THE BLOG

09
Jan

Payday Loan Store Profits

Have you ever worked at a payday loan store? What are typical payday loan store profits?

Submitted to us by Frank M. from Texas: I’m thinking of opening a franchise payday loan store, but I’m concerned that the company is padding the stats on how much business can be expected. What can I expect for payday loan store profits?

I’m wondering if anyone has ever been a counter clerk at such a place and if you could answer the following questions for me:

  • How many payday loans would you say went through your store per day on average? Of course the answer depends on where the store is located. Downtown Los Angeles will fund more payday loans or car title loans per day than a loan store in Dubuque, Iowa. Competition plays a role as well. I would also advise you to position your store as a “financial service center” offering a plethora of loan products rather than a mono-line payday loan lender.

The AVERAGE U.S. payday loan store funds 133 loans/month. Average fees generated are $61.28 X 133 = $8150.24/month. Add for late fees and NSF fees and the AVERAGE is an additional $956.00 month in revenue for a total of $9106/month gross revenue.

  • What was the average loan size? $383.00 at $16 per $100 loaned = $61.28 in fees per funded payday loan.

The REALITY of the payday loan industry? We have a medium sized 3 year old store in Northern California with generating gross fee revenue of $48,000/month. Store rent is $750/month. We employ 4 part-time employees and 1 full time employee. Very profitable… It’s a collections business. To be successful making money by lending money, you must be good at collections AND monitor employee theft; there’s a LOT of cash!

I would be remiss if I didn’t suggest car title lending as well. In California, we charge 9%/month on the outstanding loan principal to as much as 30%/month. This depends on the customer’s perceived credit risk, the vehicle, the loan principal… Again, VERY profitable. To be clear, a $2600 title loan at the low end – 9% – generates a payment of $234/month and does not reduce the loan principal. Thus, the borrower could conceivably make 6 ea $234.00 car title loan payments and still owe the original loan principal of $2600. Defaults? For us they are less than 1%. No one wants to “lose” their automobile in California!

Finally, why pay a payday loan franchise fee of 8% of your gross revenue for the privilege of teaching you how to start and operate a payday loan, installment loan or car title loan business? It’s not rocket science 🙂 Go to your biggest, baddest future competitor and GET A LOAN. That’s the way to begin.

This strategy and a “million” others are available to you in our “Payday Loan Bible” and our “Car Title Loan Bible.”

payday loan store profits

For more on this topic and all things related to making money by lending money, read our payday loan and car title loan BLOG. And don’t fail to signup for our Monthly Tips, Tactics and Newsletter (your upper right-hand corner of this page).

24
Dec

Payday Loan Portfolio Sales

Payday Loan & Installment Portfolio Sales & Bad Debt Chargeoffs

$112,000,000 in bad debt sold for $1,700,000 by Regional Management Corp.

Regional Management Corp. (NYSE: RM), a specialty consumer finance company, announced  that it has completed the sale of approximately $112 million of its existing charged-off loan portfolio. (Man, that’s gotta hurt!)

How to start a car title loan businessPre-tax proceeds from the one-time sale of the existing charged-off loan portfolio, net of commission and other expenses, were approximately $1.7 million, and will be recognized in the fourth quarter on Regional Management’s income statement as a reduction of its provision for credit losses.

Proceeds from the sale of forward flow charged-off accounts will be received by Regional Management on a monthly basis.

Regional Management Corp. (NYSE: RM) is a diversified specialty consumer finance company providing a broad array of loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies and other traditional lenders.

Regional Management began operations in 1987 with four branches in South Carolina and has since expanded its branch network across South Carolina, Texas, North Carolina, Tennessee, Alabama, Oklahoma, New Mexico and Georgia.

Each of its loan products is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments and is repayable at any time without penalty. Regional Management’s loans are sourced through its multiple channel platform, including in its branches, through direct mail campaigns, independent and franchise automobile dealerships, online credit application networks, retailers and its consumer website.

For more information, please visit http://www.RegionalManagement.com. Contact: Investor Relations Garrett Edson, (203) 682-8331

01
Dec

Update: Payday Loan Business-Consumer Financial Protection Bureau

The CFPB Consumer Financial Protection Bureau & the Payday Loan Industry

Payday loans, auto title loans, and similar lending products: update from The CFPB

We’ve written often here about the issue of payday loan State’s rights versus the Fed’s and the CFPB.

