Category: Laws

16
Feb

Madden v. Midland Funding Fix for Lenders and Debt Buyers: Huge Deal!

THIS IS HUGE! A fix for Madden v. Midland Funding! This has serious implications for all lenders. That includes tribes, online lenders, B & M’s…

This is a portion of a guest post written by Scott Stewart, CEO of the Innovative Lending Platform Association  on LendAcademy operated by Peter Renton; a great blog and an excellent Podcast you should be dialed into! (NOTE: As you read this, realize that consumer debt is impacted as well. For now, it appears to be borrowers in NY, VT and CT with more states coming!)

“Imagine you opened a salon two years ago with a chair for both you and your business partner.  Over the years, you built a small clientele and grew steady revenues.  Your business is profitable, and you want to add two more chairs to your shop.  You estimate that the expansion will cost $20,000 but will yield $40,000 annually in new revenue.

Together, you discuss taking out a small business loan with both large and small banks, but they turn you down citing your 640 personal credit score and the lack of two years of business tax returns as the reason for the decline.  So, you reach out to online lenders in the hopes of securing the capital you need to expand and grow your business. [Continued below…]

 

How to start a loan businessAfter reviewing your application, an online lender offers your business a $20,000 loan that can be funded in a day and paid back in weekly installments over a six-month period.  The APR seems high – it’s about 40% – but the total cost of capital is only $2,115.  That means you’ll pay $2,115 to borrow $20,000 to fuel your expansion, and that expansion is expected to yield a $40,000 return on your investment.  You and your partner decide to seize the opportunity.

Unfortunately, a recent decision by the Second Circuit Court of Appeals in Madden vs. Midland Funding, is making it difficult for online lenders to offer businesses the funds they need to grow and succeed.  The Madden decision undermined the legal doctrine known as “valid when made,” which has been a cornerstone of banking law for over 100 years.  The principle is simple.  If a loan is legal with respect to its interest rate, then it does not become invalid or unenforceable when sold to another party.  Numerous bi-partisan and non-partisan groups have come out in opposition to the Madden decision, in part because of the dangerous uncertainty it has inserted into the financial markets that are critical to supplying credit to individuals and small businesses.”

Peter Renton also wrote about the impact of Madden v. Midland in an earlier Post on Lend Academy:

There was a long discussion about the impact that this decision has had on borrowers in Second Circuit states: NY, VT and CT. Research has been done by Columbia University and others that show lending is down significantly in the three states and one panelist noted that “no marketplace lending platform is issuing loans in these states to borrowers under a 625 FICO.” If for some reason the Madden decision was to be expanded to all states then lending platform volume could drop as much as 50%.

Recently, the United States Congress passed the “Protecting Consumers’ Access to Credit Act of 2017 (HR 3299), otherwise known as the “Madden Fix” bill.

This bill would restore the “Valid when Made” doctrine meaning that if a loan was valid when it was made it does not become invalid when assigned to another party regardless of state usury laws.

In 2015, a Second Circuit panel in Madden v. Midland Funding, LLC overturned a district court’s holding that the National Bank Act (NBA) preempted state law usury claims against purchasers of debt from national banks. (See Special Alert on Second Circuit decision here.) The appellate court held that state usury laws are not preempted after a national bank has transferred the loan to another party.

It passed the house by a margin of 245 – 171 so it successfully picked up support from Democrats!

Lets hope this bill gets through the Senate in tact.

And, if you want to learn how to start a loan business that focuses on signature loans, car title loans, single-payment loans (payday), line-of-credit lending… start here:

“How to Loan Money to the Masses.”

Jer at PaydayLoanUniversity.com

08
Feb

U.S. Bancorp Reveals $608M Scott Tucker Liability

The Business of Lending Money to the Masses

The Business of Lending Money to the Masses

As previously disclosed, the Company U.S. Bancorp is working to resolve matters with regulatory agencies, including the Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network, relating to their review of the legacy Bank Secrecy Act/anti-money laundering compliance program of U.S. Bank National Association (“U.S. Bank”).

