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Hang In There Payday Loan Fans! The Future is Ours!!

Payday Loan, Car Title Lenders, Check Cashers and all the rest of us in the micro-lending niche will survive. In fact, we’ll thrive.

How can I say this? How can I be so certain?

First, let me share with you the catalyst for this rant.

I got into payday loans, car title lending and check cashing in 1997 when I opened my first store in Mission Viejo, Calif. It was the early days and nobody in my world even knew what a payday loan was. I attended my first National Association of Check Cashers Convention (now called FISCA), networked, attended the workshops and left feeling really upbeat about the future of the payday loan industry and micro-lending in particular.

Everything was going great. Sure, there were always rumblings about regulators in a few states getting their feathers ruffled after prodding by The CRL or some other anti-business, anti-capitalist, anti-financial choice group. But I came to realize we enjoy a huge demand by consumers for our products and services. And we have some really smart and creative people in our industry.

Then October 2003 came along. I was at the FISCA Convention (I think it was at The Broadmoor in Colorado) when the FDIC announced all federally chartered banks involved in payday loan lending would have to increase their reserves to 1:1. Additionally, the FDIC advised that banks should ensure that payday loans are not provided to customers who have had payday loans outstanding from any lender for a total of three months in the previous 12-month period. “FDIC-supervised institutions currently engaged in payday lending are instructed to submit plans detailing how they will address the revised guidance.”

This announcement swept like wild fire through the halls of the convention. Shares of publicly traded payday loan lenders and check cashers plummeted that day. Valuations of brick-n-mortars plunged! “There would be no financing available in the future for our industry.” Stephens Investment Bank dutifully reported M & A action in our market segment was “dead” for the foreseeable future. Fully a third or more of the convention attendees freaked out. It was they said, “The end of our industry.”

Many operators bailed. They sold out; some at fire sale prices. (I know that many of these sellers eventually came back to our industry. They couldn’t stay away :o)

And then a funny thing happened; our industry survived. Store revenues increased. Transaction volume increased. The Internet began to play a role. CFSA was formed and eventually the OLA .

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I don’t know the date you’re reading this. It doesn’t even matter. Just be aware that the regulatory and legislative issues discussed here are a universal theme, so keep reading. You’ll be glad you did! It’s very optimistic!!
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Now don’t get me wrong! There have been more bumps and grinds along the way. The payday loan advocates in Georgia were defeated by GILA . Oregon went down the tubes. Arizona and Ohio were tough battles. Virginia is edgy. And there were others! (By the way, don’t think the residents of these “dark” states are no longer getting their payday loans and car title loans; they most certainly are. They simply aren’t walking into a store in their state. Instead, they’re using the Internet,they’re driving across state lines, they’re calling 800#’s… meanwhile there are fewer jobs in their state. There is more crime in their state. Fewer taxes are being paid in their state. Vacancy rates for commercial buildings are higher in their state. And the fees that licensed payday loan and car title loan businesses were paying to their State are now non-existent. I guess that’s the subject of another rant!)

But it’s not all doom and gloom for us!

Here’s just a few reasons why we will overcome!

It will be 12 to 24 months before anyone in Washington even reads the 2300 page Consumer Financial Regulatory Agency Proposal. It will take months and months to form the committees and boards required to attempt to oversee our industry. There will be massive lobbying by the banks, the credit card companies, the automobile dealers, and our own organizations including OLA, FISCA and CFSA creating a lot of “give-and-take.” Who knows what the ultimate outcome will be. I’m certain we will evolve into whatever it takes. (For more on this read USA Today’s description of past failures of new financial regulatory reform out of Washington.

And there’s technology. Technology is in our favor. Technology knows no boundaries. Pay attention to Internet solutions. Get acquainted with “peer-to-peer” lending. Educate yourself regarding the origination of the Grameen bank and Muhammad Yunus who won the 2006 Nobel Peace prize for micro-lending. Do you know what he’s doing in New York and Pennsylvania today? Take a look at the Kiva Model and Prosper and Lending Club. Here’s a Business Week article offering some further insight into peer-to-peer lending:

Acquaint yourself with installment lending, open-end credit agreements, closed-end credit agreements, the Credit Services Organization (CSO) Model, collateralized and non-collateralized loans… (all of these are discussed in our Training Manual at PaydayLoanIndustry.com .

