TAB members. You can also sign up to provide services as rebuilding begins in southeast Texas. For more information, visit: www.texbiz.org/2017/08/25/hurricane-harvey/."
The infamous and continuously failing Texas Payday Loan City Ordinance.
Since Texas cities began passing the infamous and continuously failing Texas Payday Loan City Ordinance there has been a decrease of 1,300 or so licensed locations inside the State. According to the most recent OCCC licensee totals, this represents a 37% market shrink. The results have been a shuttering of businesses in Texas, a loss of thousands jobs, a loss of real estate rents, and decrease in property tax revenues. Rates have increased 12% in Ordinance cities and demand for unsecured short term credit has largely remained the same. This is a cold hard truth that was laid out in City Council meetings when we were asking for a "No" vote on the Ordinance. Is an "I told you so" in order here?
2017 has been a rough year for the Ordinance though, many cities are now bucking the trend and have voted the Ordinance down. As well, the City of Austin got the double slam-dunk in their simultaneous loss to Speedy Cash and Advance America City Ordinance lawsuits in April. Those two cases were around a year in the making I wonder if the taxpayers of Austin feel good about the time and expense the City put into an issue that results in a .000153% complaint to loan ratio for Texas residents? I live in Austin and things are tight budget-wise in this City, despite all the stories you hear about growth it has some problems that should be commanding the attention of city leadership other than the payday industry.
So here comes the next whammee - I was reading over the OCCC's 1st quarter MSA report for 2017 and it says that 10 of the 2,200 reporting licensees generated 33% of the single payment loan volume, and get this, those 10 licensees were OUT OF STATE! As far as installment loans go in Texas, 16 OUT OF STATE licensees funded over 37% of the 271,189 installment loan and refinance transactions in the 1st quarter of 2017. Yes, these are out of state online lending companies who are licensed to do business in Texas but are not within the jurisdiction of any City. That makes them free to let the market decide and boy did the market ever decide. On either of the products mentioned - the out of state licensee group was the largest "market" in Texas. The next biggest markets down were Houston and Dallas but it wasn't even close to the out of state operators. Check out the report for yourself below.
Imagine if the Payday Loan City ordinance did not force the closure of all of those locations in Texas! All of that businss would be taking place here in Texas. Kudos to the online guys who are meeting the need but for obvious reasons we need to work to get those customers back! I bet the OCCC wishes they had that extra $800,000 per year in licensing revenue. And how about that $300,000 per year in contributions to the Texas Educational Endowment fund that is now lost?
The full ugliness of the Payday Loan City Ordinance is now beginning to show in the light. Please pass this information along to your City Council the next time this issue comes up in your market - we are positioned to deliver the facts to them quickly and efficiently so that they can have the full story and move on to the next issue which will be much more meaningful, no doubt!
The OCCC is seriously focused on Credit Access Business Examinations right now - are you ready?
Over the last several weeks there has been a significant uptick in OCCC examinations of our Credit Access Business friends and clients. Are you ready for the OCCC to walk in your door? Chances are if you are a member of TOFSC or if you are a client of CAB Consulting you are in a good position regarding software, APR% calculations, loan contracts, disclosures, and fee schedules.
That being said it is always good to get refreshers on where the OCCC may be looking the next time you come due for an examination. If you are in DFW, East Texas, or Houston I would make sure that you are ready to rock!
TILA – is your APR% exact? Are you off slightly? Needs to get fixed asap if you are even slightly under-quoting. Contact your software company ASAP.
Financial Privacy Act Notices – are the ones in your document package proper?
Credit Services Disclosure Statement – regarding the time frame consumer have to ask for information – are you quoting the proper number of days?
Updated OCCC Contact information – there was a change awhile back on this. Did you update it?
OCCC Notice – must be plain to see and easy to find 1-click from the home page of your website.
Interest paid or to be paid to lender – this must also be disclosed on the Credit Services Agreement.
When selling a motor vehicle that has been repossessed - how many bids are you getting?
If you would like additional information on these areas feel free to reach out!
Just a reminder for all of you CABs out there - continually review your Consumer Transaction Information Disclosures & Fee Schedules.
Many times throughout the course of the year CAB operators may change their CAB fee amounts or offer different loan products such as offering multi-payment installment loans, payday loans, or auto title loans. When changes are made and loan products are dropped, added, or modified, we have seen the Fee Schedule & Consumer Transaction Information Disclosures be overlooked.
Take the time to ensure that your Consumer Transaction Information Disclosures & Fee Schedule are up to date with all of the products you are offering. This is on the OCCC Examiner Checklist and Examiners will call you out on this. Be an "A" student and get it right.
Additionally, per Texas Administrative Code 83.5004, if changes are made to your Fee Schedule or Consumer Transaction Information Disclosure, preceded versions must be maintained on site for a period of one year or until the next OCCC examination.
"In-store fee schedule and notices. The in-store fee schedule and notices required by Texas Finance Code, §393.222(a), and §83.6003(a) of this title must be available for inspection by the OCCC in a conspicuous location visible to the general public. If a licensee amends the in-store fee schedule or notices, it must maintain documentation of the previous versions of the schedule or notices for one year from the date of amendment or until the next examination by OCCC staff, whichever is later. The licensee may maintain the documentation of previous in-store fee schedules and notices at a centralized location other than the licensed location or branch office. In this case, the documentation must be maintained for one year from the date of amendment or until the OCCC's next examination of the centralized location, whichever is later. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it."
"Website and online disclosures. If a licensee maintains a website, it must make the website available to the OCCC for inspection. The website must include a fee schedule to show the licensee's compliance with §83.6003(b) of this title, and applicable consumer disclosures to show the licensee's compliance with §83.6007(f) of this title. If a licensee amends the website's fee schedule, consumer disclosures, or method of accessing the fee schedule or consumer disclosures, the licensee must maintain documentation of the previous version of the website to show compliance with §83.6003(b) of this title and §83.6007(f) of this title. This must include the home page, any pages used in accessing the fee schedule and disclosures, and copies of the previously used fee schedule and disclosures. The licensee must maintain this documentation for one year from the date of amendment or until the next examination by OCCC staff, whichever is later. This paragraph does not require a licensee to maintain previously used pages of the website that were not the home page or pages used in accessing the fee schedule and consumer disclosures. The licensee may maintain the documentation of previous versions of the website at a centralized location other than the licensed location or branch office. In this case, the documentation must be maintained for one year from the date of amendment or until the OCCC's next examination of the centralized location, whichever is later. However, upon the OCCC's request, the licensee must have the ability to promptly obtain or access copies of the complete documentation so that the OCCC can examine it."
Babin, DiNardo: State should not loosen payday lender regulations. Written by Anna M. Babin and Cardinal Daniel DiNardo.
Let’s take a minute and dice up this Houston Chronicle piece on Texas Credit Access Businesses. The newspaper was apparently not satisfied with their role in passing the Houston “Payday Loan Ordinance” which caused a massive amount of closures in the City. They still take up this reckless cause with Consumer Advocate and Church Groups by giving them a full and open forum to wage the war against the businesses that offer these loans and the people who need them. The Ordinance raises payment amounts. How does that help? And the Chronicle looks the other way when this article’s authors say they do not want to put us out of business? Are they saying that with a straight face or with a wink and a smile?
