Texas Payday Loans

How Payday Lenders Use Credit Access Businesses to Offer Loans exceeding Texas’s 10% Interest Cap.

By: Jer at Trihouse Consulting. Article 16, Section 11 of the Texas Constitution imposes a 10 % cap on the amount of interest that can be charged on personal loans. What’s so amazing is that it’s estimated that the state of Texas is responsible for more than 60% of the nationwide annual profits flowing to the payday loan and car title industries.

How? Credit Access Businesses (CAB’s) and Credit Services Businesses (CSO’s). Texas regulators allows lenders to incorporate their storefronts and websites as separate, but affiliated, entities that—on top of the 10 % interest they collect on behalf of a lender—then legally charge additional  fees and interest for the services that they provide by “referring” consumers to the lender and servicing the loan.

In Texas, payday and auto title store fronts are allowed to register as Credit Access Businesses (CAB) under the state’s Credit Services Organizations Act.

This  Act imposes no limits on fees, interest rates, loan amount size, or refinances, and it does not require the CAB to assess ability to repay based upon the consumer’s income. [Although obviously, this is a calculation all lenders make in order to make certain the borrower can successfully pay back the loan. Lenders do not simply give away money. They need to be repaid! [See our Manual for strategies to accomplish this.]

Accordingly, for single payment products  – payday loans for example – offered in Texas, CABs often charge an “origination fee,” typically ranging from $22 to $30 per $100 borrowed and, if the borrower is unable to repay the loan by the due date, a “refinance fee” that is usually identical to the amount charged as an origination fee.

Because of the third-party lending structure, CABs also charge consumers up to an additional 10 % annual interest rate while the loan is in repayment on the lender’s behalf.

How to Start Installment Loan Business

How to Start Installment Loan Business

The state’s “estimated average payday loan borrower can pay up to $840 for a $300 loan and monthly fees for a $4,000 auto title loan often exceed $1,000.” [This estimate by the State of Texas is questionable. Obviously, if we were to consider a “Bell Curve” there would be Texas payday loan borrowers on both ends of the “Bell.”]

The Point? Operated “correctly,” a Texas based payday loan business can be very profitable. For a complete, step-by-step explanation of “How to Start and Operate a Payday Loan Company” in any State, we recommend our Manual; considered by many to be “The Bible” of the lending industry.

Have questions? Need help? or 702-208-6736


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


Payday Loan, Title Loan & Installment Loan Marketing Ideas Part 2

Part 2: Payday, Car Title & Installment Loan Marketing Ideas

This is a short followup to our previous email/Post entitled:

“Payday, Installment & Title loan Store Marketing Ideas: 101”

Every lender is whining about how to get more customers and fund more loans.

The truth is there is no magic! To scale your loan portfolio requires you to get-off your butt, do something, test your efforts and MEASURE the results.

As a result of our previous lengthy Post on “Marketing 101 Ideas,” dozens of operators called and emailed with questions and comments.

The #1 question posed to me by storefont lenders? How do I find potential referral partners?

You may recall this idea from the Post:

“Referral programs with businesses that service our demographic and need to be made aware of how we can help the merchant make more money. I’m referring to lawyers, bail bondsman, mechanics, Aamco transmission, brake shops, tire and rim companies, other PDL/title loan stores that employ different loan criteria or don’t service the same loan areas we do, tax preparers… GET CREATIVE!”

My answer? Google it! [See image bottom of this Post.]
Search for “bail bonds service los angeles 90057”
Click on each of the red icons
Enter the Company name, address, phone number, website [if they have one] etc. in a spreadsheet.

Depending on your circumstances, pick at least one day every week to do the following:

  • Arm yourself with some of your company pens, pickup some donuts and GO VISIT THEM!
  • Introduce yourself
  • Share how your loan service can help them make more money.
  • Discuss your paid referral program with them. [IE: Offer them $25, $35, $50 per funded referral.]
  • Suggest they have a potential referral customer mention the Bail Bonds Company for a 10% discount on their first loan with you.
  • Pick up their business card and leave; after you leave them some of your company pens and the donuts.
  • Document who you met, what was said, what you promised… on a yellow pad while in your car before hitting your next bail bondsman.
  • Visit as many of these potential referral parners as you can that day.
  • Return to your office and enter your notes from these meetings into your spreadsheet.

