THE BLOG

08
Jan

How to Collect Your Money: Small Dollar Lending

Small Dollar Loan Collection Tips

Time to start making your collection calls. Yep, it’s a pain. Yep, we hate making these calls. But, you gotta do it DAILY! Every day rain or shine you gotta reach out to your borrowers and get your cash; or at least find out why they haven’t paid you AND when they will.

So… set up a schedule and get on the phone. It’s best to do what you hate the most FIRST; get it over with.

Mean-Payday-Loan-Boss

Mean-Payday-Loan-Boss

While we’re at it, ALWAYS have a checklist in front of you when you make your collection calls. Whether your calling a borrower about a payday loan, a car title loan, a signature loan… have your list WITH a picture of a really nasty Boss in front of  you. Why a nasty Boss? MOTIVATION to do the work!!

What’s on your COLLECTION CHECKLIST? Among other things:

  • Notes about your previous conversations with your delinquent Borrower. [What did she promise you during your last conversation?]
  • ASK FOR YOUR MONEY! [Make this request simple, easily understood and firm. Common sense, right?]
  • Why isn’t she paying you as promised? [Keep digging until you get the REAL answer! This will help provide you with insight for your next call with her and get you insight as to the likelihood of her paying you next go around. No payment? Slow payment?]
  • Push hard for full payment today – right now – or at least a significant partial payment. [Waive late fees if she pays today? Reduce the loan principal? Get creative!] 
  • Review and summarize THIS COLLECTION CALL with your borrower while she is on the phone. [Confirm everything said. Any promises made by you or your borrower.]
  • Verify her contact information. [Phones, email, Facebook, Twitter, text, employer… In an ideal world you get them all 🙂 
  • Followup your conversation with a text and an email.
  • Enter NOTES about this conversation into your Loan Management Software program. [Have these notes available for your next scheduled call with her!]
  • Finally, do some role playing. [Get on the phone with a fellow payday loan, title loan… employee and PRACTICE these collection calls. Take turns playing the role of a deadbeat small dollar loan borrower  🙂 
16
Dec

Why Consumers Borrow at 100%+ APR’s: Signature & Payday Loan Industry Survey Results

By: Jer and Miro. Payday Loan Industry Survey Results available.

Payday loan entrepreneur, do you want to know who your customer is? Still trying to figure out who uses payday loans, why they use them and what they really want?

A most interesting payday loan survey is now available! It was sponsored by the Government of Alberta, Canada. It reveals some great insight into the wants and needs of the following respondents to the survey:

  • individual consumers and consumer organizations;
  • payday loan businesses;
  • credit counseling agencies;
  • “other stakeholders.”
  • (Our Thoughts: Don’t let the fact that this survey was conducted in Alberta, Canada cause you to dismiss it as having little relevance to your situation. We have access to multiple studies in various locales and the conclusions are very much the same. Micro-lending consumers are similar throughout the world. And micro-lending products, like the payday loan, car title loans, and pawn services will continue to be in great demand as long as consumers can breathe. Government cannot legislate our product out of existence nor will the so-called “consumer protectionists” ever reach into their own pockets to help an anonymous consumer in need!)

 

The firm hired to perform the survey listed the following conclusions. These HIGHLIGHTS are insightful as there are some surprising conclusions to be drawn from their results.

SURVEY RESULTS

User Satisfaction with Payday Loan Lenders
The majority of payday loan users are satisfied with their most recent payday loan experience,
including 49% who are very satisfied. Users are highly satisfied with the rates and terms being
explained to them (82%) but their satisfaction with the cost of the payday loan is substantially lower (54%).

(Our Thoughts: Why can’t the so-called consumer protectionists who continually attack the payday loan industry GET THIS THROUGH THEIR THICK SKULLS!)

Motivations for Using Payday Loans
Users cite a range of situations of great need or emergency situations in general, as their reasons for needing payday loans. The most frequently mentioned reason for needing a payday loan is to pay bills or prevent overdue bills (40%).

When asked for top of mind reasons for choosing a payday loan instead of another form of lending, users say it is a last resort (41%). Convenience factors represent other motivators for obtaining payday loans; for example, that it is easy to apply (12%), faster to get the loan (10%) and the location is convenient (6%). However, when asked to rate the importance of a number of specific aspects of payday loans, users rate speed, ability to borrow a small amount, hours of operation, convenient location, and ease of applying for the loan substantially more important (87-92% important ratings) than being the only place they are confident to apply (61%) or not being approved at other places (44%).