And then the qualifying disclaimer: “Our goal is not to put the payday and auto title lending industries out of business, but to ensure that reasonable regulations are in place to protect those most in need of the loans.” (Ok, riiiiggghhht. Grownups know better unfortunately. These people want us out of business.
Here is the deal – Texas Credit Access Businesses have to fight and scrap every single day against people who are working to put us out of business via “thoughtful, meaningful, modest, additional restrictions.” It comes from all angles across the State and media outlets like the Houston Chronicle take up the cause without any word from our side whatsoever. So, what happens? 41% of Credit Access Businesses in Texas close in a 4-year period. There were 3,500 in 2013 now there are about 2,100. With this 180-day rule, it is an issue for us that would help our CABs and customers.
Are the people who wrote and supported this article satisfied with the successful implementation of “thoughtful, meaningful, modest, additional restrictions” in the Payday Loan City Ordinance? No way – they still offer up their opinions on websites and newspapers and enjoy a wide-open forum to instill their false narrative. These groups will not be satisfied until loans are free and that is no endorsement of the “American Way,” it is more Socialism than anything else.
This article was written and supported by people who want to shut us down. And for some more fun, check out the hypocrisy below, the United Way accepted money from Texas Credit Access Businesses, $30,000 in fact. Yet they are one of the groups we have seen bring on the hate speech at multiple City Ordinance hearings at City Council meetings across the State. I mean they really go for it – they HATE us and want others to think we are the devil reincarnated!
· Cardinal DiNardo is a Cardinal overseeing the Archdiocese of Galveston-Houston.
· Stephen M. Fraga of Tejas Office Products Inc.
· Irma Diaz-Gonzalez of E.T.C. Inc.
· Y. Ping Sun of Yetter Coleman.
· Rev. Dr. Steve Wells of South Main Baptist Church.
After not being able to find the CFPB monthly complaint report on payday loans last week, I found it Wednesday which was a bit later than normal. The delay might have been because it is a different kind of report, it is focused on “older” complainants who were 62+ years of age.
This new format report focused on just one month, and discloses that payday loan industry had (23) complaints versus (27) in the prior month. That is a 28% decrease and is very much in line with all of the other reports that have been released I believe this is #23.
There have been 1,610 CFPB complaints submitted on the payday loan industry since complaints started being taken in November 2013, and (60) “older complaints” have been submitted since November 2013.
Overall, 1,163,000+ total complaints have been submitted so far to the CFPB covering all industries not just ours. 1,610 o, so PDL has a .001387931 complaint ratio!
Want to get into the Payday Loan Business?
CAB Consulting has partnered with Star of Texas Financial Solutions in the Austin, Texas area to offer live in-store training sessions to start ups wanting wide and narrow scope guidance on how to get going with their payday, installment, or auto title loan venture. As well, Payday Boot Camps are often conducted for existing companies wishing to elevate their business to another level by implementing the leading edge operating techniques we demonstrate while in our "live" storefront, or who wish to add additional products or services.
The two-day sessions are comprised of conversation and instruction in the conference room, as well as "behind the counter" demonstrations of actual transactions in the loan management system with real customers right there in front of you.
In years past, CAB Consulting has conducted Payday Boot Camps with Tri-House Consulting in California (THANK YOU JER!), and in 2016 we began hosting them in Texas at Star of Texas Financial Solutions in Austin. This has been an extremely valuable tool for individuals considering an entry into the "payday" industry.
In the two-day sessions we cover payday loans, installments loans, and auto title loans. We have hosted groups mostly from States in the U.S. like Texas, Utah, and Nevada. As well, we have conducted sessions for companies from Canada and South Africa.
No matter what State or Nation we have been able to deliver expertise on industry basics as well as licensing and regulation. CAB Consulting clients will be advised on best practices, vendor selection, underwriting, third-party lenders (Texas and Ohio), and much more. We are a comprehensive consulting business with specialties in multiple states that can deliver 100% of what is needed to start a payday business, to run one, and to make a profit.
Our industry has experienced a marked resurgence with the recent governmental changes, and CAB Consulting has seen a major uptick in Payday Boot Camp interest. We are ready to go when you are!
If you would like to learn more about our Payday Boot Camps, call or email to contact Michael Brown, let's review the program details together, and set a date!
There's a new way to file your annual and quarterly reports.
Did you know that the OCCC has added the capability of filing your Annual and Quarterly reports to the Alecs portal? That is right, you no longer need to access the separate reporting area - everything you need is done right inside of your company's Alecs portal.
Login to Alecs, click "Manage my Business" in the Nav Bar, then scroll down and to the right to "Annual/Quarterly Reporting." It is there that you can choose "upload report."
The Texas Payday Loan Ordinance suffers another blow, this time in Abilene voted it down.
Things do not seem to be going very well for the payday loan city ordinance these days the truth is really starting to get out that it is not even being enforced and the courts have decided (in two separate cases) that it is pre-empted by State Law!
So, let’s talk about how this latest defeat of the payday loan city ordinance went down in Abilene. First, I must say that I have been to many city council meetings to participate in the payday loan ordinance conversation and I have never seen so many customers turn out to tell a city council to stay out of their personal finance decisions. Not only did they turn out in droves to the meetings but those who could not attend inundated the city council email in-boxes and phone lines with a strong voice saying - vote “NO” on the ordinance.
Dozens of customers attended both the city council meetings the week of the “NO” vote wearing white t-shirts with "Stop the Ordinance" on it, inside the shape of a big red stop sign. Supporters of the ordinance had to have been very impressed by the sea of white t-shirts streaming into the council chambers while cameras were rolling. I think there was a grand total of (1) customer who attended the meetings that supported the ordinance on the other hand. But, our anti-ordinance customers stood tall and proud when they approached the microphone. Near (30) anti-ordinance supporters attended in their "Stop the Ordinance" gear, and the total for the two meetings had to have been way above that.
Those payday and auto title loan borrowers in attendance were there to tell the council to vote “NO,” to share their reasons for borrowing, and to vent their frustration that they could be possibly have their financial choices severely damaged by a reckless city ordinance that is a complete failure in 41 other cities in Texas. In the end, it was the voice of those customers that stood proud and tall to defend themselves that swayed the city council to refuse to pass the ordinance. I can remember the moment Councilman Shane Price held up the stack of comments he received and printed out from his email. The vote “NO” stack was inches thick and the stack of comments from those who supported the ordinance was quite light. In the end, he said that is what mattered.
What an empowering experience for many of these folks to go down to the formal and intimidating City Hall and have their voice heard. The customers stood strong in the face of Newspaper reporters, TV cameras, and the breathless consumer advocate groups who were there to insult them and suggest they were not intelligent enough to manage their own finances.
I could see how those supporting the ordinance began to place pressure on city council, how they began to burden the council with solving the much larger issue that is at the core of the need for short term small dollar loans. That is the fact that many Americans simply do not have enough money saved to fall back on in the event of an emergency or other problem in life. 70% of Americans do not have over $1,000 in their bank account – this is the problem. The supporters of the payday loan ordinance were trying to sell the council and get them to pass an ordinance that would raise payment amounts, close businesses, and do nothing to impact that core issue.
I was talking with a customer of ours at the meeting and we were joking and wondering if the next ordinance to be rolled out would restrict Whataburger from selling hamburgers with meat in them so the Abilene City Council can end all heart attacks in city limits. Can you imagine this?
