Category: APR’s


Interest Rate Caps Make Loans Less Available to Subprime Borrowers

Illinois’ imposition of an all-in annual percentage rate (APR) cap of 36% on loans under $40,000 from nonbank and non-credit-union lenders resulted in fewer loans being available to subprime borrowers.

Nearly 80% of respondents in an online survey of small-dollar credit customers in Illinois conducted about nine months after the imposition of the Illinois rate cap answered that they would like the option to return to their previous lender.

How to start a consumer loan business

This is according to a study by Gregory Elliehausen, J. Brandon Bolen, and Thomas W. Miller Jr. that analyzed credit bureau data from Illinois and Missouri.

The study found that interest rate caps make loans less available to subprime borrowers, contrary to the belief that caps make loans cheaper for necessitous individuals.

The study found that the number of unsecured installment loans to subprime borrowers decreased by 44% in Illinois in the six months following the imposition of the 36% interest rate cap.

This resulted in subprime borrowers being unable to replace the loans they lost that were made by finance companies.

Banks and credit unions, which were exempt under the Illinois law, did not materially increase the number of loans they made to subprime borrowers in the same period.

Subprime borrowers reported being unable to borrow money and being unable to pay one or more bills since March 2021.

Nearly 80% of respondents in an online survey of small-dollar credit customers in Illinois conducted about nine months after the imposition of the Illinois rate cap answered that they would like the option to return to their previous lender.

More than 90% indicated that their previous loan had helped them manage their financial situation at the time of the loan.

The study found that binding interest rate caps create loan deserts for some loan amounts, where there is demand but no supply.

Small-dollar loans require a high interest to generate the revenue needed to cover the considerable fixed costs for originating, servicing, and collecting these loans.

The study suggests that lawmakers must fully understand and accept that their actions have consequences for consumers.

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Why Audacious John Chose a Payday Loan vs. a Bank “Loan”

Once upon a time, a consumer named John found himself in a difficult situation.

He had written a check for $100 to pay for an unexpected expense but soon realized that the check would bounce because he didn’t have enough money in his account to cover it.

He knew that if the check bounced, he would have to pay a $35 Non-Sufficient Funds (NSF) fee, adding even more financial stress to an already difficult situation.

Feeling concerned, John started looking for a way to borrow the $100 he needed to cover the check.

He came across a payday loan company that offered him a $100 loan with an interest rate of 15% and a repayment period of 14 days.

John knew that the interest rate was high and that he would have to pay back $115 in 14 days.

However, after considering all his options, he realized that taking out the payday loan was the best decision. He thought it was wiser to pay $115 in two weeks than to pay a $35 fee in one day.

John applied for the loan and was approved in minutes. His loan proceeds were deposited into his bank account within minutes!

He used the loan to cover the check and avoided the NSF fee.

He knew that his income was stable enough to pay back the loan in 2 weeks, and he made sure to budget accordingly.

Two weeks later, John was able to pay back the loan on time, and he was relieved that he had avoided the $35 NSF fee.

He felt proud of himself for making the intelligent decision to borrow the money he needed and for being able to pay it back on time.

He learned the importance of considering all options and the potential consequences before making a decision and also the importance of budgeting.

He also made sure to have emergency funds for unexpected situations in the future to avoid having to take out a payday loan again.

Typical Bank Overdraft Example (NSF’s are really payday loans by banks and credit unions!)

Overdraft Example:

100 X 365/6 X(170/100-1) = APR

6083.33X.70 = 4,258.33% APR

Total cost to client = $175.00


If a bank customer overdrafts their account by $100 they can be charged an initial $35+ Overdraft Fee for the 1st day, and an Extended Overdraft fee of $35 on the 6th day. 

Typical Payday Loan Example:

John borrows $100 for 14 days

Payday loan lender advances $85.00

On payday, John pays the lender a $15.00 fee + the $85 loan principal.



100 X 365/14 X (115/100 – 1 = APR

2607.14 X .15 = 443.21% APR

Total cost to client = $117


A 36% APR on a 2-week loan = customers pay $1.38 per $100 borrowed.

Learn how to start a consumer loan business! Your inventory is MONEY! What could be better? Zip!


Consumer Loan APR Rates

By: Jer Ayles

FALLACY #1: Payday lenders, car title lenders, installment lenders, and all small-dollar loan lenders can earn a profit under a state-imposed 36% annual percentage rate cap.

FALLACY #2: Small-dollar loan customers should simply go to a bank rather than me. My worst critic knows that banks DO NOT WANT my customer! Banks think my customer is a giant PAIN! My customers are not comfortable inside a bank. If you’ve visited a bank lately, you know it requires an act of god to even talk with a banker. Fuhgeddaboudit!