Resolution of these regulatory matters is expected to include payment of civil money penalties. Also as disclosed, a legacy banking relationship between U.S. Bank and payday lending businesses associated with former customer Scott Tucker (who was convicted of fraud charges on October 13, 2017) has been the subject of an investigation by the U.S. Attorney’s Office in Manhattan.

That investigation also has covered issues related to the adequacy and effectiveness of U.S. Bank’s legacy Bank Secrecy Act/anti-money laundering compliance program. The parties are currently working on a definitive settlement, which the Company currently expects to include a deferred prosecution agreement and payment of a penalty, which the Company expects to finalize soon. Based on the current status of these various matters, the Company has accrued a liability of $608 million, which is reflected in the Company’s financial results for the quarter ended December 31, 2017.

The settlement of these matters is subject to negotiation and completion of final documentation and approval by the Company and the relevant agencies, and therefore the final terms of the settlements may differ from the Company’s current expectations.

In addition, as previously disclosed, the Company remains subject to other ongoing examinations, inquiries and investigations by government agencies and bank regulators, including a review by the Board of Governors of the Federal Reserve System of economic sanctions and related compliance matters, any of which could result in administrative proceedings, monetary fines or other penalties.

U.S. Bancorp disclosed in a January filing with the Securities and Exchange Commission that its dealings with Tucker were the subject of an investigation by the U.S. Attorney’s Office in Manhattan, N.Y. That’s the same U.S. Attorney’s office that brought racketeering charges against Tucker. Scott Tucker was was convicted of those charges Oct. 13.

 

 

06
Feb

Indiana Payday Loans and Laws

 

How to start a loan business

How to start a loan business

Payday loan lenders in Indiana will likely experience increased transaction volume and profitability as a result of Indiana’s move to pass new laws allowing payday loan lenders to charge fees three times the existing rates previously in place.

Basically, Indiana legislators will establish longer-term payday loans for between $605 and $1,500.

Payday loan state law required that loans not exceed interest rates of 72 percent per year. But, by enabling shorter length payday loans for 7-14 days, payday lenders can offer consumers more choices for handling financial emergencies.

This is great news for consumers in Indiana!

Indiana payday loan lenders employ “unsecured consumer installment loans.” APR’s (Annual Percentage Rates) tier up to approx. 222 percent.

Indiana payday loans range from three  to 12 months with loan principals of $605 to $1,500.

As an example,  a 3 month payday loan – installment loan –  having a loan principal of $605 results in the payday loan borrower paying $144 in monthly maintenance fees and $91 in a “nonrefundable original fee.” Total payday loan payback is $840. (Beats asking friends or family for money!)

Bottom line: these Indiana payday loans will provide residents of Indiana more financial choice when facing emergencies.

Licensed Indiana payday loan lenders are barred from charging more than 20 percent of the borrower’s monthly gross income and an Indiana payday loan borrower can have one installment loan at a time.

What do you think about the new business opportunity for entrepreneurs to loan money to the masses in Indiana? Email Jer@PaydayLoanUniversity.com

Want to start a loan business in Indiana? Learn how here: PaydayLoanUniversity.com

How to start a loan company

How to start a loan company

14
May

Texas Payday Loan Laws & License

Texas Credit Access Businesses

Texas Credit Access Businesses obtain credit for a consumer from an independent third-party lender in the form of a “deferred presentment transaction” or a “motor vehicle title loan,” more commonly referred to as “payday loans” or “title loans.”

In Texas, the actual third-party lender is not licensed; the credit access business that serves as the broker is the licensee in this Texas CAB/CSO regulated industry. The credit access business charges a fee to the consumer for obtaining the third-party loan; this fee is usually calculated as a percentage of the loan amount.

Texas-CSO-CAB-ManualThe unlicensed third-party lender charges a maximum of 10% interest annually. Often, the Texas third-party lender participates in consumer late and NSF fees thus increasing this 10% APR.

The borrower will sign a promissory note with the lender for the actual loan and a separate credit service agreement with the credit access business. Generally, all documents are signed at the credit access business location and payments are made directly to the credit access business.