The CFPB issued an update on their website regarding proposed rulemaking for car title loans, payday loans, installment loans, line-of-credit loans and related loan products made to consumers in the U.S.

Here’s the the CFPB release in full including 3 links to their “research” and “studies.” Take a deep breath and hold your nose…

The CFPB press release and website Post specifically state:

“The Bureau is in the process of developing a Notice of Proposed Rulemaking to address concerns in markets for payday, auto title, and similar lending products. The Bureau is particularly concerned that lenders are offering these products without assessing the consumer’s ability to repay, thereby forcing consumers to choose between reborrowing, defaulting, or falling behind on other obligations. We are also concerned about certain payment collection practices that can subject consumers to substantial fees and increase risk of account closure.”

The CFPB announcement went on to say:

Jer Trihouse Consulting

Jer Trihouse

“The Notice of Proposed Rulemaking will build on feedback we have received from small businesses and other stakeholders after releasing an outline of proposals under consideration last spring for purposes of the Small Business Regulatory Enforcement Fairness Act process. The Bureau will also publish results of further research it has been conducting into these markets in connection with the rulemaking proposal. The Bureau previously released a white paper and a report summarizing some of its research on some of these products. We expect to release the rulemaking proposal in first quarter 2016.”

Here’s a direct link to the CFPB’s “Small Business Regulatory Enforcement Act process (CFPB 1)

And a link to the previous CFPB Payday Loan White Paper, “Payday Loans and Deposit Advance Products: (CFPB 2)

And the CFPB Report, “CFPB Data Point”: (CFPB 3)

Need answers? Starting or improving your loan business? Begin here: Help

YOUR THOUGHTS? Help@PaydayLoanUniversity.com

05
Nov

Payday Loan Leads

Payday Loan Leads

By: Team PaydayLoanUniversity.com. [Updated] The CFPB has spent considerable time exploring the implementation of new rules and regs payday loans, payday loan lead gen and internet lead generation in general. After months of meetings and discussions with consumer protectionists and lead buyers, sellers and generators, they published a Blog about their “findings.”

This is a good, basic description of the current process. The astounding element that escapes the majority of us is that the lead generation and monetization process described takes place in nano seconds!

HubSpot has some interesting lead gen stats here that are worth a few minutes of your time.

Here’s some quick lead generation stats that will blow you away:

On average, we conduct 12 billion searches per month on the web in the United States. (Comscore)

YouTube has become the 2nd Largest Search Engine – bigger than Bing, Yahoo, Ask & AOL combined. (Social Media Today)

$26-50: the average Cost Per Lead for companies with $250,000 to $10 million in revenue.

44% of consumers say that they would like brands to deliver deals and coupons to their mobile devices. (Millward Brown)

50% of all mobile searches are conducted in hopes of finding local results, and 61% of those searches result in a purchase. (Search Engine Watch)

61% of companies have created a mobile site or optimized their existing site for mobile. (Chief Marketer, Mobile Marketing Survey)

Research shows that 35-50% of sales go to the vendor that responds first. (InsideSales.com)

79% of companies that have a blog reported a positive ROI for inbound marketing last year. (HubSpot State of Inbound)

80.8% of users report reading email on mobile devices.

Last year, email marketing was cited as the most effective digital marketing channel for customer retention in the United States. (eMarketer).

Here’s the original Executive Summary of the FTC Lead Generation Workshop. You may click the link below for the original work.

CFPB: The Five Stages of Online Lead Generation

Theodore R. Flo and Christopher J. Willis

Advanced Payday loan business course

Advanced PDL Course

The FTC presented a workshop on lead generation entitled Follow the Lead. Online lead generation is an area receiving increased regulatory scrutiny by the FTC and other regulators, including the CFPB. Over the next several days, we will be presenting a series of posts highlighting key issues in the industry and likely targets for CFPB and FTC enforcement activity. In this first entry, we provide a high-level overview of online lead generation’s five-stage process.