It was hilarious, but quite honestly from our standpoint the payday loan ordinance is just as absurd. The payday loan ordinance is a misguided disaster that is going to continue to unravel. What the consumer advocate groups and church groups cannot grasp is the fact that the city ordinance does not achieve what they say they want. It is a gigantic lie that has been perpetrated in 41 cities. Their (mostly Texas Municipal League and Texas Appleseed) technique to get the ordinances passed has worked in those cities where council members do not do their homework, believe in a lot of regulation, or just want the businesses to go away. But, their tired argument has grown stale, the final blow appears to be that cities are losing court cases over it, and cities are now voting it down.
Consumer advocates and church groups have their hearts in the right place but are choosing wrong vehicle to help solve what is a much larger problem than the short term small dollar loan industry. I mean, unless you just did not do the math on how the 25% rule in the ordinance works, how can you ask the city council to approve an ordinance that will raise a borrower's payment amount? That fact alone should have caused the ordinances to get dumped in the trashcan two minutes after Texas Appleseed comes strolling into a city council person's office.
Texas Appleseed – did you know payday transactions have hovered at the same level statewide even with a 41% decrease in stores? Is the ordinance really the ideal vehicle for your cause? If you want to do some more good, why not help communities apply for for a $30,000 grant from the Texas Educational Endowment (http://occc.texas.gov/consumers/texas-financial-education-endowment-tfee-grant-program) to start financial education in the schools in your town instead? This fund is completely funded by Credit Access Businesses to the tune of $400,000 per year (roughly).
The bad news regarding the TFEE is that Texas Appleseed and TML’s efforts resulted in the closure of 1,400+ locations which caused contributions to the TFEE to fall through the floor. In 2013, the annual contribution amount was more like $700,000 per year. $300,000 less per year is an insane amount of money that they took away from some groups that could have made a difference for the same people you are trying to help.
Also, the OCCC has taken a huge hit on licensing revenue that they could have used to hire new examiners to enforce the regulations already in place statewide. Licensing fees are $600 per year per location, with 1,400 less locations in 2017 versus 2013 that comes to $840,000 less in licensing revenue per year.
Between the loss in TFEE contributions and the loss of OCCC licensing revenue that adds up to millions of dollars you have caused to evaporate from places that could have helped the consumers you are trying to protect.
To Churches and other groups besides TML and Texas Appleseed that have chosen to pile onto this issue when the issue comes up at city council meetings - why not just payoff all the loans that people take out with your own money? Or why not just offer them a loan at 10% APR yourselves? Stop asking the city fix the problem with a lousy ordinance and fund some loans yourself!
Long blog and I could go on about this for days, but I am going to wrap this up and save my energy for the next city that wants to look at the payday loan city ordinance. I will conclude with another thank you to all the people that worked hard in Abilene to get the “NO” vote and again say how much we appreciated the opportunity to tell our side of the story to a city council who really committed to doing their research on this issue.
Around March 1st a huge blow was dealt to the "Payday Loan Ordinance" in Texas. The news came out that an Austin court had ruled in favor of Credit Access Businesses in (2) lawsuits related to the ordinance where the City of Austin was sued. In those cases, the court ruled that the ordinances were "preempted" by State law in several ways. Preemption is something that we as a group have been after for a very long time and we are pleased to see that our industry got its day in court. The consumer advocate groups who have been pushing the ordinance on cities should be on notice that the truth is starting to get out. All that has happen is for the cities to enforce the ordinance.
Many of you may not know the truth, which is that the cities have not been enforcing their ordinances. This is a deliberate tactic to avoid being sued by Credit Access Businesses. It is also likely that they have no staff or budget to allocate to the endeavor which is worth mentioning as well. Each city is given a payday loan city ordinance "playbook" that gives them the tactics and methods for enacting the ordinance along with how not to get sued. If they do not enforce then the payday companies have no legal grounds to sue on because they have not actually been "harmed."
Well, the City of Austin went beyond its rights and decided to go in and examine and cite two Credit Access Businesses - Advance America and Speedy Cash. This was the first instance that I know of where a city has enforced and cited a company for not abiding to the ordinance. So, the first time a city goes in and enforces an ordinance what happens? They get sued and lose! This simple scenario is one that should resonate with all cities who have passed an ordinance and with those who are looking at it. Austin happens to have its act together and enjoys a pretty decent legal budget - if they can lose then anyone can lose.
Cities should know that there is now a very real legal risk for them - their city councils will be embroiled in lawsuits and will have to consider retaining outside legal counsel to defend themselves. Council members who know that they have been charged with real responsibilities such as protecting water, investing in infrastructure, maintaining police strength, and providing general safety for their citizens know that they are way outside the lines when telling someone how much money they can borrow and how long they can have to pay it back. It seems incredibly absurd to me. For many of you it would be like having the city tell you that you can only have a car that costs $10,000 or less and you must pay it off in (6) payments. Also, you can only have one car! It is literally the same thing. What if you have the cash to simply pay $40,000 for a car? What if you have a spouse that you want to buy a car for? That example plus a hundred more can be made - and what it does is blow a gaping hole in the practicality of the "Payday Loan City Ordinance." That is where the whole thing should have stopped years ago.
But now the cold hard truth has landed on the desks of anyone involved in this matter - the court has ruled in favor of Credit Access Businesses. Cities now need to decide what they are going to do. They need to be asked publicly, "Are you going to enforce this ordinance?" If they say "No," then won't that mean they are effectively rolling back the ordinance? If so, Credit Access Businesses will be able to go back to offering the kinds of credit that consumers in the ordinance cities need and want. Won't this be an improvement over being told they must drive 15 minutes down the road or get on their smartphone to request a loan from an unlicensed unregulated offshore lender in the Bahamas?
What if they say "yes, we are going to enforce the ordinance?" Then Credit Access Businesses will be given the chance to defend themselves like Speedy Cash and Advance America did. What they will simply do is execute a transaction that violates the ordinance, then take that one transaction down to the City and "self-report" the violation. At that point the city must act and if they do cite the Credit Access Business then they will turn around and sue the City. What lies ahead will be a court decision that will resemble that of the court orders in Austin.
CABs are already sufficiently regulated by the Office of Consumer Credit Commissioner. We have 20-30 page contracts for a $300 loan! We adhere to a long list of federal and state rules and regulations (all in our contract package) and our complaint percentages on the state and federal levels are fractional on a complaint to loan basis. I believe in Texas the complaint percentage is .000153% (yes that is three zeroes!). Our CABs abide by a 90-point CAB Examination checklist that we obtained from the OCCC. TOFSC members tune in to a weekly conference call every Wednesday where we talk about CFPB and OCCC compliance, share ideas, and try to safeguard our businesses. We are small business owners banded together to try and survive the ordinances. In the last (4) years CABs have shrunk from over 3,500 in Texas to about 2,200 that is a 37% decrease in CABs. That is thousands of jobs lost, thousands of leases broken, a significant loss in tax dollars for cities, and a loss of livelihood for many. All of that and the demand has not decreased (check OCCC data and consumer reports for online inquires in ordinance cities the data is there if you want to do some homework) although there has been a 37% decrease in stores.