The Texas CAB services the loan, markets the loan, and secures the consumer loan on behalf of the third-party lender.

Typically, Texas CAB’s charge $22 – $35 per $100 loaned for a period due on the consumer’s next payday.

CREDIT ACCESS BUSINESS LICENSING FORMS

Texas CAB Licensing Forms

New License Applications: Apply Online: ALECS

Personal Affidavit

Personal Employment History

Personal Questionnaire

Texas CAB Individual License Forms

Application for New License or Transfer of License

Application Questionnaire

Assignment of Statutory (Registered) Agent

Business Operations Plan

Disclosure of Principal Parties

Disclosure of Third-Party Lenders

Financial Statement-Personal

Financial Statement: Schedules 1 – 3

Financial Statement: Schedules 4 – 6

New Application Checklist

New Application Consent Form

Personal Affidavit

Personal Employment History 

Personal Financial Statement

Personal Questionnaire

Statement of Experience

Statement of Records/Record keeping

 

 

22
Mar

Arizona Proposed H.B. 2496 Relating to Consumer Access Line of Credit

Arizona consumers, with any luck, will have access to a new installment loan financial product to help them meet emergencies.  Since the payday loan laws “sunset” several years ago, Arizona borrowers have had few choices to solve their short-term financial worries.

House Bill 2496 would allow people with poor credit ratings to borrow up to $2,500 a year at the low, low interest rate of 164.25 percent.

Here are some highlights from the new Arizona Bill 2496:

Defines a CALC loan plan as a written or electronic agreement in a record between a licensee and
a consumer establishing an open-end credit plan under which the licensee contemplates repeated
noncommercial loans for personal, family or household purposes that are all of the following:
a) unsecured by personal property or real estate.
b) without fixed maturities or limitation as to the length of term.
c) subject to prepayment in whole or in part at any time without charge or penalty

Stipulates that a person is engaged in the business of entering into CALC loan plans and making CALC loans if the person induces a consumer, while located in this state, to enter into a CALC loan plan or making a CALC loan in this state through the use of the internet, a fax, a telephone or another means.

How to Start Installment Loan Business

How to Start Installment Loan Business

Stipulates that this chapter does not prevent a licensee from conducting the business of entering into CALC loan plans and making CALC loans over the internet.

Fees 42. Allows a licensee to only charge and collect a daily transaction fee to defray the ordinary costs of opening, administering and terminating a CALC loan plan, including certain specified costs.

43. States that the daily transaction fee is not interest and may not exceed a daily rate of 0.45 percent of the outstanding principal balance.

44. Prohibits a licensee from entering into a CALC loan plan or making a CALC loan plan having an annual percentage rate greater than that set forth in federal law to a person who is either: a member of the United States Armed Forces who is on active duty, on active national Guard and reserve duty, or a dependent of one of these persons.

45. Prohibits a CALC loan plan from having an outstanding principal balance in excess of $2,500 at any time.

46. Requires a CALC loan plan to require a minimum payment on or before the due date of each billing cycle in an amount sufficient to reduce any outstanding principal balance by at least eight percent per month or an amount calculated to pay off the entire principal within one calendar year, whichever is greater.

47. Allows a licensee, if a consumer defaults under the terms of a CALC loan plan and the licensee refers the consumer’s account to an attorney, to: a) if allowed under the CALC loan plan, charge and collect from the consumer reasonable attorney fees; b) refer the consumer to an approved consumer credit counseling agency and offer concessions with regard to daily transaction fee, repayment schedule and other terms as agreed; and c) charge and collect interest following the default of the consumer or a judgment in favor of the licensee at a periodic interest rate not to exceed the United States prime rate plus 15 percent a year.

Ability to Repay

57. Requires a licensee to underwrite each CALC loan to determine a consumer’s ability and willingness to repay the CALC loan, before entering into a new CALC loan plan or increasing the credit limit of an existing CALC loan plan. 58. Requires a licensee to obtain information from the consumer relating to the consumer’s income and expenses and to validate a consumer’s supplied information using at least one consumer credit report. 59. Allows a licensee to validate a consumer’s supplied information using other reasonably reliable sources such as debt verification services, the consumer’s bank statements, tax returns, payroll information, benefits or child support statements or other information that is either provided by the consumer or is commercially available online.