FACT: A report by Professor Victor Stango, “…a 36 percent cap eliminates payday loans. If payday lenders earn normal profits when they charge $15 per $100 per two weeks, as the evidence suggests, they must surely lose money at $1.38 per $100 (equivalent to a 36 percent APR.)”–Economists Robert DeYoung, Ronald Mann, Donald Morgan, and Michael Strain, Federal Reserve Bank of NewYork  

So-called consumer protectionists and competitors [think pawn shops, banks, credit unions, and lenders servicing 640+ FICO consumers via long-term, $3000+ loans] lobby hard for capping interest rates at 36%.

A 36% Annual Percentage Rate Cap in the real world =

  • $100 borrowed would generate $1.38 per month in interest.
  • That’s equivalent to $.10 per day.
  • A $100,000 “book” [portfolio – “money on the street,” would earn $36,000 per year in top line revenue.
  • In other words, $36,000 per year or $3000 per month GROSS.

The Reality?

  • I cannot pay my storefront rent with $3000 in monthly fee revenue with a $100,000 portfolio!
  • I need 2.5 employees. [How much $$$$ in wages and benefits is that in your locale?]
  • My average cost of capital is 12%.
  • Bad debt. My net chargeoffs are 18%.
  • My CAC is $185.
  • Additional line item expenses include insurance, security, underwriting, phones, utilities, licensing, state audit fees, collections, text messaging fees, and loan mngt. fees, office expenses…
  • Taxes.
  • Accounting, legal & professional fees.
  • Unlike credit unions, various community groups & banks, my business is NOT subsidized.
  • While my competitors technically provide <36% loans to a limited pool of subprime consumers, they evade the 36% APR cap by selling expensive insurance products to their customers, products that are NOT included in the loan’s APR calculation. The result? 180%+ APRs.
  • My customers WANT & NEED my loan products! They know my loan product is expensive. I tell them it’s expensive. The fees I charged are plastered all over the walls of my store and on my website. My team doesn’t hide our fees. EVER! There is no need.
  • My customers desire loans of $100 – $500. Who is going to take a chance on them? Not a bank? Not a credit union. Their friends and family, who my customer is too embarrassed to ask for a loan, are OFTEN in the same boat. Where to turn in an emergency? Food, Car repair, medicine, rent…
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National 36% APR Cap Introduced

A National 36% APR CAP INTRODUCED! Lenders, NEED HELP? We have STRATEGIES. Reach out to

“WASHINGTON – A bill to protect consumers who borrow with consumer loans has been introduced by U.S. Senate Majority Whip Dick Durbin (D-IL) and other lawmakers.
The bill, known as the Protecting Consumers from Unreasonable Credit Rates Act, would cap fees and interest on consumer loans at an Annual Percentage Rate (APR) of 36 percent. This is the same limit that currently exists for loans marketed to military service members and families.”


Rational Discussion: Why People Focus on APR and Why They Shouldn’t

Guest Post by Pawnbroker Steven Adsit: Recently, in a pawnbroker forum, the discussion turned to State APR [Annual Percentage Rate] Caps on Payday Lenders. Some pawnbrokers voiced opinions that Payday Lenders were predatory and charged too much. Others defended them and said the rates were needed based on risk and cost. I want to discuss some of the ideas and points that were made.

Specifically, I’d like to review the Payday Loan Model as it compares to Pawn Loans. This includes the key differences for consumers, their impact on the lending process and APR, and a general discussion on why legislation may not favor pawn lending. Perhaps most significantly, I want to provide talking points as to why rate caps are dangerous for consumers.

“Payday Lenders Have a Very High-Interest Rate”

Well, yes, it’s high, but it likely needs to be. Most people see what seems like a high rate and don’t put much thought into it. To put a very complicated P&L into a simple statement: a business needs to make more than it spends. What it charges for its service is a direct reflection of that. The important point that many forget or don’t even consider: Payday Loans are non-secured loans. Many have 25-45% Loss Rates. Picture your pawn loan balance: what would happen if 25-45% of your Pawn Loan Collateral just disappeared? You have nothing to show for it, you gave them the money; they gave you nothing and just disappeared. You have nothing to sell; now picture what that would do to your sales.

Payday Lenders’ rates need to be high to offset the loss from bad loans. Most Payday Lenders do not check Credit Scores which makes it hard to establish the “likelihood to repay.” While this model allows credit access to more people, this essentially forces all customers to pay for the significant volume of borrowers who default.