(A number of other studies of our industry have consistently pointed out the same thing; IT”S ABOUT CONVENIENCE!)

STIGMA
There is a degree of stigma associated with payday loans, with 25% of users agreeing they would be concerned about being seen at a payday loan store.

INTERNET PAYDAY LOANS
A low percentage of users obtain their loans through the Internet (3%). Almost all users obtain their loans from a payday loan store, usually somewhat or very close to their home. Most users (82%) have Internet access, at about the same incidence as the general population (84%). NOTE: In the USA, it’s 35% Internet & 65% storefront lending.

Remember – this is Canada. (OUR THOUGHTS: “Only 3% of payday loan users have used the Internet to get a payday loan and yet 25% of users admit to being concerned about being seen in a payday loan store.” We know from our own operations that 48% of our borrowers apply via our websites!  Canada must be different? This is further evidence that those of us offering payday loans should implement the Internet for our product offerings and, we suspect, strive harder to deliver peace of mind to those payday loan consumers contemplating the use of the Internet to get a loan.)

FOCUS GROUPS

Users believe that payday loans serve a need because they allow for emergency loans to consumers who cannot obtain alternative financing.
However, users and non-users alike are in favor of regulating the following areas to eliminate unfair or predatory practices:
  1. limit to the allowable cost of borrowing and, to a lesser extent,
  2. making agreements easier to understand,
  3. allowing a “cooling off” period during which the loan can be cancelled without penalty,
  4. allowing the borrower to repay only the principal amount borrowed if the business violates the regulations,
  5. the practice of “discounting,” and
  6. rollover loans.
Payday loan users acknowledged that they are under financial hardship and have poor budgeting skills. They also appeared to have little comprehension about the actual cost of borrowing from payday lenders when all of the rates and fees are converted to an annualized percentage rate.

Our Sponsors
We have worked with a great number of Vendors and Suppliers offering superior products and services. If you’re in need of legal expertise, collections help, software for your payday loan, check cashing or car title loan business, consumer data, scrap gold buying training, or any other related services, go here for help: Vendors & Suppliers

Attention Vendors! Your company is NOT LISTED here? Get listed here as well!  TrihouseConsulting@gmail.com
Characteristics of Payday Loan Users
The payday loan users participating in the survey demonstrated a higher than average likelihood to be between 25 and 35 years of age (35% vs. 18% of the Alberta general population) and a lower likelihood of being under 25 (6% vs. 14%) or 65 years and over (5% vs. 14%).
Reflecting their ages, 46% of users report having children in their household under 18 years of age, versus 39% in the general population. Users’ annual household incomes are below average, with 37% having incomes between $20,000 and $49,999 per year versus 23% for the general population.
Use of Payday Loans
The study estimates that 3% of Albertans have ever taken a payday loan. Another study provided an estimate of 6% based on a sample size of 900 respondents (+1.6 percentage points, 19 times out of 20).(Thus, the potential for HUGE growth remains for the small dollar loan product.)The vast majority (93%) of non-users rate themselves unlikely to consider a payday loan. Supporting this view, most Albertans would not need a payday loan if they needed $300 in cash, as they tend to have access to funds from their bank accounts, relatives, lines of credit, overdraft protection and cash advances.Non users are more confident than users about being able to obtain the funds they need through their bank account or through a line of credit, while users and non users demonstrate similar levels of confidence about getting the required funds from other sources.Albertans who have had a payday loan before tend to be repeat users (79%), using payday loans an average of four times in the past. However, only 22% anticipate using payday loans again in the future.

Users perceive that they pay their loans off as soon as they are due (80%) and only use payday loans as a last resort (62%). Some users see themselves using payday loans at certain times of year (20%) and 10% use payday loans as part of their regular banking.

Payday loans most frequently involve obtaining between $200 and $499 (52% of users’ most recent loan value), and the amount is almost always under $1,000 (88%).

Payday Loan Agreements
While almost all payday loan users (92%) report having received a copy of their payday loan agreement, only 66% read the loan agreement before signing.

(We would bet the percentage of payday loan consumers who actually read their contract EXCEEDS those home buyers who read their loan new documents!)