Now, make certain that during EVERY inbound phone call you receive or customer walk-in, your Team asks “How did you hear about us?” [BEAT THIS INTO YOUR ENTIRE TEAM!]

Be MANIC about paying your referral partners their fees. Deliver the CASH to them IN PERSON!

Rinse and repeat… Bail bondsman, lawyers, auto repair shops…

FOLLOW-UP & PERSISTENCE will increase your income! Get organized.

This is not rocket science!

Now go make some MONEY!

payday loan, car title loan, installment loan marketing ideas

Use Google Maps to Discover referral partners for payday loan, installment loan and car title loan lenders.


Payday Loans, CFPB, Trump Divorce Update

By: Jer Ayles-Trihouse Consulting. Get ready my friends! Small dollar  lenders [payday loans, title loans, micro-lenders, Fintech…] will likely experience a renaissance as early as 2017. The CFPB structure has already been determined to be unconstitutional. Congress cannot digest the ability of the CFPB to get funding directly from the Federal Reserve Board – really tax payer money – thus circumventuing congessional purse strings and oversite. And today, the second in command of the payday loan CFPB attack dogs took a drubbing from the Republicans who will likely determine the fate of the CFPB. Will the CFPB have ANY teeth left? Unlikely…

GABE RUBIN over at Morning Consult wrote an exciting piece describing a fractious conversation that took place between President Trump’s potential pick for head of the CFPB [Randy Neugebauer (R-Texas)] and a CFPB staffer (Silberman).

The bottom line is that these CFPB bureaucrats, who are determining the spectrum of financial products and services Americans have access to ADMITTED TO NEVER SO MUCH AS VISITING A PAYDAY LOAN STORE IN THEIR LIVES!

Jer Trihouse Consulting

Jer Trihouse

Meanwhile, the CFPB is proposing regulations that have, and will continue, to destroy jobs, drive entrepreneurs into banktruptcy, empty store-fronts thereby increasing commercial property vacancies and crushing commercial property valuations, while MOST IMPORTANTLY denying consumers the right to choose what financial product BEST SERVES THEIR NEEDS!

As Gabe reports it, “The hearing started off testily, with House Financial Services Financial Institutions and Consumer Credit Subcommittee Chairman Randy Neugebauer (R-Texas) decrying the CFPB’s “paternalistic erosion of consumer product choices” in short-term, small-dollar lending.”

‘It got worse from there. “What the heck is a scholar on payday lending? Is it someone like you, who has never been to a store?” Rep. Roger Williams (R-Texas), asked Silberman to rollicking laughter of his fellow Republicans on the committee.’

[Gabe wrote that Silberman had conceded earlier in the hearing that he had not personally been to a payday lender storefront, though his staff had.]

“It would be great if you’d back off a little bit and realize that consumers know better,” Williams said.

Are you ready to jump into the business of making money by lending money? Get started! Learn the ropes! Get our Book. Schedule a call! It’s going to be fun times for those few entrepreneurs who have access to a few bucks and some guts!

Jer and Miro at 



For Lenders, There’s Dancing in the Streets Again

Lenders Dancing in the Streets Again!

How to Make Money by Lending Money

By Miro Posavec. A few months ago I wrote an article called, “There’s PANIC in the Streets.”

Let me start by saying that I don’t care too much for politics. I care about what happens to my country, my businesses, my family, and to me. I believe that’s true of most people.

And these past few years have shown how much damage can be done by public servants who don’t understand that the public has NEED of our payday and installment loan services, and by limiting options, they’re making life HARDER for those that most need every available choice.

With the support of the current administration, the CFPB has been attacking our industry on multiple fronts. Through negative press, discontinuing ACH transactions, limiting rates/ fees, and squeezing our banking partners.

How to start a payday loan businessIt was ugly. And all the projections were that the Democrats would win.  We lenders were all getting ready for the worst. Our consulting clients weren’t calling about methods to grow or expand their businesses. They were calling to get out, or wondering how to survive in such a hostile environment.

