20
May

Payday Loans: Banks & Credit Unions Want a Piece Again

By: Jer – Trihouse. The payday loan industry took a huge hit in August 2013 as a result of the Obama administration’s ACH debacle via “Operation Choke Point.” Hundreds of lenders including tribes, state licensed and offshore lenders were forced to leave consumers high and dry without access to short-term emergency funds.

I’ll NEVER forget that day! I had arrived in Paris for a month’s holiday the prior day and suddenly I was inundated by my payday loan business partners, peers, competitors and friends with their tales of woe. Their ODFI’s and ACH processors were dropping them like flies. We had to scramble to collect on hundreds of millions of dollars in consumer loans! But how?

I must have spent 80 hours on Skype my first week in France in an attempt to solve our payment process and banking issues.

Eventually, we developed a plan and survived. Many of my friends did not.

Today, things are completely turned around for us. It’s back to business as usual. Banks, ACH processors, credit and debit card processing are relatively easy to secure. New lenders with creative loan products are entering our game daily. Installment loans, FinTech, P2P, marketplace lending, loan-by-phone… exciting times and tremendous opportunity!

As I pointed out in a previous article, Native American Tribes loaned $1B plus last year. One publicly traded company lent $500M in just one recent quarter while others report similar results. Meanwhile, thousands of brick-n-mortars continue to thrive in 33+ states and new lenders enter this space daily. “Pew estimates 12 million Americans take out payday loans each year, spending $9 billion on loan fees.” Add car title loans, installment loans, line-of-credit loans… And, let’s not forget: 53% of American households cannot get their hands on $400 in an emergency! Difficult to fathom but so true.

Why? Because consumers and SMB’s continue to seek loans at record rates. And, they are willing to pay 300%+ APR’s for the privilege. (NOTE: I rarely refer to APR’s but it seems appropriate here.)

So, it’s no surprise to me that the Wall Street Journal ran a piece with the headline:

“Banks Want a Piece of the Payday-Loan Pie”

“Pushed out of short-term loans by 2013 regulation, banks and credit unions hope for a comeback.”

This is great news for alternative financial lenders!

I welcome this development!!

With banks and credit unions (recall credit unions do not pay taxes) lobbying for less regulation and declawing the CFPB, our future is secured.

As WSJ reporter Yuka Hayashi writes, “Letting banks and credit unions offer small loans, proponents say, would help the millions of U.S. households that pay billions of dollars in fees each year to payday and auto-title lenders that often charge annual interest rates exceeding 300%.”

And, this movement by banks and CU’s clears the path for alternative finance lenders like us to continue to offer our consumers fast, easy, transparent loan products that solve our customers financial challenges. No bank or CU can beat us at our game! We are laser focused on our customers and their needs.

Honest reporters acknowledge (Lisa Servon, I’m thinking of you 🙂 that a visit to a payday loan store or website CLEARLY and CONSPICUOUSLY reveals EXACTLY what the fees are for a payday loan, an installment loan, a car title loan, a line-of-credit product…

Can ANY bank or credit union say the same thing about their fees? A RESOUNDING NO!

Our future, in spite of reports of our death being greatly exagerated, is certain!

Need help with your small dollar loan business? Click for help.

  • Credit card processing: push-to-fund processing
  • ACH services
  • Debit card
  • Check-21/RCC
  • Online or brick-n-mortar
  • Tribes, state-by-state, offshore