MAXIMUM RATES

Consumers
Most of the consumers and their advocates said they would prefer, for simplicity’s sake, to see the maximum rate set as a percentage or dollar amount of the loan. One exception is a senior citizens’ association. This association would like to see the government set a limit of $15 per $100 on the first $300 of the loan, $10 per $100 on the next $500 and $7.50 for any amount above that.

Credit counselling agencies are also in favor of a tiered system. “These loan schemes take advantage of those least able to afford it,” says an outreach program for street people. “If indeed the service is required, then it needs to be better controlled – it is a circle whereby one never gets the loan paid off.”

How to start a loan company

How to start a loan company

The Industry
Most payday loan businesses that responded to the public consultation are in favor of a regulated maximum rate.

One payday lender says it opposes interest and fee limits because the current level of competition in the market is healthy and the “normal range” of rates charged in Alberta is consistent with those charged in other provinces. “We believe that a market-based approach to rate-setting is the most effective way of setting rate caps.”

Another industry stakeholder did not say in the discussion paper what rate it would like to see the maximum set at, it charges interest and fees of as high as $41.50 per $100 based on information received by regulators or disclosed in writing on disclosure statements to borrowers. An Edmonton television journalist posing as a first time borrower reported he was charged $52.70 per $100.
[Learn how to make money lending money to the masses! Your inventory? Cash; not flowers that wilt, fruit and vegetables that rot, merchandise that goes out of style… MONEY! Visit PaydayLoanUniversity.com for details. Start a Loan Machine! We operate “Boot Camps” as well.]

The stakeholder would like to see the government set a maximum fee as a percentage of the loan, i.e.: $23 per $100 lent. While it does not disclose what rate cap it would like to see set, the $23 figure is consistent with figures it has said publicly that it would like to see charged. Several small payday lenders said they would like to see the maximum set between $30 and $35.

The payday loan business respondents are unanimous in their desire for some form of industry regulation, and almost universally in favor of creating this with federally approved legislation. The sole exception is one payday lender in a small Alberta city that prefers regulation without federally approved legislation.

Comments? Questions? Help? Suggestions?
Learn More at: Payday Loan University
12
Dec

CFPB: Colossal Upheaval Equals Tremendous Uplift in Payday Loan Industry

FLASH: Massive Upheaval at CFPB & the Monumental Future for the Payday Loan Industry

Jer Ayles

Jer Ayles

By: Jer Ayles. You’re aware of the dark cloud hanging over the payday loan industry since 2013

It was a BIG, REPULSIVE, FRIGHTFUL, NASTY cloud; a visible, billowing, dark mass of vapor hanging over the small dollar loan industry. [Think Elizabeth Warren.]

This cloud was given a name.

We know this cloud as “The CFPB” or “EW” for short.

“The Consumer Financial Protection Board.”

Well, guess what dear reader?

This blood sucking, murky, overcast, confused muddle IS GONE!

POOF!!

Rainbows, opportunity, sunshine and smiles all around!

A shindig for money lenders and consumers begins today!

As lenders, we can get back to our business of lending money to the masses enabling our clients to solve their financial challenges; fix their car, buy that refrigerator, get their prescriptions, invest in their school books and generally just get on with living.

President Trump appointed Mick Mulvaney as the new director of the CFPB.

The mission given to Director Mulvaney by President Trump? “TO FIX IT! To protect people without trampling on capitalism.” Without choking off access to financial services. Folks in the lower end of the middle classes…”

Director Mulvaney’s first words? “Regulators must protect people without choking lending. I won’t set the CFPB agency on fire, but it will change.”

Director Mulvaney added, “Anybody who thinks that the Trump administration CFPB will be the same as an Obama administration CFPB is simply being naïve.”

Both Director Mulvaney and President Trump “felt the CFPB under the previous administration had GONE TOO FAR…”

Mick Mulvaney, once called the Consumer Financial Protection Bureau the “worst kind” of government entity, vowed to keep the agency open while making changes that protect people without choking off capitalism.

“Elections have consequences at every agency, and that includes the CFPB,” Mulvaney said.

“Things are going to be different,” Mulvaney said.“I consider the CFPB to be part of the executive branch of government. That means that it is charged with executing the laws.”

All I can say Dear Reader is HALLELUJAH!!!!!!!!!!!!!!!