Stage One: A Consumer “Raises Her Hand”

In Stage One, a consumer takes some concrete action online expressing interest in a product or service. Often, this consumer interest is first reflected in an online search. Various players in the online advertising market work to optimize what consumers see when they enter particular search terms. Upon viewing the search results and targeted advertisements that appear alongside or embedded within the search results, a consumer then clicks, allowing anyone with access to the click data to get a better sense of what the consumer is interested in. The consumer’s expression of interest, by itself, is not enough to generate a marketable lead, however. The interest data must be combined with a way of contacting the consumer.

Stage Two: Converting Interest into a Lead

There are several ways that this may occur. For example, after clicking an online advertisement, a consumer may be redirected to an affiliate website containing a form to fill out. An advertisement may also allow a consumer to “click to call” a live salesperson.

Online leads may also be created by aggregating data about consumer behavior in different online spheres. For instance, a consumer may visit a shopping website and search for socks. A third party may purchase the click data, incorporate personal contact information obtained from another source such as an online retailer that can link the consumer’s IP address to contact information, and create a lead that can be followed-up on by a specialty sock retailer.

Each of these different aspects of lead creation is often handled by a different company that specializes in hosting web forms, managing “click to call” phone centers, or aggregating data, for example. Once these entities have created the lead, they work to sell or otherwise monetize it to earn a profit, often through resellers.

Stage Three: Lead Resellers Package and Auction Leads

In Stage Three, lead resellers connect lead creators with lead purchasers. Lead resellers maintain networks of lead creators whose leads they buy at prearranged prices. Lead resellers also maintain networks of companies interested in purchasing leads with certain characteristics. When leads come in from the creators, the resellers filter them and present lead purchasers with leads matching their specifications.

Stage Four: Selling the Lead or Lead Data to a Purchaser

In Stage Four, purchasers buy the leads from resellers, often through a reverse auction process referred to as a “ping tree.” In the reverse auction, various purchasers set prices that they are willing to pay for leads. The reseller then presents leads matching the purchasers’ specifications to the list of purchasers with the high bidder being given the first opportunity to buy the lead and so on until the lead is sold or the buyer list has been exhausted.

After a lead is purchased, lead creators, resellers, and even purchasers may sell the lead or some data from the lead to other purchasers through a practice known as “re-marketing.” Critics of this practice say that it causes consumers to be bombarded by “unwanted” advertisements. Proponents argue that it gives consumers more choices and information which helps them make better decisions.

Stage Five: The Lead Purchaser Reaches Out to the Consumer

Stages One though Four often happen within seconds of a consumer expressing interest in the product or service. In Stage Five, the purchaser reaches out to the consumer in an attempt to close the deal. Lead purchasers do so in several ways. Some simply call or email the consumer. Others present the consumers with a series of targeted offers or buying choices through a website or “landing page.”

Potential Problems

Participants in the FTC workshop raised several consumer protection issues with this process, which we will explore in subsequent blog posts. Some view the process as inherently deceptive. They argue that the information that consumers receive from the lead purchasers is not an accurate reflection of the consumers’ buying choices because the information pertains only to a limited subset of products or services offered by the lead purchaser. Of course, by this standard, any advertisement would fail, given that none of them present consumers with the full range of choices on the products or services that could potentially fulfill the consumers’ needs. Rather, most advertisers market their own products exclusively.

Other participants raised questions about the role consumer disclosures should play in lead generation. Some said that disclosures should be made more robust and prominent. Others argued that too many disclosures cause information overload. Still others said that disclosures don’t matter because consumers don’t read them. There does not appear to be any consensus on this issue.

More fundamentally, if a balance needs to be struck on any of these issues, who should decide how that happens?

Currently, the lead generation industry is largely unregulated by the government, except through a handful of federal and state laws, highlighted a few years ago in a GAO report, and a patchwork of federal and state agencies. Right now, many lead generators submit to industry regulation through membership in the Online Lenders Alliance and its “best practices” or other organizations such as the Better Business Bureau. We know that the CFPB is stepping in to this area and will doubtless take a leading role in defining whether certain conduct is deceptive, the proper role of disclosures, and how the industry will be regulated going forward.

In our next post, we will explore the disclosure-related issues that came up in the FTC workshop and how those issues are likely to play out as the industry evolves.

Here’s a link to a CFPB complaint against T3 Leads. T3 Leads . [The Bureau’s complaint against T3Leads is not a finding or ruling that the defendant has actually violated the law.] If for no other reason, read this CFPB complaint to gain insight into what/who the CFPB is targeting.]