As always, we advocate good business practices, taking care of customers, and having a variety of services and revenue streams. This is true if you’re one location or 10,000.

If you’re lending money online, we recommend a few brick and mortars, and if you’re a store front, we advise dipping your toes into the online world. Diversity gives you power over adversity.

Moving forward, it appears we’re going to have a government that’s friendly to our industry. It looks like the CFPB is going to be “de-clawed,” and we’re going to be able to grow our lending operations.

We’re witnessing loan portfolios and enterprise valuations going up while our consulting clients are calling us with different questions. Now, we’re getting more of, “how do I grow?”, “I want to capture market share…”

Regarding “the business of lending money to make money,” here’s what we’re working on for you right now. 

We’ve created a Google Local solution. If you don’t know what I’m talking about, you’d better pay attention. Most consumers now look for a local business on their phones. And that means they do a google search.

Let me be clear. Our “Google Local Solution” is probably the most important marketing tool for your business TODAY. Here’s why:

  • Your customers are in their cars, driving towards a solution to their financial problem.
  • This scenario isn’t a fantasy or brand building exercise.
  • This is the most effective way to present your offer to people at the very moment they are about to buy your product or service.
  • We know the payday loan space! We own stores! We run Boot Camps. We talk and meet and counsel both successful and starving lenders of money EVERY DAY from all over the USA and MANY countries!
  • We’ve been doing this since 1998 AND  STILL GOING STRONG!
    • After all, how many years have you been reading our stuff 🙂 You can admit it! Even you vendors; loan management software providers, ACH processors, credit reporting agencies, lawyers, the staff of Congressman and Senators, OLA, CFSA, and FISCA members and staff, reporters, tribe leaders, call center providers, consultants… EVERYONE of you have invested in at at least ONE of our “Payday Loan Bibles!” This isn’t braggadocio; IT’S A FACT! And you dear reader know it]
  • It doesn’t get any better than this.

There are hundreds of directories, and services that promise to get you onto page one of Google’s search results. But Google is too smart to be played. There are no shortcuts, and no substitute for quality content.

Google has recently changed all of their algorithms, and there is no magic bullet that’s going to guarantee your top spot.  You’re probably getting a dozen sales calls per day promising control of Google.

Over the next week or so, we’re releasing an UP TO THE MINUTE Google local solution for lenders.  (Some changes came down just in the past 2 weeks).

So… we’re offering you three levels of participation in our new Google Local Program specifically targeted to lenders and rellated financial services businesses.

Join our waiting list! Click here to Sign up  As your reward, you’ll receive free our #1: “The 5 Things You Must Have on Your Google Local Listing for It to Be Effective.”

  • #1: “The 5 Things You Must Have on Your Google Local Listing for It to Be Effective.” (Free! And you can use our checklist against your current setup to make sure that you have it all covered)
  • #2: A Step-by-Step Video Course that will walk you through all the steps you need to make sure your Google Local setting is the best it can possibly be. You can delegate the tasks to your own people.
  • #3: Done for you solution. We have staff that’s been researching and developing this program for the past year. Since we already have our regular consulting clients on the schedule for this, we can get you on the calendar for implementation and review.  (Cost: to be determined by number of locations)
  • Apply to be considered here: Get Me On Google!
  • In closing, on behalf of Jer and myself, we wish you all the best for 2017.  May you have great health, prosperity, and enjoy the ride in this new year!
By Miro Posavec: Co-Founder
  1. Apply to be considered here: Get Me On Google!



Update: Banks, Payday Loan Lenders and Operation Choke Point

Operation Choke Point

Obama Administration Last Gasp to Kill Payday, Installment, Guns, Dating, Escort Services…

In August of 2013, the payday loan industry was brought to its knees as a result of the revelation that the Obama administration launched “Operation Choke Point.”