TOFSC Members are tuned in to this issue and we are ready to fight to save our businesses and to bring the access to credit back to consumers in ordinances cities that is desired. Cities should prefer that legal, licensed, and regulated businesses serve their citizen’s needs. C'mon cities - let's bring it back to the CABs and let the cities focus on their big priorities!
See the links below for the court orders. For media inquiries - feel free to call Michael Brown at 214-293-8676, or email me at Michael@CreditAccessBusiness.com. Michael is the President of the Texas Organization of Financial Service Centers ("TOFSC") which is a trade group comprised of small to mid-sized Credit Access Businesses in Texas. As well, he is President of CAB Consulting, a consulting firm that offers startup, licensing, compliance, and operating guidance to payday businesses in Texas and other states.
Last week my team and I released a blog about Carlos Uresti, a San Antonio based Senator whose offices had been raided by the FBI.
Check your work! Last week my team and I released a blog about Carlos Uresti, a San Antonio based Senator whose offices had been raided by the FBI. We happened to know that a politician by the name of Uresti in the San Antonio area had also written a bill that would attempt to "cap" all finance charges on Credit Access Business payday, installment, and auto title loans to 25% of the amount borrowed. Being that I am a rabid defender of our CAB clients, I sprang on the name "Uresti" immediately and assumed he was the same man who had written the bill - which was House Bill 1733.
We made two mistakes on the blog post. First, State Rep. Tomas Uresti wrote House Bill ("HB") 1733 and Carlos Uresti did not. Second, we should have known that a Senator would not write a "House Bill" because they are not in the "House," they are in the Senate! This was one day that our team totally messed up on the details - the blame is on me.
These errors were sharply pointed out to me and we pulled down the post right away. We have a lot of people reading our posts and people count on us to relay information. It is important to make sure we get them right. This oversight is a fresh reminder that the good old fashioned saying "the devil is in the details" is alive and well.
I just about fell out of my Toyota Prius when I learned what the CFPB spends its money on.
It is a shame to say that with all of that advertising budget they can only manage to give up 150 or so complaints per month from the entire country. About 15 million people have a loan out at any given time during a month in the United States. That's a complaint % of .00001 (yes that is four zero's on the right side of the decimal). We have cited the statistics before from the CFPB Monthly Complaints report and the "Payday" Industry complaint percentages drop 15-2-% each month since they have been getting tracked! So, needless to say the advertising dollars spent by the CFPB preying upon consumers and trying to coerce them into complaining have not been working. Specific to our industry, this is particularly telling of the high level of satisfaction our customers actually have, and that the "payday loan" issue is highly politicized.
"Some of the larger salaries at the agency have eclipsed those paid to some of the country's most influential lawmakers, such as Senate Majority Leader Mitch McConnell (R., Ky.) and House Speaker Paul Ryan (R., Wis.).
Speaker of the House Paul Ryan of Wisconsin receives $223,000 per year, but that's less than what 54 CFPB employees are paid.
Another 170 CFPB employees earn more than the secretaries of defense and state, the attorney general, and the director of national intelligence. All Cabinet salaries are capped at $199,700, but not at the bureau. Thirty-nine CFPB employees earn more than the $230,000 paid to Vice President Mike Pence.
The in-depth analysis uncovered that over 449 CFPB employees make over $100,000 and 228 employees make over $200,000. Nearly 200 of these employees make more than their most senior boss, Federal Reserve Chairwoman Janet Yellin, who earns $201,700 a year."
This information is eye opening needless to say. I hope that President Trump is dialed in to the CFPB as he looks into Dodd-Frank!
Some very positive news came out of Lubbock with the City Council voting down the "Payday Loan Ordinance" by a vote 5 to 2. Credit Access Business owners all across Texas were impressed by Lubbock's push back of the liberal backed City Ordinance. Ordinances across Texas have shut down over 40% of Credit Access Businesses in the last several years.
Rates have increased as CABs have fought to survive the ordinances, access to credit for consumers who need it most has decreased. The ordinance issue just another reminder that liberals meddling with small businesses and the passage of more regulation ends up hurting the consumer they say they are trying to protect.
We have quite a lengthy set of rules and regulations that govern Credit Access Businesses in Texas. And, the Office of Consumer Credit Commissioner does an effective job at overseeing Credit Access Businesses. Let the conversation about "payday" stay at the Capitol and trust in the statewide legislative process.
The City of Canyon, Texas has enacted a "Payday Loan" ordinance. Per News Channel 10 in Amarillo, the City Council of Canyon enacted the ordinance on Monday of this week. Canyon is located about 18 miles south of Amarillo and has a population of just over 13,000. The City of Amarillo said many of their lenders left after they enacted the ordinance and this apparently prompted Canyon to follow suit. Per the Texas Office of Consumer Credit Commissioner ("OCCC"), Canyon only has one active Credit Access Business "CAB") license. That CAB is "Texas Car Title & Payday Loan." With only (1) CAB for 13,000 people it can hardly be said that the market is saturated, in most markets there is about (1) CAB for every 5,000 in population.
Review your company policy regarding acceptable methods of payment for motor vehicle title loans in Texas as a Credit Access Business.
Review your company policy regarding acceptable methods of payment for motor vehicle title loans in Texas as a Credit Access Business. With tax season upon us, there will be an increase in the number of folks paying off loans, especially motor vehicle title loans as the income tax refunds start to pour in over the next few weeks. For that reason, it is a good time to issue this reminder.
Many seasoned companies choose to only accept certain forms of payment on the pay-off a title loan prior to releasing that title for certain reasons. For example, what if a paper check is accepted and that check bounces later? Your business could have released the title to the customer without being paid!
Accepting debit cards without getting the consumer sign the debit card receipt could be viewed as a swipe transaction versus a signature transaction and it could result in “chargeback.” Days later this would occur which would also mean that your business could have released the title without getting paid.
Allow several days to pass before relinquishing the title so that you are assured the payment has successfully cleared. (If you accept these payment types).
Cash is always ideal for Credit Access Businesses in these situations, but not everyone uses it and consumers may not prefer it when amounts are larger.
HB 60, Introduced by Romero Jr: Requiring a Credit Access Business to verify the vehicle identification number used to obtain a motor vehicle.
HB 197, Introduced by Bernal: Relating to the contracts and other documents issued by a Credit Access Business (requiring to have English & Spanish). Also, to read the contract in its entirety to consumers who cannot read.
HB 877, Introduced by Chris Turner: Relating to certain telemarketing calls by a Credit Access Business. Prevents a CAB or an employee of a CAB to make telemarketing calls to consumers who are on the Texas No Call List.
First, we must remind you that Tom Craddick proposed similar bills in the last session two years ago, in 2015.
How this can affect us. Right now, only a couple of cities are enforcing the ordinance or at a minimum sending city employees out to ensure that CAB’s are registered. If this rule were to go into effect, the city would not need to enforce the Ordinance, it will be under a State Law, allowing OCCC examiners to enforce City Ordinance Regulations, which they do not currently do right now.
SB 560, Introduced by Hannock. This bill is to empower the OCCC to enforce and apply penalties for those CAB’s who charge a surcharge on those paying via debit or credit card. To the best of our knowledge, none of our members are doing this anyways. If you charge someone a fee for paying with their debit or credit card, you are already out of compliance as this a state-wide rule that is currently in existence, one which carries some hefty penalties by the Attorney General’s office. This Bill by Hannock applies a $500.00 fine for each infraction.
