Industry News Payday Loans

Dear Friends,

The CFPB is putting together rules that will cripple our industry.  This will directly affect all our jobs, not to mention limit customers access to credit.  Please take a minute to sign this petition by clicking HERE.  If we can get 100,000 signature, the White House will review the rules to see, if in fact, they are in the best interests of the borrower.

If you want to learn more about the problem with these NEW rules and what the consumer lending industry is doing about it, you can learn more at FISCA’s website by clicking HERE.

Best Regards,

The Team at Intro XL

A Texas lender passed this along…. Texas is adding new rules for CABs.  You can see them HERE.

This is totally out of left field.  I thought this was interesting:

“The Finance Commission adopted these amendments at its October 16 meeting. Final amended figures are available here. The amendments will be effective November 5, 2015. See the rule’s preamble for information about the delayed implementation period, allowing creditors to continue using certain contracts until December 31, 2016.”

“Consumer complaints are the CFPB’s compass and play a central role in everything we do. They help us identify and prioritize problems for potential action,” CFPB Director Richard Cordray said in a press release announcing the new public database.

Sounds like Richard Cordray is speaking out of both sides of his mouth.  The facts do not substantiate his blitzkrieg on payday loans.  They comprise less than 1% of the complaints at the CFPB.   So why all the new rules?  It’s personal.  You can read the full article at titled “CFPB’s Inconvenient Truth Revealed By Complaints Database”

1. mortgage (36 percent)
2. debt collection (17 percent)
3. credit reporting (15 percent) and other categories
4. payday loans (less than 1%)

I’ve received a lot of questions on text messaging, so I’m breaking it out into it’s own post.  I’m not listing the legal cases here b/c they’re everywhere now.  If you’re going to send someone text messages, make sure your documentation is clear, conspicuous and unambiguous. Seems here that if there is a question of an unsolicited text, you have to prove consent ……like zero confusion here.

• Don’t bury your opt in.
• Make the customer check a box.
• Document and prove your opt-ins.
• Marketing texts must be sent through short codes as opposed to long codes.
• Two opt-ins are better than one.  This is called a double opt-in.  The consumer responds back to your request that they receive your marketing texts.

I’ll defer to Twilio regarding  the opt-in disclosures for receiving text messages.   Can you make this part of your written opt-in?  Sorry, not sure.

Additionally, the FCC has some short and concise information on both email and text messaging here.  Not sure how definitive it is, but it’s something.

This article from Experian titled SMS compliance: What you don’t know CAN hurt you is extremely helpful.

This is an attempt to educate you and not provide legal advice blah, blah, blah.  Always consult with your lawyer, first.

It’s easy to assume that SPAM is unwanted electronic messages, but the operative word is “unsolicited”.  Unsolicited means “given or supplied without being requested or asked for.”  I’m going to focus on email and text messaging, which fall under completely different laws, which is worth noting.

SPAM –  “It is named after Spam, a luncheon meat, by way of a Monty Python sketch (funny video) in which Spam is included in every dish. The food is stereo-typically disliked/unwanted, so the word came to be transferred by analogy.”

So, why should you care about being accused of SPAM?

• For every single email that violates the CAN-SPAM Act, the FTC will fine you $16,000 (gulp).
• For every unsolicited text message / phone call that violates the TCPA (Telemarketing and the Telephone Consumer Protection Act) will cost It’s $500 for every unsolicited call or text message, $1,500 if the telemarketer “willfully or knowingly” sends it after the consumer opts out.  You can read a nice resource at Klien Monihan Turco law firm and Patric Lester and Associates.

Let’s tackle email first and CAN-SPAM (Controlling the Assault of Non-Solicited Pornography And Marketing).  This law is pretty easy to comply with.  There are seven (7) items to focus on here and they are reasonable.  The truth is that it does not have a lot of teeth b/c does not seem to be enforced a lot, unlike text messaging.

The FTC breaks commercial emails into two categories:

1. Commercial content:  In a nut shell, advertisement or promotion.  These are the emails that can cost you $16,000 a pop.  CAN-SPAM was a bi-partisan effort, so it’s very forgiving if you follow the rules.  Allegedly consent can be oral or written.  The reality is that if you send borderline SPAM emails, you may not get fined, but the Internet has SPAM filters that will black list you forever.  This is as bad in it’s own special way.
2. Transactional or Relationship content:  This part is tricky:  If the message contains only commercial content, its primary purpose is commercial and it must comply with the requirements of CAN-SPAM. If it contains only transactional or relationship content, its primary purpose is transactional or relationship. In that case, it may not contain false or misleading routing information, but is otherwise exempt from most provisions of the CAN-SPAM Act.