The aim of “Operation Choke Point” is to sever bank relations with payday loan lenders, cash advance loans, dating services, escort services, gun sales ammo sales, coin dealers, credit repair services, fireworks sales, government grants, tobacco sales, marijuana sales, lottery sales, on-line gambling, surveillance equiptment and on and on and on…

How to Start Installment Loan Business

How to Start Installment Loan Business

It appears that the Obama administration, gasping for its last breath of oxygen, is doing everything possible to put an end to payday loans, installment loans, gun sales, ammunition sales, dating services, home based charities, Lotteries…

Wednesday, Advance America and the CFSA asked a judge for emergency relief from “Operation Chokepoint, lawyers included a written statement from Ed Lette, chairman of the Business Bank of Texas.

In an unusual display of straight forwardness, Mr. Lette shared how employees of Office of the Comptroller of the Currency “forced Mr. Lette to end a mutually beneficial, long-standing relationship with Power Finance Texas, a Texas-based payday lender.”

“Business Bank of Texas was forced to end this long-standing and beneficial relationship with Power Finance Texas by the Office of the Comptroller of the Currency,” Lette writes, adding:

“During a recent meeting with Scott Ward, an assistant deputy comptroller in the [Office of the Comptroller of the Currency’s] San Antonio office, Mr. Ward pressured our bank to end our relationship with Power Finance Texas. Mr. Ward told me that, if Business Bank of Texas continued to provide [automated clearing house] services to Power Finance Texas and other small lenders, the bank would incur a significant reputational risk. Although I completely disagreed with this assessment, Mr. Ward left no doubt that the relationship would have to be ended. The pressure that was brought to bear on our bank by our regulator left us with no choice but to drop Power Finance Texas as a customer and close its accounts.”

Even more astounding is the assertion by Orbert Michel, financial regulations expert at The Heritage Foundation and a vocal critic of Operation Choke Point, said it’s “very unusual” for bankers to publicly reveal internal issues they are experiencing with The Office of the Controller; VERY RISKY!

“So this statement is a very strong indictment of what’s going on behind the scenes,” said Mr. Michel.

During the past several months, gun shop owners have been loud and clear about the negative impact “Operation Choke Point” has had on their businesses. Their customers are screaming about their limited access to firearms and ammunition.

More than a few dating websites have experienced “bank discontinuence” as well because of “Operation Choke Point.”

And, as regular readers of our Newsletter know, “bank discontinuance” has been a significant problem for check cashers and money service businesses since the early 2000’s!

Payday loan lenders, installment loan lenders, car title loan lenders, tax preparers… aren’t the only industries complaining that “Operation Choke Point” targets their businesses unfairly. Tom Hudgins, chief operating officer  installment loan corporation Western Shamrock told The Daily Signal that his industry has felt the squeeze as well.

“Our funding sources continue to be squeezed and our banking relationships at local levels continue to be eliminated,” said Hudgins, who operates 300 locations in 19 different states. “It’s creating havoc.”

Hudgins said that, “There is some sentiment that there is a last-ditch effort to eliminate not just funding sources, but banking relationships for the installment loan lending industry.”

Per The Daily Signal, in some cases, Hudgins said he’s maintained relationships with banks for over 20 years, “and suddenly, those banks decide not to do business with us because they view us as a “reputational risk.”

Randy Dalton with 37 Banner Finance installment loan locations said, “One of our main lending institutions essentially cut us off from wanting to do business, and we had a relationship with them for over 50 years.”


Could be very good for us! Both Senators Ted Cruz, R-Texas, and Mike Lee, R-Utah, introduced legislation thatwould  kill “Operation Choke Point.” Both men are aligned strongly with the new Trump AG, Jeff Sessions.

Based on the renewed interest in the payday loan, installment loan and tax prep industry as measured by our own antecdotal increase in phone calss, emails, and “Bible” sales, President Trump is going to make it a certainty that consumers will continue to have plenty of financial choices and loans to solve their financial emergencies!

Cell: 702-208-6736

  Want free monthly updates?


Wall Street Journal Reports Trump to End Payday Loan Rules

By: Jer Ayles at Trihouse. Alright, alright, alright!!!!!