People and lawmakers see a high-interest rate and immediately vilify those businesses assuming they are predatory. In fact, the APR is ALL they see; the APR is the focal point.

Payday Loan APR Chart

True APR Chart for Loans

To use an industry comparison, think of a diamond shopper. Customers often come in and ask to see your 1ct stones. The Size is the focal point, they don’t ask to see your VVS stones or your EX EX EX stones. Customers do this because they only see Size as the main factor. We all know there is much more to the diamond’s cost than the size shows, just as there is more to a loan cost than the APR. However, the public sees diamond size as the main factor, just as they see APR as the main factor.

Payday Lenders have a high APR, but I’ve seen many Payday Lender’s books, and they aren’t making “obscene” profits with their high rates. In fact, I often wonder how it’s worth it to them. But you don’t need to see their books to determine this; all you have to know is that when the state forces them to lower their rates, they go out of business. If they could make a profit on the lower rates, they would; I assure you none of them want to close down.

There is historical evidence that Payday lenders were usurous in the beginning when there was no regulation, mostly because of the cycle of re-borrowing that often occurred. The free market competition began to drive those rates down, but by that point, most local governments had already begun to regulate them. And perhaps that was justified. The problem is they didn’t stop with the initial regulatory limitations. At some point, in many states (each state is different), Payday Lenders ran on much lower APRs than they started with and thus were no longer considered usurious. But the stigma had already stuck, and they became a focal point of many politicians. Thus, regulations continued. In many states, Payday lenders are no longer able to operate at all profitably.

The point here is that APR is not an accurate representation of charges and costs. What may appear to be a high rate may not be unjust. Rates are usually in proportion to the cost of doing business. This is a direct relation to pawn. This is a direct relation to any lender. We have to look below the surface to know the cost of doing business and how it is structured. This is how some lenders can charge less, and some must charge more. APR is not an accurate representation of business operations, but unfortunately, it’s all most people see.

This Cost of Business Factor is, in fact, one of the best arguments FOR pawn. Because we hold collateral, we can operate at a lower cost than a Payday Lender. 25-45% of our loans don’t just disappear because they are collateralized, thus protecting the lender from loss and, in fact, saving the customer in the end. Non-Recourse means the customer is free and clear. This saves the customer from collection agencies, legal fees, etc. etc…

Pawn is the BEST business model for servicing the population with a lower credit score. Non-Recourse is the Key to our superiority.

The fact that Sub-Prime Credit Lenders exist, and have always existed, proves that the Industry needs to exist. Obviously, there is a demand for loan products for the unbanked, un-bankable, and even the banked who want fast and easy access to cash. Denying access to a legitimate service that consumers want and need is an unintended consequence of rate caps.

Banks: “A bank can offer a lower rate.” Banks mitigate risk by using credit scores. They don’t see a 25-45% loss because they wouldn’t even loan to that customer in the first place. And if the risk is higher (Low Credit Score), they charge more. That’s one factor that lets them stay profitable at a lower rate. There are more…

A bank charges Loan Costs directly to the customer. Banks require you to obtain insurance, appraisals, home inspections, and other costs BEFORE you qualify for the loan. This is all paid for by the borrower as part of the qualification process, thus allowing the bank to charge a lower APR.

Imagine if someone brought a diamond into your store and wanted a loan. If you used the Bank Model, you would tell them, “OK, you must first Pay to Ship this to GIA, pay to have it graded to find out its 4C’s, then you must pay to have it Appraised for Market Value, then you must pay the Servicing Fees and Administrative Fees for me writing this loan, then we will give you the loan.” If that was the case, then, of course, you could charge a lower APR. A bank makes the consumer pay all the costs then just sits back and collects the interest! If they added all the upfront costs into the APR, it would certainly result in a higher APR. But because the model does not work that way, the masses simply see a lower APR and give them a pass.

For a long-term bank loan, the cost is all at loan origination (Which is mostly paid by the customer directly), and long-term servicing of the loan is very affordable. The profit on a lower interest rate is likely higher on the P&L than a high-Interest Payday Lender or Pawnbroker with short loan terms and high overhead, and a lower cost of capital.

Cost of capital: Most pawnbrokers operate on borrowed money. Pawnbrokers have to pay for the money they loan out. Banks pay almost nothing for the money they lend out. Payday lenders typically pay 12% – 20% for capital to “put on the street!”

At a bank, when an “insufficient funds” [NSF] check is paid by the Bank, allowing an overdraft, the fee is often around $35. This is essentially a loan. What’s the APR on a $10 Overdraft Loan with a $35 Fee? [1800% Take a look at the Chart Above!]