HB 975, Introduced by Giddings, relating to the threat or pursuit of criminal charges against a consumer in association with certain extensions of consumer credit and providing a civil penalty for the Credit Access Business.
This bill is interesting as it states that a CAB cannot file a criminal charge against a consumer, unless the CAB has “extrinsic evidence sufficient to prove that the consumer committed an offense”. If a CAB or anyone for the matter could determine what sufficient evidence of a crime is, then that would essentially eliminate District Attorneys as they are the officials in the capacity to make that determination of whether a case should be brought against someone or not. This one may not last too long.
HB 741, Introduced by Bernal: Relating to the affordability of extension of consumer credit. This bill is extremely vague as well. It states that a CSO must verify a consumer’s income, and establish that the income verified to be used demonstrates that a consumer can reasonably repay the loan in cash.
Credit Access Business rules for 2017 that you need to know!
New Technical Rules for 2017 you should be aware of. Did you know there are new rules related to the application for new licenses, transferring a license, and criminal history of CAB owners? Much of this was covered during CAB Consulting’s “CAB II” project that many clients and members took advantage of.
*The language for rules and transfers removes the part mentioning that you need to wait on the OCCC's approval to operate a CAB while the license is being transferred. The transformer assumes all responsibility of the license until the license has been transferred to the transferee.
**Criminal History can affect license holders. This affects anyone with a State license from a concealed handgun license to a Credit Access Business license. In the eyes of Texas, it is a privilege to maintain a Texas license, and therefore license holders must be law abiding residents.
Theft, assault, any offense that involves misrepresentation, deceptive practices or making false or misleading statements.
Any offense that involves breach of trust or other fiduciary duty.
Any criminal violation of a statute governing credit transactions or debt collection.
Failure to file a government report, filing a false report or tampering with a government record.
New bill: HB 877, from Chris Turner (Democrat out of Tarrant County, Represents Grand Prairie & portions of Arlington).
Caption: Relating to prohibiting certain telemarketing calls by a credit access business.
A credit access business or a representative of a credit access business may not make a telemarketing call, as defined by Section 304.002, Business & Commerce Code, to a consumer whose name and telephone number are on the Texas no-call list maintained under Subchapter B, Chapter 304, Business & Commerce Code.
The full text of the proposed bill mentions that you would be able to contact consumers with whom you have had done business with in the past, so long as it has not been more than 1 year since the last transaction.
Comments: Our clients and Members to not typically "telemarket" or use outside telemarketing firms. We are not aware of many CABs who do this but would be interested to see how "telemarketing" is defined. Stands to reason that if someone has asked not to be telemarketed to that they are not telemarketed to. Not sure why it is worth the effort to put this bill out.
Description of what bills have been posted ahead of the 85th Texas Legislative Session.
The 85th Texas Legislative Session starts on Tuesday, January 10, 2017. At this point, (3) bills have been posted ahead of the session. See below for information on the bills as well as a few comments.
Relating to requiring a credit access business to verify the vehicle identification number used to obtain a motor vehicle title loan. Before obtaining a title loan for a consumer, to physically inspect the vehicle used as collateral, photograph the vehicle identification number, and verify that the number matches the number on the title provided by the consumer. Requires the CAB to retain the photograph until the second anniversary of the date the extension of credit is made.
Comments: This really is something that any decent operator will do anyway. Not sure why additional regulation is needed here. CABs have a very long list of regulations they abide by so why is Mr. Romero wanting to add more?
Relating to the authority of a municipality to regulate occupations. Prohibits a municipality from adopting any ordinance that: (1) establishes additional, more stringent licensing requirements for an occupation that requires an occupational license issued by a state licensing authority, or (2) requires a person to obtain an occupational license issued by the municipality. Provides that any ordinance violating this prohibition is void.
Comments: Anything that will void the city ordinances related to payday, installment, and auto title loans makes sense. The city ordinances have caused over 1,500 businesses to close and have caused thousands of people to lose their jobs who worked at those stores. With the increased cost of doing business that resulted from trying to survive the ordinances, CAB owners had no choice but to increase rates and that has hurt consumers - it was that or go out of business.
Relating to contracts and other documents issued by credit access businesses. Requires the contract and other documents provided by a CAB to be: (1) provided before signing written in both English and Spanish, (2) written in plain language, and (3) printed in an easily readable font and type size. Requires the Finance Commission to adopt rules implementing this provision. Requires the CAB disclosure and notice to be available in both English and Spanish at each CAB business location.
Comments: CAB consumer loan document packages are typically 25 pages - if you have to create document package in both languages that will be 50+ pages of documents, tons of ink, paper, and toner. That will mean an increase in costs and slower processing times which will be a major concern for business owners and an inconvenience for the customer, and likely even higher rates. Who decides what "plain" language is? Will all the current document packages have to be re-written? What is "reasonable" font size? I know 12 point font is required in the TILA disclosures but due to all the regulations and other disclosures that are required to be provided, CABs (and other entities like banks) need to shrink font as small as possible so the documents aren't too long. (remember 25 pages+ to start). If you go 12 point font on a document that is mostly 8 point font it is going to cause the document to double in size. 50 pages in English, 50 pages in Spanish! And, the CAB has to make copies of the signed loan documents for their files so that becomes 200 pages! All that for a $300 loan? If this one passes we should all get into the paper, ink, and toner business!
In an earlier blog the CAB license renewal deadline was addressed as it is coming on January 31st.
In an earlier blog the CAB license renewal deadline was addressed as it is coming on January 31st. It is very much worth mentioning that each year when the CABs across Texas pay the renewal fee of $800 per location, that $200 of that goes to the Texas Financial Education Endowment Fund (http://www.tfee.texas.gov/). It appears that 2,125 CAB licenses will be renewed this year and that comes to $425,000 in contributions to the fund!
In years past there have been as many as 3,500 CABs so that would have meant that $700,000 was contributed for that given year. CABs have been contributing to the fund since the CAB law went into effect in 2012 so 2017 will be the 6th year. CAB renewals fluctuate but it is safe to say that $2-$3 million has been put in to this fund by Texas Credit Access Businesses.
"The Texas Legislature established the Texas Financial Education Endowment (TFEE) to support statewide financial capability and consumer credit building activities and programs. The endowment is funded through assessments on each credit access businesses and is administered by the Finance Commission of Texas."
This program is 100% funded by the licensed CAB operators in Texas. As a group we should all be pleased to make contributions towards the kinds of programs that have been given grants through the fund.
You absolutely positively cannot miss this deadline.
Credit Access Business ("CAB") License renewals with the Texas Office of Consumer Credit Commissioner ("OCCC") are due by no later than December 31st.
You absolutely positively cannot miss this deadline. If you do, you will likely lose your license and have to re-apply for a new one. That is not the biggest problem - if you do not renew then you do not have a license, you have an expired license. And, during the time that you operate with an expired license you could be forced to return all of the fees you collected.
Use OCCC's online portal called "Alecs" to do the renewals. It takes a matter of minutes to login and do it!
Although we are all hopeful the proposed CFPB rule will unravel in the near future, the CFPB action against Moneytree is a good reminder that we can at any time be examined by the CFPB in the same way that the OCCC can show up at our stores at any time.
Specific to this particular action was collections and advertising. The information on www.CFPB.gov stated that there were "deceptive online advertisements and collections letters." And that "the company also made unauthorized electronic transfers from consumers’ bank accounts."