Here’s a link to Director Mulvaney speaking before reporters: LINK

Recommended Action: Got a question? Idea? Need help? Want to make money lending to the masses? Reach out: Jer@TrihouseConsulting.com or check out our “Resources” page.

 

06
Oct

CFPB Finally Issues New PDL, Title… Rules

[If you’re not a regular subscriber to our free small dollar loan Newsletter, be sure to signup.]

We appreciate hearing from you. Let us know if you ever have any questions: TrihouseConsulting@gmail.com

SUMMARY: The Bureau of Consumer Financial Protection (Bureau or CFPB) is issuing this final rule to establish 12 CFR 1041, which creates consumer protections for certain consumer credit products, and the official interpretations to the rule.
First, the rule identifies it as an unfair and abusive practice for a lender to make covered short-term or longer-term balloon-payment loans, including payday and vehicle title loans, without reasonably determining that consumers have the ability to repay the loans according to their terms.
The rule exempts certain loans from the underwriting criteria prescribed in the rule if they have specific consumer protections.
Second, for the same set of loans along with certain other high-cost longer-term loans, the rule identifies it as an unfair and abusive practice to make attempts to withdraw payment from consumers’ accounts after two consecutive payment attempts have failed, unless the consumer provides a new and specific authorization to do so.
Finally, the rule prescribes notices to consumers before attempting to withdraw payments from their account, as well as processes and criteria for registration of information systems, for requirements to furnish and obtain information from them, and for compliance programs and record retention.
The rule prohibits 2 evasions and operates as a floor leaving State and local jurisdictions to adopt further regulatory measures (whether a usury limit or other protections) as appropriate to protect consumers.
201710_cfpb_final-rule_payday-loans-rule

 

 

25
Sep

How to Calculate Installment & Payday Loan Annual Percentage Rate

Are you calculating the APR you charge your installment loan, car title loan and payday loan borrowers correctly?

Does your installment, payday and car title loan loan management software [LMS] correctly calculate the annual percentage rate (APR) on your loan contracts? I HIGHLY RECOMMEND you double check your APR calculations!

Here’s a free APR tool provided by the Office of the Comptroller of the Currency! Download it free here: APR Calculator

How to Claculate Loan APR: payday. installment & car title lenders

1: How to Claculate Loan APR: payday. installment & car title lenders

How to Claculate Loan APR: payday. installment & car title lenders

2: How to Claculate Loan APR: payday. installment & car title lenders

How to Claculate Loan APR: payday. installment & car title lenders

3: How to Claculate Loan APR: payday. installment & car title lenders

How to Claculate Loan APR: payday. installment & car title lenders

4: How to Claculate Loan APR: payday. installment & car title lenders

 

How to Claculate Loan APR: payday. installment & car title lenders

5: How to Claculate Loan APR: payday. installment & car title lenders

Get the facts. 400+ page “How to Start a Payday Loan, Car Title Loan or Installment Loan Business.”

We cover it all. Here’s a link to the Table of Contents. Link

How to Start a Loan Business

How to Start a Loan Business

13
Sep

Seed/Angel Funding with Tribe Lending Enterprise [TLE] & Experienced Servicer

The Opportunity:

Seed/Angel Funding with Tribe Lending Enterprise [TLE] & Experienced Servicer

A highly experienced Team of two founders & a TLE are launching a tribal online loan portfolio in the USA.

FOUNDERS’ DETAILS:

  • Founders’ contribute $1.1M cash to this launch
  • Founders’ contribute their lead aggregator company having generated 500K sub-prime consumer leads/month
  • This is not their first rodeo
  • U.S. based Team
  • Tribe lending model with a multi-pay installment loan product in 45 states.
  • Founder(s) previously successfully launched and exited tribe online loan portfolio
  • Founder(s) previously launched a highly successful online loan platform/portfolio in the most competitive, complicated state in the USA
  • Founder(s) previously serviced $20M sub-prime loan portfolio and 40K loans
  • Founders’ are family oriented – obligations, dependents, motivated, strong willed, driven, impeccable credentials… [I always favor these conditions when I   collaborate.]
  • Founders’ know their loan product KPI’s. Realistic. Experienced. Well versed in Cost per Funded Loan, First Time Defaults, Customer Acquisition Costs, Lead   metrics/costs…
  • Founders’ loan management software platform provides investors with 100% transparency hourly, daily, weekly, monthly… access to all accounting, reports…
  • In-house call center with highly experienced call center operations manager on Team
  • Tribe [TLE] Marketing/Servicing agreement in place with a large, sophisticated TLE – several $10M/$30M+ portfolios.
  • Supremely customer focused loan product offering financial literacy and credit building
  • ACH, bank accounts, CRA’s, EIN, lead generation… in place.
  • Founders have commissioned compliance officer, TLE employee(s), call center, accounting…