63. Prohibits a consumer from having more than one CALC loan plan at any one time.

64. Allows the Superintendent to require licensees to confirm through the use of a state-approved database that a consumer does not have more than one outstanding CALC loan plan at any one time or that a CALC loan does not cause the CALC loan plan to exceed an outstanding principal balance in excess of $2,500.

65. Requires that the database: a) be capable of real-time queries; b) be selected by the Superintendent through an open bidding and review process; and c) have licensee-paid usage fees for the database and not have consumer-paid usage fees.

113.Allows a consumer, if a consumer access line of credit has accumulated a past-due balance but has not defaulted, once per year, to request, and the licensee shall approve, that the past-due balance be repaid on an interest-free balance in equal installments to be added to the minimum payment for the outstanding line.

114.Allows a consumer who has a past-due balance and who has not defaulted and a licensee to agree to other repayment options by mutual agreement.

115.Allows a consumer to request and a licensee to approve a lower pay-down rate or minimum payment, except that a minimum payment that would fail to reduce outstanding principal by at least two percent per billing cycle may not be approved.

House Bill 2496

19
Sep

Payday Loan Leads: Ads Better Not Appear on Kids Websites

“The case started when an investigator noticed a payday loan ad on a website designed for children while browsing from a computer used in a payday loan investigation. The website’s advertiser apparently knew the user had visited payday loan websites before.

A 1998 federal law – Children’s Online Privacy Protection Act – prohibits unauthorized collection of children’s personal information on websites directed at users under 13.

The New York attorney general’s office discovered websites for Mattel’s Barbie, Hot Wheels and American Girl; Viacom’s Nick Jr. and Nickelodeon; JumpStart’s Neopets; and Hasbro’s My Little Pony, Littlest Pet Shop and Nerf had payday loan advertisements appearing on them.

“Operation Child Tracker,” a two-year, first-of-its-kind investigation by the New York Attorney General’s office, discovered that websites operated by these companies were home to tracking technology that illegally enabled third-party vendors, such as marketers and advertising companies, to track children’s online activity in violation of COPPA.

How to start a payday loan business“Federal law demands that children are off-limits to the prying eyes of advertisers,” said Attorney General Schneiderman. “Operation Child Tracker revealed that some of our nation’s biggest companies failed to protect kids’ privacy and shield them from illegal online tracking. My office remains committed to protecting children online and will continue our investigation to hold accountable those who violate the law by tracking children.”

The Children’s Online Privacy Protection Act (COPPA)

In 1998, Congress enacted COPPA to protect the safety and privacy of young children online.  COPPA prohibits operators of certain websites from collecting, using, or disclosing personal information (e.g., first and last name, e-mail address) of children under the age of 13 without first obtaining a parent’s consent. The operators of websites directed to children under the age of 13 (a “child-directed website”) and the operators of websites that have actual knowledge that they are collecting personal information from a child under the age of 13 (collectively, “covered operators”) are subject to COPPA.

Companies Agree To Pay Penalties Totaling $835,000, Adopt Comprehensive Reforms To Protect Children From Improper Tracking

According to The Los Angeles Times, “The case started when an investigator noticed a payday loan ad on a website designed for children while browsing from a computer used in a payday loan investigation. The website’s advertiser apparently knew the user had visited payday loan websites before.

12
May

California Payday Loan Laws and Licensing

California Payday Loan Laws & Licensing

PAYDAY LOAN FREQUENTLY ASKED QUESTIONS

DO I NEED TO BE LICENSED TO OFFER DEFERRED DEPOSITS [PDL’s]?