CFPB has ordered the company to cease its illegal conduct, provide $255,000 in refunds to consumers, and pay a civil penalty of $250,000.
What did the CFPB say Moneytree did wrong?
§ "Used deceptive online ads: In early 2015, Moneytree ran advertisements online offering to cash consumers’ tax refund checks for “1.99.” The actual fee for the service was 1.99 percent of the amount of the check cashed, rather than $1.99, as the company’s advertisements implied. Consumers were required to visit one of Moneytree’s physical branches to take advantage of the advertisement’s offer, which appeared online tens of thousands of times."
§ "Deceptively told consumers their vehicles could be repossessed: From late 2014 through early 2015, Moneytree mailed letters to hundreds of consumers indicating that their vehicles could be repossessed if they did not make past-due payments on their installment loans. But none of these consumers had loans secured by their vehicles, and Moneytree had no right or ability to repossess them."
§ "Withdrew money from consumers’ accounts without authorization: Moneytree failed, in over 700 instances, to obtain pre-authorization from consumers for withdrawals from their bank accounts, in violation of federal law."
Advertising: As an owner of your business ALWAYS read the final proof of all advertising and distribute the policy on a campaign in writing to your team, communicate the policy verbally as well so that emphasis can be made in areas where necessary. Think critically about how a statement can be interpreted on your advertising materials, ask yourself "If a regulator who wants me out of business reviews this how else could this advertising copy be interpreted to be accurate or to be misleading?"
Collections: I am not sure if this was an error or if it was intentional that Moneytree sent letters to debtors saying they were going to repossess their vehicles if they did not pay their unsecured loan off. I am going to assume that this was an error I really have not met anyone in the last (5) years of consulting that would do that kind of thing intentionally. As an owner of your business make sure to review and approve collections letters as they go out. Collections (and in particular repossession) is a risk laden mine field on the regulatory front. There are too many instances of fines occurring due to internal error in Collections not to make sure you keep an extra close eye on this crucial part of every business.
ACH or Debit Card authorizations: Everyone must get an ACH or debit authorization for every transaction. Only debit the amount(s) due per the agreement and payment amounts must match what is on the payment schedule. Most know this, but often times the employees get bogged down or too busy and these errors occur. An automated e-sign process helps this as signature lines are less likely to get missed. If you do not have the authorization signed, it could be deemed "illegal."
Did you know? 7 in 10 Americans have less than $1,000 in savings in case of emergency.
7 in 10 Americans have less than $1,000 in savings in case of emergency.
34% of Americans have zero savings.
5% of Americans have relied on payday loans or similar services.
90 % have a high school diploma or better, 54 % have some college or degree.
53 % are under 45 years old (only 9 % are 65 or older).
32 % own homes, 54 % have credit cards, 100 % have steady incomes, 100 % have checking accounts.
Let's speak the truth about the "Payday Loan Industry" for a minute.
An Industry Trade Association mainly comprised of small and mid-size business owners in Texas who offer short-term, small-dollar loan services. You may be more familiar with our industry and it’s more commonly referred to name “The Payday Loan Industry.” In fact, that term is loosely (not really accurate) used to describe many kinds of financial services that exist in the U.S. market, such as Check Cashing, Auto Title, Payday, and Installment Loans. Titles aside, it is most important to understand that our Association members are in business to provide a needed service to Texas citizens.
Members of TOFSC are small business owners in towns spanning across the State of Texas. We are licensed “Credit Access Businesses” and are legal business owners dedicated to maintaining the highest level of compliance with the Regulations of the Texas Office of Consumer Credit Commissioner. Many of our Members sit across the desk from our customers and providing loan services them directly. Our customers value us and we treat them fairly. In fact, in 2015 over 1.6 million Texas consumers used our services. Complaint averages each of the last two years have been under 500 per year. That is a per loan customer complaint % of .0003125%.
Banks earn a reported $30+ billion per year in Overdraft and NSF charges from the same customers the Payday Industry serves. The Payday Industry earns less than $9 billion per year industry-wide. Even though we are a much smaller industry in terms of revenue, banks have gotten a pass while the Payday Industry has taken the full brunt of the media and Consumer Advocate onslaught. And, when the same APR% calculation methods are applied to bank NSF and Overdraft charges they can be as high as 1,600% which is 2-3 times greater than many Payday Industry products. Many Consumer Advocates suggest the banks should be the saviors of what they call the “payday loan problem,” but the truth is the amount of money the banks earn from our shared customers should be more heavily scrutinized.
The citation of the triple digit A.P.R. %’s that many of our products carry is the easiest and most frequent argument used against us by the media and Consumer Advocates. It is very true that our industry’s products can be expensive for consumers - this fact is always disclosed to customers before and throughout the loan process. However, opponents of our industry rarely if ever discuss the extremely high defaults and fraud %’s that must be absorbed to maintain profitability. After subtracting bad debt, rent, payroll, and other basic operating expenses, our small business owners are focused on simply making a profit no different than every business in Texas.
The States have decades of experience in dealing with our industry and already have many helpful regulations in place. In Texas, the Office of Consumer Credit Commissioner conducts examinations continually, where each licensed business is taken through an 80+ point examination checklist. Consumer loan documents used in Texas include compliance with a long list of key Federal and State regulations such as: Truth in Lending Act, Military Lending Act, Fair Debt Collections Practices Act, Unfair and Deceptive Trade Practices Act, and Fair Credit Reporting Act. Arbitration and dispute resolution is offered, Privacy Policies are in place, and customers are given the “Right to Rescind” for up to three days.
There is some funny money making the rounds in Abilene and the East Texas region.
There is some funny money making the rounds in Abilene and the East Texas region. There were two incidents recently that were uncovered. The way money usually works is that it will circulate in a region so I want to make sure everyone is upping the amount of attention put towards identifying counterfeit bills.
Incident #1: Fake 'movie' money used at movie theater and other Abilene businesses (KTXS News).
Abilene police are investigating a case they hope will have a Hollywood ending. APD’s Fraud Unit says suspects have made purchases at more than 20 local businesses using counterfeit bills made specifically for use in the movies. Ironically, one of the places that accepted the funny money was a movie theater.
There have been additional news articles on the use of the counterfeit “movie” money in East Texas as well. The Longview Journal posted an article that the “movie” money has been reported in other parts of East Texas such as: Lufkin, Diboll, and Jasper.
The OCCC has released the CAB Quarterly Report data for 3rd Quarter 2016 - some of the highlights are below!
The average Payday Loan was $439 for single pay transactions and $557 for installment loan transactions.
The average Title Loan was $1,230 for single pay transactions and $1,008 for installment loan transactions.
The average CAB fee for Payday Loans was about $24 dollars per $100 borrowed on single payment transactions and $166 per $100 borrowed on installment transactions (which is about $14 per $100 every 14 days).
The average CAB fee for Title Loan was $17.13 per $100 borrowed on single pay transactions and $88 per $100 borrowed on installment loan transactions (which is about $17 dollars per 30 days).
If anyone is interested in looking at the reports for a specific Metropolitan Area such as comparing Dallas versus Houston or El Paso to Austin, that information is available in the "MSA" report see below!
Dan Micawber at AF$PA / Payday Brokers has announced a Consumer Alert (and operator alert) regarding for a new round of Fake Debt Collectors circulating in our industry.