Investor(s)

  • Provide $3M to be deployed year 1
  • Interest rate for investors = 15% to 24% paid quarterly
  • 15%  to  50% equity to investors
  • Investor funds to be returned year 5
  • End of year 5, Investor return is $7.4M on $3M investment plus investor maintains their negotiated 15% – 50% equity in the enterprise.
  • OBVIOUSLY NO GUARANTEES:
    • Conservative performance estimates!
    • Year 3 = 80% return on loan portfolio
    • Year 4 = 100%
    • Year 5 = 125%
    • Year 5 Stabilize new investment money inflow = annuity of $750K/year

As they say, “Your results may differ.”

Exit strategy: maintain the portfolio as an “annuity” [estimated at $938K/year] or sell the loan portfolio for 2.2X.

NEXT STEP?
• Email your contact information to: TrihouseConsulting@Gmail.com
• Conference call(s)
• Meet the Founders
• Fall in love
• Nail down a Term Sheet.

Jer@TrihouseConsulting.com 702-208-6736 Cell
Knowledge Store: Tribe & State-by-State Licensing Models
http://www.AutomobilePawn.com Start a Title Loan Biz
http://www.PaydayLoanIndustryBlog.com
http://www.PaydayLoanUniversity.com/ Start a Loan Biz
http://www.eCheckSystem.com ACH, ICL, Debit/Credit card

08
Sep

CFPB vs Great Plains Lending & Plain Green: Tribe Payday Loans

Several years ago, before the Wall Street Journal reached out to me for my thoughts regarding tribal lending, I was having lunch in Newport Beach with a friend – I’ll call him Bob – who owned 61 brick-n-mortar payday loan stores in 4 states. As we were about to eat, I got a call from an investor requesting my help in partnering with a federally recognized Native American Tribe. The caller and I discussed the project briefly on the phone and I suggested I call her back later. I got off my phone and Bob went-off on me! He screamed and yelled something about all the years and money he had invested in securing state licensing and store leases and now these Indian tribes “are going to crush him!”

A few years have passed since this incident. Bob is still going strong BUT city ordinance and state licensing issues have caused him a LOT of grief. And Bob is like a LOT of operators in the payday loan space! He’s cunning, hard working and adaptive. Bob is still my friend  😎

Whatever role you play in the small dollar-payday-installment loan space, the Tribal online lending model has to be of interest to you.

Are Tribal Lending Enterprises (TLE’s) subject to the CID’s [civil investigative demands] issued by the CFPB?

Are Tribal lenders taking market share away from you?

Are your customers receiving direct mail offers from Tribes that compete with your state licensed loan business?

Are you a lead aggregator or lead generator selling leads to Tribal lenders?

Perhaps you’re a loan management software company with Tribal lender clients?

Seems to me about HALF my readers are ACH providers  😳 Most of you would not be too comfortable dealing with a CID.

Maybe you’re an investor, a lawyer, an SEO/SEM provider?

The Tribal online lending business model continues to impact the payday loan – installment loan industry in unimaginable ways! Tribes are making serious attempts to improve their economic situation while state licensed lenders fight them tooth and nail. (Disclosure: I have my feet – read MONEY – at work in both camps.)

You may think it’s easy for a Tribe to simply form a TLE and start lending via the Internet. WRONG! It requires MONEY and KNOWLEDGE. The majority of Indian Country is located in some far off, forgotten hinterland with zero access to capital and operational skills. Not many Tribal members receive a stipend from a successful Casino. Tribes face monumental barriers to entry.

So… down below here, is a PDF for your enjoyment.

Whatever role you play, you should sit back on a warm, dry Sunday morning and review this “PETITION FOR A WRIT OF CERTIORARI by NEAL KUMAR KATYAL (Counsel of Record)

In The Supreme Court of the United States
_________
GREAT PLAINS LENDING, LLC,
and PLAIN GREEN, LLC,
Petitioners,
v.
CONSUMER FINANCIAL PROTECTION BUREAU,
Respondent. 