Yes, if you are a person that offers, originates or makes a California payday loan called a deferred deposit transaction, arranges a deferred deposit for a deferred deposit originator, acts as an agent for a deferred deposit originator, or assists a deferred deposit originator in the origination of a deferred deposit is required to obtain a license from the Department of Business Oversight, person located in California, who plans to engage in the business of making Deferred Deposit transactions over the internet only to residents in other states, or person located outside of California who plans to engage in the business of making Deferred Deposit Transactions over the internet only to residents in California and to residents in other states.

HOW DO I APPLY FOR A CALIFORNIA DEFERRED DEPOSIT TRANSACTION LAW (CDDTL) LICENSE?

Persons that are licensed under the CDDTL California payday loan model may be an individual, corporation, a partnership, a limited liability company, a joint venture, an association, a joint stock company, a trust, an unincorporated organization, a government entity, or a political subdivision of a government entity. An application must be submitted for each location that the applicant intends to engage in the business of deferred deposit transactions. A licensee with one or more licensed locations may file a short form license application established by the Commissioner. Applications are processed in the order they are received.

The requirements for obtaining a California payday loan license are as follows:

For each California payday loan location, submit an application with the appropriate exhibits, an application fee of $200, and an investigation fee of $100. Fees are non-refundable. An application on a short form established by the Commissioner may be submitted for each additional location that the applicant intends to engage in the business of deferred deposit transactions. Short form applications for each additional location, including mobile units, must include an application fee of $200, and an investigation fee of $100.

Maintain a surety bond in the amount of $25,000 which must be in effect prior to the issuance of a license.

Submit financial statements prepared in accordance with Generally Accepted Accounting Principles that demonstrates that the applicant has a net worth of at least $25,000. After licensure, the licensee shall be required to maintain a net worth of at least $25,000 at all times.

The California payday loan application must include fingerprint information submitted by live scan and the cost of fingerprint processing for the following: The applicant; The general partners, officers, directors and persons owning or controlling, directly or indirectly, 10% or more of the outstanding equity interests of the applicant; and
Other key persons involved, such as managers/members, trustees, any other officers with direct responsibility for the conduct of applicant’s deferred deposit activity, and the persons who will be in charge of the place of business.
An application may be denied if any officer, director, general partner, or person owning or controlling, directly or indirectly, 10% or more of the outstanding interests or equity securities of the applicant has, within the last 10 years (A) been convicted of or pleaded nolo contendere to a crime, or (B) committed any act involving dishonesty, fraud, or deceit, if the crime or act is substantially related to the qualifications, functions, or duties of a person engaged in the business of deferred deposit transactions.

how to opene payday loan company

Start Payday Loan Business

[NOTE: for a complete, step-by-step Manual describing how to start and profit by lending money via payday loans and car title loans, go here: “How to Start a Payday Loan or Car Title Loan Company Successfully.”

California payday loan Application Forms and Notices

I AM PLANNING TO ENGAGE IN THE BUSINESS OF A DEFERED DEPOSIT ORIGINATOR. I CURRENTLY DO NOT HAVE ANY LICENSE OR PERMIT. WHERE DO I OBTAIN THE PERMITS OR LICENSES TO ENGAGE IN THE BUSINESS?

If you wish to engage in the business of deferred deposit California payday loan transactions you will need to have a license from the Department of Business Oversight.

WHAT ARE THE REQUIREMENTS TO OBTAIN A LICENSE TO ENGAGE IN THE BUSINESS OF DEFERRED DEPOSIT FROM THE DEPARTMENT OF BUSINESS OVERSIGHT?

You can view requirements and download forms here.

WHERE DO I OBTAIN AN APPLICATION FOR A LICENSE UNDER THE CALIFORNIA DEFERRED DEPOSIT TRANSACTION LAW? 

You may download the application forms through the Department’s website, visitng any of the Department’s office locations or by calling the Department’s Consumer Services Office at (866) 275-2677.

WHERE DO I OBTAIN FINGERPRINT LIVE SCAN FORMS?

The fingerprint live scan forms are available through the Department’s website at Request for Live Scan Service – Applicant Submission.

WHEN CAN THE CDDTL SHORT FORM APPLICATION FOR LICENSURE BE FILED?