Dan Micawber at AF$PA / Payday Brokers has announced a Consumer Alert (and operator alert) regarding for a new round of Fake Debt Collectors circulating in our industry. If you are a consumer who received a call from a debt collector that says you owe money to a “payday loan company” but will not tell you the name of the company or claims they are a member of the "Alternative Financial Service Providers Association" ("AF$PA") - it is a scam.
All Debt Collections Agencies who comply with the Fair Debt Collection Practices Act "FDCPA" must follow a very long list of rules regarding how contact can be made with borrowers. One very specific issue with the FDCPA that is not being followed by these current scammers is that they must be able to "verify the debt." If they will not say who the debt is from it is not likely they have a contract to collect on. A collection agency must disclose the name of the company that the debtor owes money to. If they refuse - it is a scam. If they say they are sending the sheriff or police - it is a scam. If they say they can have you locked up - it is a scam.
Our CAB clients and members should be concerned about this as well. One of the biggest sources of complaints at the OCCC is this kind of problem. As compliant CAB's we often times are lumped in with unsavory characters out there who google their way into becoming debt collection scam artists. A bad actor can simply google search for payday loan and run into the AF$PA website or maybe even grab larger CAB's name off the internet and start calling people saying they owe them money. It is only a matter of time before they trick an innocent consumer into running down to the corner store and loading some money onto a prepaid card that sends funds directly to them in an Indian call center.
I have helped consumers on this issue and even had one conference me in with the scam collections agent. I was able to shut them down in less than 30 seconds and enjoyed it immensely. Most TOFSC members have the TOFSC Comment / Complaint line posted in their store - if you have any customers telling you they are encountering this problem please have them contact me at 214-293-8676 and we will get them going in the right direction.
Renewal dates are as follows: Renewal period starts November 15th and December 1st renewals are due. Any licenses that are not renewed by midnight of December 31st will expire.
Do not forget this it is a nightmare if you do, you will have to go through the license process again. We have seen this happen to clients and members before and the OCCC is not as forgiving on this topic as they may be in other areas.
Here is a link to the OCCC website for more information: http://occc.texas.gov/industry/cabs/licensing-forms (look at right margin of screen).
As many of you may know, in October 2016 we all began operating by new rules in regards to how we must treat "Military" applicants and their dependents.
As many of you may know, in October 2016 we all began operating by new rules in regards to how we must treat "Military" applicants and their dependents. We now need to verify what has been told to us by the applicant regarding their status on this topic. The burden is on us as operators to confirm the status versus the past where the applicant simply checked the "yes" or "no" boxes on the application form or on the consumer loan documents.
My very close personal friend and true Southern Gentleman Max Wood at Borrow Smart Alabama put out the following thought provoking questions on this Military Lending Act topic and I wanted to pass those along to our site visitors. Please review and due your part to make sure your operation is as strong as it can be on this subject!
1. Will will be violating SCRA rules if we don't rewrite an existing customer who on paper said they were not a covered borrower but when accessing the DOD we discover they are?
2. On a busy day, clerks want to run DOD reports in the morning for all customers due that day so they won't have to slow down the loan making process during the day. Is this acceptable or do they have to run reports only when customer is standing in front of them?
3. How will we determine if someone is the dependent of an active member in the military or reserves without having that family members information?
4. Will we need to continue to check the DOD website after the first advance of someone is permanently disabled, or is of social security age?
5. Will the following provide safe harbor: MLA website, "big three" credit bureau, SCRA website, retail credit report ostensibly re-reporting from "big three"?
6. If a product APR is too high for Military but was obtained pre-military, may it be re-financed with or without additional credit (not a payday loan)?
7. Does the database search cover all exposure for noncompliance with MLA? In other words if the database search is performed and comes back clear does that cover any possible violation?
8. What exposure do we have for spouses, family members for this. What are some of the questions we need to ask to determine all related persons to the applicant are covered?
9. If the website is down when the search is performed is it enough to document that and have them sign a disclaimer stating that they are not an active member of the military. Would it be a good idea in this case to run a search after the site is up and document the file?
10. My understanding of this is basically when a new contract is executed a search has to be performed. What are the exceptions to this?
11. For an installment loan renewal does a new search have to be performed when the loan is renewed?
12. For a flex loan (open line of credit) do we need a search when the customer takes out an advance on their existing line?
13. For a Tennessee Title Pledge loan do we have to do the search prior to sending a renewal letter for an extension?
14. Is there any reason to take existing Military Act questions off of the existing contracts?
15. Is there anything that needs to be done re pre-10/3 loans (e.g., scrub against the database)?
16. Do MLA restrictions apply to "mere" loan extensions?
17. In AL a title pawn is actually a traditional pawn transaction (title is held as merchandise for pawn) - unlike most other states. At the end of 30 days the customer may pay the fee (interest) and extend for another 30 days. There are a couple of ways people do this.
a) After the initial transaction and contract each subsequent extension is done by accepting the payment and extending for another 30 days. If the loan amount increases the old contract is paid off and a new contract is generated that reflects the new amount. This transaction type would require a check of the database, I am sure. BUT, if there are no changes or principal is paid down and only a receipt is printed, is a check of the database required? To further complicate the situation some operators use a different pawn number for each extension and others do not change the number. Would a check of the database be required under either or both scenarios?
b) A new contract is generated at each extension. My guess is that a database check will be required.
18. If a lender is in compliance with the new MLA rule including the database check, is there a problem with a lender continuing to obtain a signed military form (the model form) for our files in addition to the new required database check confirmation certificate ID number?
19. Are there any prohibitions to refusing to lend to a covered borrower?
20. A new customer divorced her husband who was active duty. She received no spousal support in the divorce yet her MLA search lists her as a dependent. The database had not been updated to reflect her as no longer deriving income from her now ex-husband. Is it acceptable to provide a loan to the customer as long as income and divorce documentation is provided?
Did you know that Payday and Title loan business owners in Texas have rules that dictate where services can be marketed and advertised?
We are at a point in the year when many Credit Access Business owners who offer payday, installment, or title loans to Texas consumers increase their marketing and advertising efforts in hopes of serving those needing an extra financial cushion to get through the Holidays.
We are at a point in the year when many Credit Access Business owners who offer payday, installment, or title loans to Texas consumers increase their marketing and advertising efforts in hopes of serving those needing an extra financial cushion to get through the Holidays. It is important that readers know there are some restrictions around off-site advertising.
Per Texas Finance Code Chapter 393, a Credit Access Business may not advertise on the premises of a nursing facility, assisted living facility, group home, or intermediate care facility for persons with mental retardation, or other similar facility subject by regulation of the Aging & Disability Services.
It is my opinion that many of our clients and members would not intentionally advertise or market to these consumer groups. But, we should all be aware that employees who are out and about hanging door hangers, passing out flyers, etc may not think about it while they are on the premises of such facilities. So, just head's up and let's all make sure we are thinking a few layers deep while we are working through a high demand higher action period of our business cycle.
(CFSA) anticipates that more than one million concerned Americans will have spoken out against the CFPB's “Payday Loan” rule.
The CFPB now faces a massive backlog in its comment portal. Presently, only 158,259 (as of 10/26 the totals were 144,140 so that’s 14,119 in three weeks) comments are publicly accessible on the Bureau's Regulations.gov comment portal.