71-8-cert_petition

And if you need superior counsel or advice regarding how to make money by lending money, reach out to me: Jer@TrihouseConsulting.com

Payday, Small Business & Installment Loan Biz

Payday, Small Business & Installment Loan Biz

 

07
Sep

Serious Trouble for a PDL_Lead_Aggregator Again: Tribal Sovereign Model Attacked?

Major Payday Loan Lead Aggregator in Trouble Again

CONSUMER FINANCIAL PROTECTION BUREAU TAKES ACTION AGAINST ZERO PARALLEL FOR STEERING CONSUMERS TOWARD BAD DEALS
Bureau Orders Zero Parallel and Its Owner to Pay $350,000 and Stop Their Abusive Practices

[Again, thanks for being a loyal subscriber! Send thoughts, comments, questions to: Jer Trihouse]

1st they were T3Leads.

Now, they’re Zero Parallel

Our industry simply cannot tolerate “cowboys.” On the other hand, the CFPB made charges against Zero Parallel for:

There is no need to “play” on the fringes! DISCLOSE EVERYTHING and stay out of trouble! The millions of consumers and small businesses reaching out for MONEY are not shopping rates. They simply want a fast, easy, PRIVATE transaction.

 

So, the big, bad CFPB with their unlimited budget focuses on Zero Parallel! Why? Because of Item #17 above? Could this really be an attack on the tribe sovereign model? Is it cheaper for Zero Parallel to simply payoff the government hacks at the CFPB rather than enlist expensive legal help? Shouldn’t the tribe payday loan association get involved? In an effort to protect their interests? Perhaps Allen Parker over at Consultants4Tribes.com will share his take on this!

 

Zero Parallel admitted to no wrongdoing. And I have not been in contact with Davit lately regarding this CFPB matter. But, I do know what happened to Blue Global; another lead generator/aggregator! $110M fine… bankruptcy…

 

PayPal invested in Lendup. Lendup funds small dollar loans to consumers. Why fund Lendup? PalPal continues to look for ways to make money. They decided that credit and lending is the way to make serious money!

 

Enova lends nearly $300M per quarter in small dollar loans.

 

Uplift, a very new lender founded by the guy who was thrown out of Lending Club, already initiated $1B dollars in small dollar loans.

 

Prodigy Finance: Raised $240M in equity and debt. They’re a student online lender. They focus on students paying $40K year to go to school. Borrow $$ against their future earning/career. Prodigy has $40M in equity and $200M in debt financing available.

 

I can name another 100+ lenders that continue to earn inordinate profits and raise millions by lending small dollar loans of $300 to $1000 and more to “average” consumers throughout the world.

 

So why do a few knuckleheads in our lending vertical DO STUPID STUFF? There is no need. Lenders can DISCLOSE EVERYTHING and still make money!

 

I can tell you there are several VERY SMART, EXPERIENCED small dollar loan operators – entrepreneurs having SERIOUS operations experience – ready, willing and able to take on these inefficient behemoths and achieve SERIOUS ROI’s for their investors. I’m talking about hybrid debt and equity deals for investors in search of double digit annual returns combined with equity in multi-million dollar loan portfolios! [You want an intro? Reach out: TrihouseConsulting@Gmail.com ]

 

“The Consumer Financial Protection Bureau (CFPB) took action against an online lead aggregator for steering consumers toward lenders who offered illegal or unlicensed loans that were void in the consumer’s state.”

 

“Zero Parallel, LLC sold consumers’ payday and installment loan applications to lenders it knew were likely to make void loans that the lenders had no legal right to collect.”

 

The CFPB also submitted a proposed order in a separate case that would resolve a pending lawsuit against Zero Parallel’s owner, Davit Gasparyan, for engaging in similarly illegal conduct at his prior company, T3Leads.

 

The CFPB ordered Zero Parallel to end its illegal conduct and pay a $100,000 penalty. The proposed order against Gasparyan would prohibit him from engaging in the same abusive practice and require him to pay a $250,000 penalty.

 

“Zero Parallel steered consumers toward payday and installment loans that were a bad deal,” said CFPB Director Richard Cordray. “We’re ordering Zero Parallel and its owner Davit Gasparyan to pay $350,000 and to stop these illegal abusive practices.”