A person applying for a license must first file the Department of Business Oversight’ “Application for A License Under the California Deferred Deposit Transaction Law.” Thereafter, the Short Form License Application may be filed by the same person seeking a license for additional locations.

WHERE DO I SEND THE COMPLETED LICENSE APPLICATION, INCLUDING FEES?

All application information should be submitted to the Department’s Los Angeles Office
Department of Corporation
320 West 4th Street, Suite 750
Los Angeles, CA 90013-2344

ARE THE LICENSEEES SUBJECT TO EXAMINATION BY THE DEPARTMENT OF BUSINESS OVERSIGHT?

Yes. The California Deferred Deposit Transaction Law provides that the Department may at any time, but not less than once every two years, investigate the business of deferred deposits, and examine the books, accounts, records and files of every licensee. The purpose of the regulatory examination is to determine compliance with the CDDTL and the rules and regulations established by the Commissioner. The licensee is required to allow the Department’s representatives to have free access to the offices and places of business, along with books, accounts, records, files, safes and vaults. Each licensee is required to pay for the costs of the regulatory examination.

ARE LICENSEEES ALLOWED TO STORE AND MAINTAIN THE BOOKS, RECORDS AND ACCOUNTS IN ELECTRONIC FORMAT?

Yes. The books, records and accounts may be retained and provided to the Commissioner in electronic format provided that the electronic records are maintained and provided in a format that allows the Commissioner complete access to all of the books, accounts and records. The electronic records must be maintained in a media that ensures reliable, credible, accurate and auditable records. The electronic records must be provided to the Commissioner in a software format that is acceptable to the Commissioner and allows Commissioner to download and print any or all of the records that are stored and maintained electronically. The licensee shall provide any and all records maintained in electronic format in printed form if the electronic records are not in a format that enables the Commissioner to determine if the licensee is complying with the CDDTL or rules there under.

DO I NEED TO NOTIFY THE DEPARTMENT OF BUSINESS OVERSIGHT IF I CHANGE THE ADDRESS OF A LICENSED LOCATION?

Yes. A licensee is required to notify the Department at least ten days prior to the change of an address for a licensed location. The Department will approve the change in location by issuing an amended license with the new address.

IS A LICENSEEE REQUIRED TO NOTIFY THE DEPARTMENT OF BUSINESS OVERSIGHT IF THERE ARE CHANGES IN THE APPLICATION AFTER THE LICENSE IS ISSUED?

Yes. The license issued under the CDDTL is not transferable or assignable. Generally, if there is a change in entity type, a new long form license application and new short form license applications for any additional locations would have to be filed for the new entity. A license issued to a partnership or limited partnership is not transferred or assigned by the death, withdrawal or admission of a partner, general partner or limited partner, unless the death, withdrawal, or admission dissolves the partnership to which the license was issued. If the change dissolves the partnership, a new long form license application and new short form license applications for any additional locations would have to be filed for the new partnership. A licensee is required to notify the Department of any change of its officers, directors or any persons named in the application within sixty days from the date of the change. The amendment to the original license application reflecting the change shall include the effective date of the change and the names of the persons involved in the change. The new persons are required, at a minimum, to submit Statement of Identity and Questionnaires and fingerprint information with the notification of the change.

HOW OFTEN DO I NEED TO RENEW THE LICENSE ISSUED BY THE DEPARTMENT OF BUSINESS OVERSIGHT FOR A DEFERRED DEPOSIT ORIGINATOR?
You do not need to renew the license issued to a Deferred Deposit Originator. The license shall remain in effect until surrendered, suspended or revoked.

HOW DO I SURRENDER MY LICENSE IF I AM PLANNING TO CEASE ENGAGING IN DEFERRED DEPOSIT TRANSACATION BUSINESS?

A licensee may apply to surrender a license by delivering to the Commissioner written notice of the intent to surrender the license. The application to surrender the license must be signed by an authorized representative of the licensee and include the original license.

WHAT IS THE AVERAGE TIME FOR PROCESSING A CDDTL LICENSE?