The good news for those of us in the payday loan industry continues! Not only are valuations for payday loan stores already rising in conjunction with the payday loan publicly traded companies – check out Enova for example – but the phones are ringing off the hook, investors are looking for opportunities to collaborate with experienced operators, a major content development media company is planning a 6 part small dollar loan financial series, Elizabeth Warren is foaming at the mouth, our Payday Loan Startup Manuals are selling like hot cakes again, entrepreneurs are launching apps of all kinds, funding platforms requiring only a cell phone account for a borrower to receive their loan funds in 60 seconds [just one of MANY startups I’m collaborating with], performing portfolios for sale… and today the Wall Street Journal reported the following commentary by Committee chairman Rep. Jeb Hensarling (R., Texas), who is under consideration to become Treasury secretary in the Trump administration:

“Both rules were cleared by agencies, not Congress. Mr. Hensarling said the GOP would like to end recent rules on retirement advice and payday loans.”

NOTE: The destruction or “reconfiguration” of the CFPB or Frank-Dodd doesn’t mean a return to the dark ages for consumer financial services! Rather, it empowers entrepreneurs to continue to combine technology with money lending to build financial products that make sense for borrowers and lenders. These developments enable brick-n-mortar and FinTech lenders to compete for any borrower with a dream to launch their own business or successfully navigate a temporary, emergency financial challenge!

Jer Trihouse

Jer – Trihouse

WSJ – WASHINGTON—Congressional Republicans hope to scrap two contentious rules meant to rein in conflicted investment advice and payday lenders once President-elect Donald Trump takes office.

However, despite the Republicans’ big election victory that will keep both chambers of Congress under GOP control, the party’s path to legislating still faces the hurdle of a Democratic filibuster, among other factors

House Financial Services Committee Chairman Jeb Hensarling (R., Texas) said Wednesday that talks were being held with Mr. Trump about uprooting a Labor Department rule regulating how brokers sell retirement investments and a Consumer Financial Protection Bureau proposal aimed at holding down interest rates and increasing disclosures for small-dollar loans. Read More from the source: Wall Street Journal.

Question? Cell: 702-208-6736

  Want free monthly updates?


Texas Payday Loan CSO License Application and Regulations

Texas Credit Access Businesses

Texas Payday Loan License Application

Texas CSO/CAB Regulations

Texas Credit access businesses [payday loan lenders] 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, rather the credit access business that serves as the broker is the licensee in this 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.

The Texas borrowers 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.

Texas Payday Loan Resources

New Application Process Notice

All applications for a new license or registration must be submitted through the online system “ALECS” (Application, Licensing, Examination, Compliance System).

Texas Licensing Forms

Texas Advisory Bulletins & Disclosures

Texas Reporting

Texas Published Reports

Texas Examination Accommodations

Texas Additional Resources


Statutes & Rules

These are the primary statutes and rules that apply to Texas  credit access businesses. This is not a complete list of laws that credit access businesses are required to comply with.

Primary State Statute
Chapter 393,Texas Finance Code: Credit Services Organizations

OCCC’s Rules
Title 7, Chapter 83, Texas Administrative Code

Other State Statutes
Texas Legislature Online

Federal Statutes & Rules
U.S. Government Publishing Office

Do you want to make serious money lending cash to Texans? Start here with our “How to Start a Payday Loan Business.” It includes all the info, tips, strategies and more that you need to launch a payday loan business in Texas.

how to opene payday loan company

Start Payday Loan Business

We offer two delivery methods:



Google’s Payday Loan Company Settles with CFPB

If you’re a payday loan or installment loan lender and you claim you’re going to help consumers build their credit scores, you’d better really do it!

Oh, and if you’re unaware of this factoid, Google funded Lendup!

Online Lender Did Not Help Consumers Build Credit or Access Cheaper Loans, As It Claimed

WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) took action against online lender Flurish, Inc., doing business as LendUp, for failing to deliver the promised benefits of its products. The CFPB found that the company did not give consumers the opportunity to build credit and provide access to cheaper loans, as it claimed to consumers it would. The Bureau has ordered the company to provide more than 50,000 consumers with approximately $1.83 million in refunds. The company will also pay a civil penalty of $1.8 million.