 

Zero Parallel, a lead aggregator, is based in Glendale, Calif. Lead aggregators buy consumer information—called leads—from lead generators who operate websites that market payday and installment loans. Lead aggregators sell those leads to purchasers, typically payday or installment lenders.

 

Consumers who applied for loans through Zero Parallel’s network had no control over which lenders received their applications. Zero Parallel regularly sold leads for consumers located in states where the resulting loan was void.

 

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB can take action against institutions or individuals engaged in or substantially assisting unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws.

 

The CFPB found that Zero Parallel committed an abusive practice by selling loan applications to lenders in a manner that prevented consumers from understanding the risks, costs, or conditions of the loans they were offered, and the order entered today puts a stop to it. Specifically, the CFPB’s consent order requires Zero Parallel to:

  • Ensure loans resulting from applications it sells are not void: Zero Parallel must undertake reasonable efforts to ensure that loan applications it sells do not result in consumer loans that are void under the laws of the consumer’s state of residence.
  • Pay a $100,000 civil money penalty: Zero Parallel must pay $100,000 to the Consumer Bureau’s Civil Penalty Fund.

Davit Gasparyan is Zero Parallel’s president and primary owner. The CFPB previously sued Gasparyan over his involvement with another lead aggregator, T3Leads. In that case, the CFPB today submitted a proposed order, which, if approved, would resolve its lawsuit against Gasparyan.

 

If entered by the court, the proposed order against Gasparyan for his T3Leads-related actions would require him and others under his direction to:

  • Ensure loans resulting from applications he sells are not void: Gasparyan must undertake reasonable efforts, including verifying required licenses for his purchasers, to ensure that loan applications he sells do not result in consumer loans that are void under the laws of the consumer’s state of residence.
  • Ensure that lead generators do not deceive consumers: Gasparyan must not solicit or receive loan applications through any means that uses misleading, inaccurate, or false statements. Furthermore, he must review the content of lead generators’ advertising before receiving loan applications to ensure that it does not contain misleading, inaccurate, or false statements and that the lead generators disclose to consumers how their loan applications will be conveyed to others.
  • Pay a $250,000 civil money penalty: Gasparyan must pay $250,000 to the Consumer Bureau’s Civil Penalty Fund.

So… AGAIN: The CFPB states, “Ensure loans resulting from applications Zero Parallel sells are not void: Gasparyan must undertake reasonable efforts, including verifying required licenses for his purchasers, to ensure that loan applications he sells do not result in consumer loans that are void under the laws of the consumer’s state of residence. Does the CFPB THINK they have regulatory power over federally recognized, sovereign, Native American Indian Tribes? No doubt, the CFPB will answer in the affirmative! 

Jer@TrihouseConsulting.com 702-208-6736 Cell
Knowledge Store: Tribe & State-by-State Licensing Models
http://www.PaydayLoanUniversity.com/ Start a PDL or Title Loan Biz
http://www.eCheckSystem.com ACH, ICL, Debit/Credit card for tribes and State Licensed Lenders

05
Sep

How to Start a Payday Loan Business

What do you need to start a payday loan business?

Equipment and software?

It’s ALL in the Manual. But, here’s a summary of the basics:

Are all of these payday loan startup assets required? I’ve witnessed entrepreneurs begin with less…

  • Business entity: Corporation, LLC, DBA…
  • Accountant
  • Lawyer
  • Phone
  • Computer
  • Laser printer
  • Fax  machine
  • Copier machine
  • Internet
  • In-store security system
  • Sign(s),
  • Either loan management software (LMS) or, at a minimum, Excel (not recommended).
  • Email ability plus build a customer email list (We use Aweber)
  • Text ability
  • Domain Name (Always use a .com)
  • Website
  • Website hosting account. (Start with Bluehost or Hostgator)
  • Business plan
  • Bank account
  • Consumer loan contract
  • Consumer Disclosure statement
  • Fee schedule for website and wall in your store
  • QuickBooks,
  • Consumer privacy policy
  • Business name
  • Logo
  • Marketing materials; POS supplies
  • Social media accounts
  • SOP Manual (Standard Operating Procedures Manual
  • Desk, chairs, etc.
  • Direct mail marketing IP
  • Business cards
  • Collection letter templates for drip campaign
  • Thorough understanding of your appropriate laws, rules, licensing requirements
  • Attend trade group conferences
  • When appropriate, setup accounts with 3rd party vendors (CRA: Credit Reporting Agencies     for example)
  • Join your local charitable community organizations. Build a list…
  • Car wrap for local marketing
  • Employ Enterprise Rent a Car marketing model to local businesses
  • Craigs List account
  • Safe, vault; safe keeping cash
  • File cabinet
  • Copy of The E-Myth (Read it!)
  • Notice of Declination template
  • Copies of all the Exhibits, Check Lists and Documents in our Manual for running your loan business day-to-day
  • Caller ID
  • APR calculator/formula
  • Carry out the research procedures explained in our Manual
  • Voice Synthesizer app

