Should Payday Loans Be Regulated?

Payday Loan Regulations

Unreasonable Payday Loan Regulations: a Bad Idea.

Having worked on the front lines of my own payday loan store, I can unequivocally say payday loans offer a valuable service for the majority of consumers who use them to solve their financial problems; IF THEY ARE SMART ABOUT IT.

Let me say at the start, reasonable payday loan regulations are a necessity. Just like regulations governing my food, health, car, security… are requirements in today’s society.

The age old refrain by myself and my payday loan lender peers is, “Payday loans provide a valuable resource to people who don’t have other loans or credit available to them.”

Several studies have pointed out that 65% of households can’t get their hands on $1000 in a pinch. We are not talking about the unemployed, down on their luck, stereotypical low-income consumer. These studies refer to average “Joe’s with average jobs.”

“A majority, or 64%, of Americans don’t have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC.”

“36% said they would tap their rainy day funds for an emergency. The rest of the 2,700 people polled said that they would have to go to other extremes to cover an unexpected expense, such as borrowing money or taking out a cash advance on a credit card.”

This is not B.S. I know this because, once again, I am a payday loan lender! It’s my money I’m lending. I don’t have some hedge-fund or venture capital fund giving me money to loan to the financially strapped.

I hear my customer’s stories EVERY DAY. As they tell me over and over again, Sh%^^&T happens! They need cash to fix the car, buy groceries, pay for a perscription…

If the regulators put a stop to payday lenders, it’s not going to be good. For anyone! Where will a consumer in need of a car repair to keep their job go? Let’s hope they don’t get too desperate…

Credit cards? They’re maxed out.

Savings account? No way.

Get a small $1000 bank loan? Not a chance.

Their local loan shark? Not a good idea. Better to get a bunch of phone calls and texts from your local payday loan lender than a visit to your door from your local loan shark.

Sure! Payday loans are “expensive.” But these are high-risk borrowers we’re talking about. The costs to make a small dollar loan are very high. Payday lenders must pay rent, employees, phones, computers, loan management software, customer acquisition costs, bank fees, taxes, and on and on…

It’s more expensive to make small dollar loans.  Lower interest rates rammed down the throats of borrowers and payday lenders will destroy the industry and hurt consumers. One less choice for solving their financial challenge. Not a smart thing to do.

A 20% APR on a two-week, $100 payday loan would only generate 76 cents of interest; doesn’t match the cost to process the loan!

Payday loan regulations stifle competition.

The financial services industry is already undergoing tremendous upheaval. Just take a look at the peer-2-peer lenders, the Lending Clubs and Prosper’s of the world. Rather than crazy low 36% APR rate caps, allow tech savvy entrepreneurs figure out how to loan money cheaper. It’s already happening!

How to start a car title loan businessFinally, since when has big brother demonstrated their ability to figure out what’s best for all of us. Why should some schlep in D.C tell any of us when we can borrow money? They have no clue what’s happening in our daily lives.

My customers are over 21. They don’t want to ask mommy if they can borrow a few bucks until their next paycheck.

Don’t get me wrong! Regulations play an importanat role in our society. There’s always some idiot in every industry who takes advantage or is simply too greedy for their own good. But “REASONABLE REGULATIONS must be developed and implemented.

And yes, admittedly, “REASONABLE” is in the eye of the beholder.


New Mexico Payday Loans

New Mexico Payday Loans

January 1 through December 31, 2014 as reported by New

  • There are currently 148 Active locations that are registered on the state database.
  • There were 65,837 total payday loans conducted by 12,129 consumers registered to the state
    database for the YTD ending this month. These transactions represent a total YTD advance
    amount of $24.3 million and total advance fees of $3.7 million. Additional YTD information
    about these loans is as follows:
  • Average advance amount of $369.38 and average advance fee of $55.71;
  • Minimum advance amount of $9.49 and maximum of $1,947.62;
  • Effective average annualized percentage rate (APR) is 307.89% with an average term
    of 23.88 days;1
  • Average number of loans per consumer YTD is 5.43;
  • YTD average time that a consumer is engaged in an individual payday loan is 27.97
  • YTD average advance fees paid by a consumer is $302.38;3
  • 3,763 payday loans (5.72%) with an advance amount of $100 or less;
  • 50,321 payday loans (76.43%) with an advance amount between $100.01 and $500;
  • 11,704 payday loans (17.78%) with an advance amount between $500.01 and $1,000;
  • 42 payday loans (0.06%) with an advance amount between $1,000.01 and $1,500;
  • 7 payday loan (0.01%) with an advance amount of more than $1,500.
  • There were 7,627 open payday loans (i.e. outstanding loans) on the database as of this month
    end. These loans represent a total outstanding advance amount of approximately $2.8 million
    and total outstanding advance fees of approximately $414 thousand as of this month end.
  • Approximately $3.3 million in advance fees was collected as of this month end.
  • There have been 153 charge-offs / write-offs in 2014 representing a total of $47,972 dollars as
    of this month end which was comprised of $41,534 in advance amounts and $6,438 in advance
  • A total of 59,537 customers have been registered on the database since the inception of the
    program in 2008. Each of these customers would be eligible for a repayment plan pursuant to
    New Mexico law.
  • 1,247 customers have entered into a payment plan YTD and are subject to the restrictions of
    the statutory waiting period.
1) Formula for calculating average APR is (Average Advance Fee / Average Advance Amount) x 365 / Average Term.
Average Term is based on the agreement date and close date for loans closed YTD.
2) YTD average time that a consumer is engaged in an individual payday loan is the overall average of: Total term (in days) for all payday loans conducted by a consumer divided by the total number of loans conducted by that consumer during the
reporting period.
3) Average YTD advance fees calculated as follows: Average Number of loans per YTD customer x Average Advance Fee

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How to Start Payday Loan or Car Title Business

Start a Car Title Business?

Start a Payday Loan Business?

You still trying to figure out how to start a car title business? A payday loan business? Don’t know the laws? The fees you can charge? Collections? 

How to start a title loan businessYou just don’t know where to begin? Stop “Googling” for hours and try this simple tactic:

  • Get our Startup Manual
  • Run a free ad on your local website. Advertise for an employee. Get some responses from EXPERIENCED payday loan and car title loan employees who know your LOCAL situation;

Here’s a sample ad:

Immediate opening for Payday loan and Auto / Car Title Loan Officer (Your City)

compensation: $15hr DOE

employment type: full-time

We currently have position open for individuals with Payday Loan and auto title loan process and collection experience.Position opening in following location: Your City
Type: Full Time Employment
Position Description: Payday Loan, Car Title Loan / Collection OfficerQualifications:- Experience in any combination of collection, and pay day loan / auto title loan processing.
– Demonstrate high level of expertise in handling complex transactions and to maintain productivity levels to support business needs
– Able to receive general direction and is competent to perform nearly all aspects of the job independently
– Detailed oriented with computer data entry skills
– Familiar with all aspects of YOUR STATE auto title (or, payday loan) lending code, industry practices, and standards
– Works well as a team member
– Strong problem solving skills
– Excellent verbal/written communication skills
– Strong customer service orientation
-Spanish speaking a plus (or Vietnames, Greek, Haitian… whatever!)