“LendUp pitched itself as a consumer-friendly, tech-savvy alternative to traditional payday loans, but it did not pay enough attention to the consumer financial laws,” said CFPB Director Richard Cordray. “The CFPB supports innovation in the fintech space, but start-ups are just like established companies in that they must treat consumers fairly and comply with the law.”

Flurish, Inc., doing business as LendUp, is an online lending company based in San Francisco, Calif. that offers single-payment loans and installment loans in 24 states. The company began marketing its loans in 2012 as a way for consumers to build credit and improve credit scores, and it offered consumers who participated in the program the ability to progress to loans with more favorable terms, including lower rates and longer repayment periods, over time. The company advertised this opportunity as the ability to move up the “LendUp Ladder.”

According to today’s enforcement action, LendUp did not deliver on its promises. Some of its product offerings weren’t available to consumers where they were advertised. In addition, for a time, the company did not properly furnish information to the credit reporting companies, denying consumers the promised opportunity to improve their creditworthiness. LendUp’s conduct violated multiple federal consumer financial protection laws, including the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the CFPB found that the company:

  • Misled consumers about graduating to lower-priced loans: Many of the benefits the company advertised as available to consumers who moved up the LendUp Ladder were not actually available. Despite the fact that LendUp advertised all of its loans nationwide, loans at the higher levels were not available outside of California for most of the company’s existence. Therefore, borrowers outside of California were not eligible to move up the “LendUp Ladder” and obtain lower-priced loans and other benefits.
  • Hid the true cost of credit: LendUp gave some consumers inaccurate information about the true cost of the loans offered. The company used banner ads on Facebook and other Internet search results that included “slider bars” allowing consumers to view various loan amounts and repayment terms, but it did not disclose the annual percentage rate as required by law.
  • Reversed pricing without consumer knowledge: With one particular loan product, borrowers had the option to select an earlier repayment date. Borrowers who selected an earlier repayment date received a discount on the origination fee. But if a borrower later extended the repayment date, the company would reverse the discount given at origination. The company did not disclose this and, in three states, the company’s loan agreement specifically stated that it would not charge any fees to extend the repayment period. In addition, if a borrower defaulted, any discount received at origination was reversed and added to the amount sent to collections.
  • Understated the annual percentage rate: LendUp offered services that allowed consumers, for a fee, to obtain their loan proceeds more quickly. The company passed along the fee to a third party, but LendUp also retained a portion of the fee from loans made between May 2013 and March 2016. In many instances, these retained fees should have been included in the annual percentage rate calculation; because they were not, the company inaccurately disclosed the finance charges.
  • Failed to report credit information: Although the company began making loans in 2012 and advertised its loans as credit building opportunities, the company did not furnish any information about any loans to credit reporting companies until at least February 2014. Before April 2015, LendUp also failed to have any written policies and procedures about the accuracy and integrity of information furnished to consumer reporting agencies.

Enforcement Action
Under the Dodd-Frank Act, the CFPB has authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Under the terms of the CFPB order released today, LendUp is required to:

  • Provide approximately $1.83 million in redress to victims: The company is ordered to pay about $1.83 million to over 50,000 consumers. Consumers are not required to take any action. The company will contact consumers in the coming months about their refunds.
  • End deceptive loan practices: LendUp must stop misrepresenting the benefits of borrowing from the company, including what loan products are available to consumers and whether the loans will be reported to credit reporting companies. The company must also stop mispresenting what fees are charged, and it must include the correct finance charge and annual percentage rate in its disclosures.
  • End unlawful advertisements: The company must regularly review all of its marketing material to ensure it is not misleading consumers.
  • Ensure accuracy of pricing: The company must regularly test annual percentage rate calculations and disclosures to ensure it complies with the Truth in Lending Act.
  • Pay a $1.8 million civil penalty: LendUp will pay $1.8 million to the CFPB’s Civil Penalty Fund.

The full text of the CFPB’s consent order is available at:

The CFPB investigation was conducted in coordination with the California Department of Business Oversight, which today announced a separate settlement with LendUp: Settlement Release 09-26-16.pdf


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.