19
Aug

What’s a 36% APR Look Like to a Payday Loan Lender?

At first glance, a 36% maximum interest rate on a consumer loan appears to make a great deal of sense. After all, banks and credit unions are paying less than 1% on savings accounts. That equates to $100 in the bank for a year earns $36; $3 per month. No biggie. That barely pays for a family to eat at Kentucky Fried Chicken once/year.

South Dakota, Iowa, Kentucky, Arkansas, the military and a few other states, have passed legislation that enforces a maximum 36% APR on consumer loans.

What’s that look like in the real world? A 36 percent annualized rate offers lenders just $1.38 for every $100 they lend for two weeks. $1.38!

Now I’m not referring to consumers with 780+ FICO scores. Payday loan borrowers have either very poor or non-existant FICO scores. And their employment histories are “sketchy” to say the least.

When a payday loan lender funds a loan to the typical payday loan borrower, chances are 25%+ that this PDL consumer will not make ONE SINGLE PAYMENT!

That’s right! 1st-time defaults for payday loan borrowers typically exceed 25%!

What lender in their right mind would take a chance lending money to consumers having “thin” or non-existant credit files, jobs with Uber, Del Taco – name your poison – for $1.38 BEFORE paying their rent, payroll, store lease, insurance, phones, taxes, CRA (credit reporting agency), marketing costs…? NONE!

So… what’s a world without payday loan products look like? A WORLD OF NSF’s! Non-sufficient funds fees charged by banks and credit unions. A PERFECT WORLD FOR PAYDAY LOAN COMPETITORS!

“Follow the Money!” Who is really behind the anti-payday loan rhetoric? Bankers. Credit Unions. The competition…

According to the South Dakota Attorney General, the 36 percent interest rate cap does not apply to the following lenders:

  • State and national banks
  • Bank holding companies
  • Other federally insured financial institutions
  • State chartered trust companies
  • Businesses that provide financing for goods and services that they sell

Contributors to the fight against South Dakota payday loan lenders included Sioux Falls Federal Credit Union!

The CFPB has stated that it will interpret bank NSF overdrafts as short-term lending. Great! Banks and credit unions should be forced to disclose NSF fees as an APR. We are talking 1500% APR’s!!

Overdrafts are short-term loans. At least that is how 60% of American households treat them. However, because banks call NSF’s “fees” instead of interest, they get away with huge profits and zero disclosure.

TO BE CLEAR, I don’t care if they charge $35 for a single NSF. BUT I DO WANT THEM TO BE FORCED TO CLEARLY DISCLOSE THIS TO CONSUMERS!

According to a study by Magnify Money, a simple $100 overdraft with Citizens Bank for 10 days would cost a consumer $83.93! Is it any wonder this bank wants to outlaw payday loan products? A cheaper loan product?

Bottom line? FOLLOW THE MONEY! Understand that more consumer choices = lower fees and multiple options for solving temporary financial challenges. Short-sided “consumer advocates” usually have an agenda; they are not always looking out for consumers. You must dig a little deeper to fathom what their REAL goals are!

Which brings up my agenda; I’m a capitalist! And I’m not ashamed to be one. You should be one as well. Make a LOT of $$ and spend it the way YOU choose to: not “Big Brother.” You want to build shelter for kids? Feed the poor? DO IT! YOUR WAY!!

Look no further than Cuba, Costa Rica, Argentina… for examples of “big Brother” gone wild.

The Business of Lending Money to Make Money. It’s all right here: “The Manual.” Invest in it. Read it. Read it again. Study it. Then, BEGIN!

Question? Comment? Hate me? Jer@PaydayLoanUniversity.com 702-208-6736 PDT

How to Start Installment Loan Business

How to Start Installment Loan Business