Banks are selective as to whom they will lend. Thus, an alternative service must exist to service those that the banks will not… And the risk is much higher; thus the cost is higher; thus the cost to the customer is higher…


Often, when pawnbrokers think of 36%, they think of “3% monthly loans.” This is incorrect. APR is calculated to the day. A $100 loan picked up in 15 days would collect $1.50, not $3.00.

Fees: Most low-interest states allow fees to be charged: Storage Fee, Origination Fee, Lost Ticket Fee, Maintenance Fee, etc., etc.

When Pawnbrokers in Low-Interest states add up the fees charged and calculate to the day (not to the loan), they are well over 36% APR. (Remember the bank fee schedule comparison from above.)

It’s very important to note: Many of the states that have passed Payday Loan Rate Caps have INCLUDED ALL FEES IN THE APR CAP. Meaning the total of ALL cannot be above 36%. NO FEES! This would end even the largest pawn operations with the lowest cost.

Side Note: Speaking of Storage Fees, I have numerous customers who tell me they only use us for storage. They get a loan saying, “I know it’s safe and insured, and I’m happy to pay the monthly storage fee”; should that even be called a loan?

Low Rate Ripple effect on Pawn loans – Unintended Consequences:
States with lower Interest rate regulations see minimum loan amounts way up in the hundreds, while 20% states see minimum loans at just $5. National average loans are in the $80-100 range, so there is an obvious demand for smaller loans. Rate Caps force lenders to have higher minimum loan amounts. This cuts out the lower-income borrowers leaving them with no credit options.

Risk mitigation: Low-interest states see collateral lenders ONLY lending on Jewelry and other small items with little risk and a small physical footprint. 20% state pawnbrokers will take almost anything for collateral, thus increasing credit availability to the customer. This is also important to remember as Jewelry is becoming less and less popular as a consumer good.

Loan vs. Sell Price: Low-interest states will offer to BUY at a higher price, Loan at a lower price. (15-day purchase hold vs. 90/120-day loan hold). In many cases, this forces the customer to sell out of necessity when they really would rather keep the item. The Buy vs. Loan value difference becomes especially large with the rapid value depreciation of electronic items, such as Tablets, Laptops, and Smartphones (a smartphone can easily lose 30% value in 120 days).

Keep in mind how easy it is to sell things online for a customer these days… Pawnbrokers beat out Facebook Marketplace because we offer loans; they don’t have to give up the item, not in the scenario where they need more money and the pawnbroker has to offer less to loan. When forced to sell, the customer pays more to replace that item later at retail price than the interest they would have paid if they could have gotten a loan.

Low-interest pawn models only work with huge loan balances. Only a select few can survive. All power is then concentrated, and no one can enter the market because the startup is cost-prohibitive. This creates a huge barrier to entry for the industry. There aren’t many small business opportunities left in this country. Most government regulations create a climate where only large corporations can exist. There aren’t many moms and pops that can open a store and hope to have a million-dollar loan balance in a couple of years. And even if there were, this model can only work in large, densely populated cities. A low-interest rate pawn shop is not sustainable in a less populated city or area. This, in fact, removes access to credit for people who need it and want it. This would leave the majority of the country with no access to a pawnbroker.

Lack of Competition is bad for the consumer, and in fact, it’s bad for the pawnbroker. How many services are included for free in a 20% state: Text Reminders, Free Grace Periods, Postcard Reminders, enough employees to prevent a long line wait (good customer service), Insurance, Security? Etc… These all have a cost!

Reducing APR limits and free services actually lowers the performance of the business; so much of what we do to attract clients is motivated by competition and profit. It encourages us to innovate and try new things. This is better for everyone; business owners, all consumers (not just our direct customers), and the entire industry as a whole. We all want to “give ‘em the pickle” as much as we can, however with very limited profit, that is hard to do. (Hopefully, only a few of you had to google “Give ‘em the pickle”)

Rate Competition exists naturally! In free-market 20% states, you will see “Jewelry Only” pawn with lower rates, or Take Anything Pawn with adjusting rates. Some stores offer different hold periods, and some offer reduced rates for large loans. The competition allows this and leaves choices and options for the borrower.

This is an appropriate time to mention that pawnbrokers serve much more than just low credit and unbanked consumers. The simple fact is that we serve people of all income levels. A pawn loan is fast, safe, and discreet. We loan to business owners, entrepreneurs, middle-class borrowers, upper-class borrowers, and many others. Our fast, easy process, customer service, and no recourse loans are extremely attractive to customers at all income levels.

Bureaucratic enforcement of low APR limits all these options and lowers the performance of the business, constraints operating models, limits consumer choice, and, most importantly, denies access to financial services to millions.