The average processing time for  CDDTL license applications is:   46 days for the first license applied for  (Long Form License Application) and 20 days to process applications for additional licensed  locations (short form license application).

Transacting Business as a Payday Lender
Yes. Each mobile unit conducting deferred deposit transactions must submit an application with the appropriate fees.

ARE THERE LIMITATIONS ON A DEFERRED DEPOSIT TRANSACTION?

Yes. The face amount of the customer’s personal check or the electronic equivalent of the customer’s personal check may not exceed $300 and the fee charged may not be more than 15% of the face amount of the check, except loans made to a military member (regular, reserve, member’s spouse and their dependents) should not exceed 36% APR.

ARE THERE LIMITATIONS ON THE FEES THAT MAY BE CHARGED IN RELATION TO A DEFERRED DEPOSIT TRANSACTION?

Yes. The fee may not exceed 15% of the face amount of the check. A single fee not to exceed $15 may be charged for a returned check. No additional fees may be added for late payments or returned checks, except loans made to a military member (regular, reserve, member’s spouse and their dependents) should not exceed 36% APR.

ARE THERE LIMITATIONS ON THE NUMBER OF DEFERRED DEPOSIT TRANSACTIONS A LICENSEE MAY MAKE TO A CUSTOMER IN A 12-MONTH PERIOD?

No. There are no limits on the number of deferred deposit transactions a licensee may make to a customer in a 12-month period. A licensee cannot make a new deferred deposit transaction during the period an earlier deferred deposit transaction is in effect for the same customer and the proceeds of a new deferred deposit transaction may not be used to pay off an existing deferred deposit transaction from the same licensee.

IS A LICENSEE ALLOWED TO MAKE A DEFERRED DEPOSIT TRANSACTION TO A CUSTOMER WITH AN EARLIER DEFFERED DEPOSIT TRANSACTION THAT IS IN EFFECT IF THE TOTAL OF THE EXISTING DEFERRED DEPOSIT TRANSACTION AND THE NEW DEFERRED DEPOSIT TRANSACTION IS LESS THAN THE MAXIMUM ALLOWED OF $300?

No. A licensee cannot enter into a deferred deposit transaction with a customer during the period an earlier deferred deposit transaction is in effect for the same customer, including transactions where the existing deferred deposit transaction and the new deferred deposit transaction does not exceed the maximum amount allowed of $300.

IS A LICENSEE ALLOWED TO MAKE A NEW DEFERRED DEPOSIT TRANSACTION TO A CUSTOMER THAT HAS AN EARLIER DEFERRED DEPOSIT TRANSACTION THAT IS IN EFFECT FROM ANOTHER LOCATION OF THE SAME LICENSEE?

No. licensees with multiple locations cannot enter into a deferred deposit transaction with a customer during the period an earlier deferred deposit transaction is in effect for the same customer at any of the licensee’s locations.

CAN A LICENSEE USE A CUSTOMER’S PERSONAL CHECK OR THE CUSTOMER’S ELECTRONIC EQUIVALENT OF A PERSONAL CHECK RECEIVED FROM A PREVIOUS DEFERRED DEPOSIT TRANSACTION FOR A NEW DEFERRED DEPOSIT TRANSACTION?

No. A licensee is not permitted to accept or use a customer’s personal check or a customer’s electronic equivalent of a personal check received from a previous deferred deposit transaction for a new deferred deposit transaction.

CAN A LICENSEE ACCEPT COLLATERAL IN CONJUNCTION WITH A DEFERRED DEPOSIT TRANSACTION?
No.
IS A LICENSEEE ALLOWED TO MAKE THE DEFERRED DEPOSIT TRANSACTION CONTINGENT ON THE PURCHASE OF OTHER SERVICES OR PRODUCTS?
No.

ARE THERE ANY SPECIAL REQUIREMENTS FOR A LICENSEEE THAT MAKES A DEFERRED DEPOSIT TRANSACTION TO A NON-ENGLISH SPEAKING PERSON?