According to Director Cordray's estimates at the time, there was a backlog of at least 855,860 comments that the CFPB must account for, that leaves about 697,601 to go. At 4,706 per week that is 148 weeks or almost 3 years! They have upped the pace from last we reported.
Texas Organization of Financial Service Centers donates $10,500 to purchase ballistic vests for Longview Police Officers.
LONGVIEW, Tex. - Spurred by the senseless shootings of police officers in Dallas and elsewhere and promoting strong support for local law enforcement, four members of the Texas Organization of Financial Service Centers ("TOFSC") have donated $10,500 to the Longview Texas Police Association to purchase ballistic vests.
The four companies making the combined donation -- Texas Star, CashMax, Texas Thrifty Loans and Rapid Payday & Title Loan -- operate storefront businesses in Longview and appreciate the outstanding public service and professionalism of the Longview Police Department.
The Longview Back the Blue support group has been raising money for the vests. Christy Purdon and Scarlet Bird launched the effort following the tragic July 10 shooting of five police officers in Dallas.
“Watching so many suffer such great loss made it even more apparent that we as a community needed to step up and do whatever we can to protect our officers,” said Christy Purdon, who is married to Sgt. Jimmy Purdon. “It is my belief that every officer across the nation deserves to be protected in the line of duty. They protect us each and every day, so why shouldn’t we protect them, too?"
Jay Pruett, owner of Texas Star, helped spearhead the donation for the vests.
Ballistic vests costs about $800 a piece. With more than 100 commissioned officers, the Longview Police Department did not have the budget to purchase vests for every officer.
Before the Back the Blue effort began, Scarlet Bird had never met Christy Purdon. But like Burdon, she has a strong and emotional connection to the Longview Police Department. She is engaged to Sgt. Donald “Chip” Koepke. The couple met when Sgt. Koepke saved Bird’s sister’s life after she was in a car accident.
With a goal of raising $80,000, Longview Back the Blue began selling t-shirts and offering the opportunity for businesses and individuals to “sponsor” an officer’s vest.
The contribution from these companies is a strong example of how TOFSC members support communities across Texas, said TOFSC President Michael Brown.
Fun with the filing of liens on Motor Vehicles in Texas.
Dealing with Texas DMV office who refuse to allow Credit Access Businesses to add a lien to a vehicle (for a Title Loan) when the registered owner of the vehicle has outstanding warrants, tickets, toll fees and or recent child support payments on file as delinquent can be a problem. We have seen this in a few counties recently - it appears to be referred to as a "Scoff Law".
The only fix we have seen that works is to simply process the lien in a different county. There are 254 counties in Texas, and each tend to do their own thing!
Another instance that has come up with some title loan borrowers is when one consumer who has a title loan with a CAB sells their motor vehicle to another consumer without the buyer getting the title. The buyer in these cases can either be tricked into doing this or may just be careless / unaware.
For the CAB in this case, because they actually have the title and the lien, they "own" the vehicle and would be forced to repossess if the seller stops paying on the loan (this would be what triggers awareness of any issue other than if the buyer comes back later and asks for the title).
If you find yourself in this predicament as a buyer or a CAB, follow the law and rely on other professionals to consult you on the best course of action. For CABs (as always) follow the proper disposition methods in compliance with Texas Business and Commerce Code Chapter 9.
I always look forward to the new CFPB complaint reports that come out each month around the 25th.
I always look forward to the new CFPB complaint reports that come out each month around the 25th. Why? Well as you will see if you follow them as well, the “Payday Loan” industry (this is the umbrella term used in these reports to refer to companies who offer payday loans, installment loans, title loans, cash advances, etc) has yet another double digit decrease in complaint volume versus the same 3-month period (July-August-September) last year. This month showed a 21% decrease.
It is unfortunate that there were complaints, and I can tell you that our clients would be extremely concerned in the event any complaint was filed by their customer. They would respond promptly and work to communicate with the customer to clarify any misunderstandings and work out a resolution. Zero complaints – that is the goal.
As is the case with the other monthly reports – we are always the industry with the largest decrease. There are 10 other industry categories and we are the only one with these giant drops in customer complaints, consistently. Student loans are #1 and our bank friends are at #2 with a 37% increase.
I am aware that consumer advocates and others who are not so friendly to the industry visit this website. I am wondering if they also view the CFPB complaints each month. The story being told here is that consumers complain less about our services than any CFPB category. I would recommend you shift your focus to the biggest offenders if you are currently hyper-focused on shutting down the “payday loan” industry.
After all the work you have done to work up complaints you have only mustered a double digit decrease in complaint volume, you may be able to do better somewhere else. I think the banks are where you should go – they target our customers with abusive overdraft charges and NSF fees with astronomical effective APR’s (think 1,600.00%), and bring in about 4 times the amount of annual revenue that our industry does.
CFPB’s 16th Monthly Complaint Report released on October 25, 2016.
Howdy folks – I saw this really great article in the Houston Chronicle titled “FDIC: Texas leads the country in 'unbanked' households." This was another reminder that we are in one heck of a strong market. Yep, everything is bigger in Texas!
This article tells me many things, but my first instinct is that it likely banks have made it so unattractive to work with them in Texas that many people ("unbanked" or "under banked") simply prefer to go another route versus the traditional bank. And, banks actually turn away many of the customers we serve for what I think are unfair reasons. Many of our clients are very pleased to work with these customers and would like to ask for their business. Whether the clients offer payday loans, cash advances, title loans, installment loans, or check cashing...it is quite likely they can suit the needs of the consumer. Banks are lazy; customers in our industry typically need some above the norm assistance while carrying higher amounts of risk. Our clients understand this and will do the work with the customers seven days a week, in-store, online, via phone, email, or text!
Despite the fact that banks are being shunned for their unfair treatment (ahem, Wells Fargo) of U.S. consumers, and despite the fact that more consumers are saying "no thanks" to the local bank branch, the banks still make 4-5 times more revenue on overdraft / NSF charges than the entire "payday loan" industry makes in annual revenue last I checked. Perhaps the CFPB should spend less time on our industry and more on the banks!
Using 2015 data, the FDIC measured "economic inclusion," which is the term they use to label families who use mainstream financial institutions.
The study estimates how many households are unbanked, or don't have bank accounts, and how many are under banked, or may periodically seek financial help from services such as title loans, payday loans and pawn shops despite having bank accounts.
9.4 percent of households, or about 967,000, were unbanked in 2015.
23.7 percent of Texas households were under banked.
Income of less than $15,000 per year: 25.6 percent unbanked, 29.5 percent under banked.
No high school diploma: 28.8 percent unbanked, 26.7 percent under banked.
Ages 25-34: 13.8 percent unbanked, 27.1 percent under banked.
Ages 35-44: 12.8 percent unbanked, 27.7 percent under banked.
About 16 percent of African American households were unbanked and 30 percent under banked.
About 18 percent of Hispanic households were unbanked, with 30 percent under banked.
In Texas, unbanked households logged the lowest savings rates at 17.7 percent.
Savings rates rose to 49.5 percent for under banked households and 59.5 percent for those considered "fully banked."
What should business owners in our industry be thinking as they read the article? What are the behaviors/traits of our customers? How do we mold our services so they are in line with the behaviors/traits? What services should we add and evolve into?

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