Next up…text messaging.  I’m not listing the legal cases here b/c they’re everywhere now.  If you’re going to send someone text messages, make sure your documentation is clear, conspicuous and unambiguous. Seems here that if there is a question of an unsolicited text, you have to prove consent ……like zero confusion here.

• Don’t bury your opt in.
• Make the customer check a box.
• Document and prove your opt-ins.
• Marketing texts must be sent through short codes as opposed to long codes.
• Two opt-ins are better than one.  This is called a double opt-in.  The consumer responds back to your request that they receive your marketing texts.

I’ll defer to Twilio regarding  the opt-in disclosures for receiving text messages.   Can you make this part of your written opt-in?  Sorry, not sure.

Additionally, the FCC has some short and concise information on both email and text messaging here.  Not sure how definitive it is, but it’s something.

This article from Experian titled SMS compliance: What you don’t know CAN hurt you is extremely helpful.

Must see for anyone that thinks the President has too much power.  These executive orders are used to circumvent the legislative process.  It’s a hilarious parity on the School House Rock public message from the 80’s.

The Washington Post writes, “FDIC attempts to end Operation Choke Point with letter, action.”  So is it?

Wow, what a coincidence?  Republicans take hold of the House and Senate and the financial witch hunt ends.  Obviously, this is good news.

“The FDIC is issuing this statement to encourage institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers,”

Operation choke point targeted businesses that the government deemed illegal, and in the process, cut off banking services to legal, licensed business such as:  payday lenders, gun retailers and ammunition merchants.

So, is ACH a good payment option for lenders?  Meh.  Nacha is proposing new rules:

• Lower the return rate threshold that could trigger such inquiry for unauthorized debits from one percent to 0.5 percent.
• Establish for the first time return rate thresholds of 3 percent for administrative returns (for example, debits returned for invalid account numbers).
• 15 percent for overall returns.

I get the 15% rule at some level, but a charge back does not have any type of remediation  in place.  So, your customer reverses a legitimate payment and your in trouble.  As far as administrative returns, most bank information is entered in by the consumer.  How is that the lender’s fault?  I guess you can verify the account somehow, but it seems like a stiff penalty for something that is usually human error.

Bloomberg reports,Banks Face Hit From CFPB on $30 Billion in Overdraft Fees. Here are the highlights…..

Richard Cordray, the bureau’s director, said in an e-mailed statement about the report. “Overdraft fees should not be ‘gotchas’ when people use their debit cards.”

IDEA:  Maybe we can stick the CFPB on some of the state auditing bodies if they care about “fair”?

Wayne Abernathy, executive vice president of the American Bankers Association, criticized the bureau’s annual percentage-rate analysis.

“Where is the logic in applying a yearly percentage rate to a fee intended for a service of no more than a few days?” Abernathy wrote in an e-mail.

IDEA:  An APR is there to compare the cost of two types of credit.  That’s not the situation here.

“Consumers value and appreciate the ability to cover expenses when they need to, from an institution they trust, without resorting to entities outside the heavily regulated banking system,” Richard Hunt, the group’s president, said in a statement. “These debit card services are completely optional.”

IDEA:  Educate the consumer.

In the new study, the CFPB found that the majority of overdraft fees are incurred on transactions of $24 or less, and that more than half of consumers pay back negative balances within three days.

IDEA:  Give people more options (not less) to cover anticipated over drafts.

A 2010 rule imposed by the Federal Reserve, the CFPB’s predecessor as the main consumer-banking regulator, required banks to obtain an affirmative “opt-in” from customers who want overdraft coverage when they swipe their debit cards. Without it, transactions are supposed to be declined at the point of sale.

IDEA:  This is a was and is a good idea.

“Opting in for overdraft coverage for debit card and ATM transactions is an expensive way to manage a checking account,” Cordray told reporters.

IDEA:  Again, the key word here is optional over draft protection fee.

A second area would address the order in which transactions are debited from a consumer’s account. A court case against Wells Fargo & Co. found that the bank manipulated the order of transactions to maximize overdraft fees.

IDEA:  Makes sense.  They should clear smaller transactions first.

In a surprising turn of events Gov. Nixon vetoes payday loan bill.  The bill passed the House 112-39 and the Senate 26-4.  With this much support, this veto comes as a surprise.  

The big change here was removing rollovers.  The Governor wrote in a statement:

“Missourians want meaningful payday lending reform, not a sham effort at reform that allows such predatory practices to continue.”

I think this is positive news.  Many lenders are moving to installment loans in Missouri, so this buys us at least another year before legislators start meddling with that product.