And don’t forget to learn what you can implement in your specific location/ model regarding setup fees, one time application fees, credit check fees (even if it’s simply Teletrack), referral fees, check cashing fees, connection fees…

MOST IMPORTANTLY, let us not forget about our customers! THEY NEED US JUST LIKE WE NEED THEM. They’re out there by the millions in the USA, the UK, Canada, Australia, New Zealand, Korea, Japan; they’re EVERYWHERE! And our customers DEMAND our product! They WANT our product! They MUST HAVE our product!

We simply have to organize better, support our industry organizations better, join forces with complementary industries, and prod our customers to support us with videos, email, letters and face book accolades. Most importantly, we must EVOLVE into whatever we need to be in order to SERVE OUR CUSTOMERS. No matter what the Regulators do, OUR CUSTOMERS WANT US! CUSTOMERS NEED OUR HELP! AND WE DESERVE TO MAKE A PROFIT SERVING THEM!!

So… with no end to consumer demand for our products and services in conjunction with an industry composed of some of the most intelligent and creative men and women on the planet, I’m 100% certain the payday loan, car title loan, check cashing …the whole micro-lending niche will not only survive but prosper in the coming decades.

Educate yourself! Read this PaydayLoanIndustryBlog.com . Read The Payday Loan Pundit . Read Nick’s stuff at PDLIndustry.com .

Consumer Financial Service Centers are our destiny! Evolve!! Adapt!! Create!!! You’ll prosper!!!!

THIS IS A MUST DO as a payday loan store owner!!

Go into your location.

Make certain your primary employee(s) are AWARE of what you’re about to do. Make certain they see and hear your every move!

Pull up a customer contract on your computer or pull out a copy of a printed one.

Call the customer.

Here’s what you say:

“Hello CUSTOMER NAME!” This is “YOUR NAME at YOUR COMPANY NAME.”

I see you we’re here in our store on, “DAY OF WEEK and CONTRACT DATE.”

“I’m simply calling you to thank you for your business CUSTOMER NAME and make certain there isn’t anything more we can do for you.”

Then SHUT UP! Just listen!!

Hopefully, your customer will describe a pleasant experience at your store.

If things are in disarray your customer may describe a rude employee.

If things are really bad in your store, this customer may tell you they have not been in your location for the past six months, or one year or…

Employee fraud is occurring! It’s not uncommon, believe me!! When performing audits for clients wanting to buy or sell their payday loan business, we’ve found as many as 22% of the contracts are bogus. They never occurred! The employee(s) made them up!

We audit our stores. You must audit your store(s)!

Your employee(s) must be aware you perform this task RANDOMLY! UNANNOUNCED!! FREQUENTLY!!!

Not only is this a great way to get a real feel of how your business is doing but, just as importantly, you’ll eliminate EMPLOYEE TEMPTATION and generate new ideas for products and services your existing customers want and need.

DO THIS! Do it this week.

And of course, if you can’t reach them by telephone you can text them, you can email them, you can leave a voice message, etc. A critical element of this exercise is for your employee(s) to be aware you do this.

Then email me. I want to know how it went! I REALLY WANT YOU TO DO THIS!!

And if you need help with any part of your business visit our “Vendors & Suppliers”

Jer

This is a brief summary of a car title loan transaction. The exact details will vary depending on the state or province the car title loan takes place in. For a thorough discussion of how to make money in the car title loan industry, refer to our “Car Title Loan Business Start Up Manual.”

A customer who owns their car outright and has the title or “pink slip” drives their vehicle to your location. Most of us who make car title loans require at least the following from our customer:

• A clear title to the car without liens or encumbrances
• A duplicate set of keys
• Proof of insurance including collision
• Driver’s license
• Phone bill
• Proof of employment
• Last 1-2 bank statements
• Last utility bill
• A minimum of 3 references with their complete contact information

Car title loan software is highly recommended for the above.

After the car title lender confirms the accuracy of all the application information (there are a multitude of data bases to perform these verifications) and verifies the “low-book” value of the automobile the car title loan is approved. Typically, the amount loaned on the vehicle (motorcycle, car, boat or RV) is 25% to 55% of this “low-book” value.

The car title loan consumer typically has 30 days to repay the loan principal and fees. Fees average 30% per month on the face amount of the car title loan. Of course, this varies greatly depending on where the car title loan takes place.

If the car title loan consumer is unable to repay the principal and fees on the date due, the car title loan lender usually collects the fees and agrees to extend the principal due date another 30 days.