Here’s the link to the FTC Lead Generation Workshop: FTC

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

Want Alerts when we post relevant payday loan and title loan industry news?

01
Oct

How to Start Payday Loan or Car Title Business

Start a Car Title Business?

Start a Payday Loan Business?

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

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

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

Here’s a sample ad:

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

compensation: $15hr DOE

employment type: full-time

We currently have position open for individuals with Payday Loan and auto title loan process and collection experience.Position opening in following location: Your City
Type: Full Time Employment
Position Description: Payday Loan, Car Title Loan / Collection OfficerQualifications:- Experience in any combination of collection, and pay day loan / auto title loan processing.
– Demonstrate high level of expertise in handling complex transactions and to maintain productivity levels to support business needs
– Able to receive general direction and is competent to perform nearly all aspects of the job independently
– Detailed oriented with computer data entry skills
– Familiar with all aspects of YOUR STATE auto title (or, payday loan) lending code, industry practices, and standards
– Works well as a team member
– Strong problem solving skills
– Excellent verbal/written communication skills
– Strong customer service orientation
-Spanish speaking a plus (or Vietnames, Greek, Haitian… whatever!)
12
Sep

The Players: Payday Loan Associations, Lobbyists and Donors

Payday Loan Associations, Lobbyists and Donors

Who are the “Players” in the small dollar credit industry?

Who funds the payday loan, installment loan, car title loan lender, OLA, FISCA, CFSA, the tribes and all the state associations enabling the rest of us to remain in the business of serving our customers and lending borrowers cash?

Like every other industry including American Association of Retired Persons (AARP), National Association of Real Estate Brokers: NAREB, the automobile industry, the pharmaceutical industry… payday loan, car title lenders, buy-here-pay-here, installment lenders and every other industry under the sun lobbies Washington. Click here to get the 12 page Payday-Pay-to-Play-FINAL-2015 report revealing all the companies in our industries who fund Washington. Who’s doing their share?

Payday and title loan installment loan associations Payday loan title loan installment loan associations

Contribute to your state and national associations! Find out who supports your industry at both the state level and the national level AND SUPPORT THEM with cash. You want to stay in business? You want to know what’s going on in your industry? You want to beat back the CFPB? It takes money.

It’s NOT UN-AMERICAN to support your fans. Again, if you’re a title loan lender, a payday loan lender, an installment loan lender, an employee of these lenders, a landlord for these store operators, a vendor in our industry… CONTRIBUTE! TODAY!!

Access this free report, “Payday-Pay-to-Play” here: Payday-Pay-to-Play-FINAL-2015

10
Sep

Installment Loans

Installment Loans

Start an installment loan company

Credit unions added $10.2 billion in loans to their balance sheet in June – the fastest growth in credit union history. Consumer installment loan balances (auto, credit card, and other unsecured loans) rose at the fastest pace since September 2009: 13.7% during the 12 months ending in June, helping to pull the overall loan growth average to 10.9% for the year.

Our government simply cannot stop entrepreneurs from meeting consumer demand for anything. Sex, drugs, rock-n-roll, cannabis, alcohol, credit…

How to start installment loan company

How to start installment loan company

This metric is even more accurate for payday loan lenders. All of us are evolving away from payday loan single pay products to installment loan products having higher loan balances ($800 – $5000) and loner, amortized payback periods (6 – 36 months).

Borrower “ability to repay” metrics are being being introduced and automated as well. By the time the CFPB implements their draconian policies, the majority of payday lenders will have moved on to installment loans and similar products.

 

 

09
Sep

Title Loan lending Tactic

Here’s an interesting title loan lending tactic:

“Leap Financial buys cars from lenders that are in the process of repossessing them from their owners. The company “leases” them back to the same owners for a lower monthly payment. The lender gets more $$ back on their balance sheet than it would if it had sold the borrower’s car at an auction.  The borrower gets the car back — with a GPS-based starter-interrupter that disables the car if the customer misses a payment.” Said Condon: “We get shockingly good results.”

Title Loan lending Tactic With all the CFPB changes in business practices on the way, it’s easy to forget how resourceful and inventive lenders in the car title loan, payday loan and installment loan industry are. Demand by households continues to increase for these products. Banks are dropping like flies when it comes to servicing the credit challenged consumer.