Yes. The written agreement must be written in the same language principally used in the oral discussions or negotiations leading to the execution of the deferred deposit agreement and must be in at least 10-point bold type.

IS A LICENSEEE ALLOWED TO EXTEND THE DUE DATE OF AN OUTSTANDING DEFERRED DEPOSIT TRANSACTION OR ALLOW THE CUSTOMER TO MAKE PAYMENTS ON AN OUTSTANDING DEFERRED DEPOSIT TRANSACTION?

Yes, though the licensee is not required to extend the due date or enter into an agreement to allow the customer to make payments on an outstanding deferred deposit transaction.

WHAT ARE THE FEES A LICENSEEE MAY CHARGE IN CONNECTION WITH EXTENSIONS AND PAYMENT PLANS GRANTED FOR REPAYMENT OF OUTSTANDING DEFERRED DEPOSIT TRANSACTIONS?

A licensee may allow an extension of time to repay an outstanding deferred deposit transaction or a payment plan, but may not charge any additional fees or charges of any kind in conjunction with the extension or payment plan.

IS A LICENSEEE PERMITTED TO DEBIT A BORROWER’S BANK ACCOUNT ELECTRONICALLY USING ACH TRANSFERS ON MULTIPLE DAYS FOR VARYING AMOUNTS TO COLLECT A DELINQUENT ACCOUNT WITHOUT THE BORROWER’S AUTHORIZATION

No. The agreement or an addendum to the agreement must specify the days and amounts the licensee is authorized to debit the borrower’s bank account electronically using ACH transfers to collect delinquent accounts. Any addendums to the agreement authorizing the licensee to debit the borrower’s bank account electronically to collect overdue accounts must be in writing signed by the borrower, by fax with the borrower’s signature or electronically authorized by the borrower over the Internet. The written agreement should cover the manner in which a customer’s check will be deposited and the specific date of deposit. For example, when the licensee elects to deposit a personal check by electronic means, the written agreement should specify that the licensee electronically deposits the customer’s check and the specific date. If the licensee wishes to deposit the check either manually or electronically when there are insufficient funds in the customer’s account, the written agreement should also specify the method and date of depositing the check under those circumstances. The written agreement should cover the manner in which a customer’s check will be deposited and the specific date of deposit. For example, when the licensee elects to deposit a personal check by electronic means, the written agreement should specify that the licensee electronically deposits the customer’s check and the specific date. If the licensee wishes to deposit the check either manually or electronically when there are insufficient funds in the customer’s account, the written agreement should also specify the method and date of depositing the check under those circumstances.

CAN A CUSTOMER BE CRIMINALLY PROSECUTED FOR FAILING TO REPAY A DEFERRED DEPOSIT TRANSACTION?

No. A customer cannot be criminally prosecuted or threatened with criminal prosecution to collect a delinquent deferred deposit transaction.

CAN A CUSTOMER BE REQUIRED TO PAY TREBLE DAMAGES IF THE CHECK DOES NOT CLEAR?

No. A check that is being negotiated as part of a deferred deposit transaction is not subject to the provisions of Section 1719 of the Civil Code. No person shall be required to pay treble damages if the check does not clear.

IS A CUSTOMER REQUIRED TO PAY COURT COSTS AND FILING FEES FOR A SMALL CLAIMS COURT ACTION TAKEN BY A LICENSEEE TO COLLECT A DELINQUENT DEFERRED DEPOSIT TRANSACTION ACCOUNT?

The Small Claims Court Judge hearing the case will determine if court costs and filing fees will be awarded to the licensee. The Deferred Deposit Transaction Agreement may not contain any provisions that require the customer to pay court costs or filing fees in conjunction with an action taken by the licensee to collect a delinquent account.

WHO DO I CONTACT WITH QUESTIONS?
Questions are to be directed to the Department at 1-866-275-2677.

TO START A CALIFORNIA PAYDAY LOAN BUSINESS, CALL TRIHOUSE CONSULTING: 702-208-6736 jer@TrihouseConsulting.com

 

26
Oct

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.

08
Oct

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
    days;2
  • 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
    fees.
  • 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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