Buy / Sell

“If they lower the interest rate, I’ll just become a Buy / Sell Shop.” That was a possible thought before Craigslist, Facebook Marketplace, Poshmark, Stock X, Let Go, etc., etc. Now, loans are all pawnbrokers have. The ability to repay and KEEP the collateral is what sets us apart. When forced to sell, very few will sell you an item at half value when they can put it up on Marketplace for 75-90% value and sell it quickly. (We also provide a safe way to sell; don’t forget to remind people of that when you remind them that they can KEEP their items)

What is the Buy / Sell effect on the consumer? All evidence illustrates the customer’s need for loans, not a place to sell. The problem is de-collateralizing people. Forcing them to sell products to get money destroys their asset base and reinforces a cycle of poverty. The cost to replace an asset is much higher than the cost of a loan, thus putting the consumer even further behind.

Some Lenders used to only charge 36%. “My Grandfather Ran a store for 50 years and only charged 3% per month.” As we clarified before, they charged 3% per Loan, not APR. Also, most charged some fees. But let’s move on….

Simply put, your grandfather did not have the overhead and risk we have today. Not even close. In fact, not even in the same ballpark.

Years ago, I was looking at an old pawn ticket (yes, I collect them) from 1936 that showed a 3% monthly Rate (not APR, but 3% per loan/month). I wondered how they could do that. I decided to see what it would look like if I did that. I did a quick little experiment on my P&L. It wasn’t perfectly scientific, but it illustrates the point.

I added a Column to my P&L called “1936,” and I adjusted each line item to represent the 1936 estimated cost and rate. I changed my annual pawn interest income to reflect proportionately a 3% rate (which is under 3%). Then I adjusted each expense to reflect an estimate of the 1936 cost. Most of the costs would not exist in 1936.

Yep, you guessed it. I would have made a higher profit operating in 1936 at 3%/month than I do operating in 2022 at 20%/month.

Look at your line items. How would they look 50 years ago?

  • Did your grandfather pay $1000 per month to operate Air Conditioners?
  • Did he pay to build and maintain a Website?
  • What % of profit did he pay to third-party online retailers?
  • How much was his Pawn Insurance?
  • Unemployment & Workman’s Comp Insurance?
  • Payroll provider?
  • Credit card processing?
  • Accounting expenses to figure it all out?
  • Security system & monitoring?
  • Surveillance system?
  • Sigma, XRF, Synthetic Diamond Tester?
  • OSHA / ADA Compliance Costs?
  • Licensing Costs?
  • Bond Costs?
  • Software Cost, Computer Maintenance, Smart Safe Cost? Broken/Locked electronics write-off?
  • Property Taxes?
  • I’ll stop there….

I could make this list go on for an entire page. Look up for a moment and look around you at everything you have and need to operate. The fact is we have a high overhead, and it gets higher every year.

Remember also; a lot of the things your grandfather did himself are now too complicated and time-consuming to do alone. They must be hired out… Payroll, Credit Card Security Compliance, Website Building…

Worry about Lending Caps? Voters don’t understand. If they see a ballot title they like, they vote for it with no understanding of the ramifications. The government never takes away regulations. They only add. And they get larger and larger. Remember when the MLA didn’t include pawn transactions? Well, guess what, it got larger and larger, and now it does. In a few years will, we will be saying, “Remember when they only capped Payday Lenders?”

This country is quickly heading to a full Government or Giant Corporation control model, if not Government control, then Giant Corporation. Bernie wants the Post Office to give loans. Amazon is offering Loans now… Google (Alphabet) has a hand in some loan companies. Facebook has some loan programs. I’d say those guys might have an upper hand in your operation. And when a Government regulation puts you out of business, you can bet that one of those big corporations will still be able to do it somehow.

Voters don’t understand any of this. Voters simply see a high rate and think they should vote it down. They do not understand Costs, Profit, Loss, Overhead, or Cost of Loan Acquisition… They don’t understand the ripple effect and how Forcing/ Manipulating one thing will affect another.

A ballot initiative might have this title: “Put a Rate Cap on Loans.” But voters don’t understand the consequences of this. Perhaps the title should be “Force all Small Lenders to Close.”Perhaps it should say, “Take all credit options away from people with lower credit scores.” How about these titles: “Only allow Large Corporations to offer financial services, no small businesses allowed” or “Prevent the unbanked from getting financial services, Increase the profits of banks collecting bad check fees, “Force people to sell personal property to secure funds, force property transfers to only happen in unsafe and unregulated environments.”

This is the ripple effect. Do you think those ballot titles would get the same number of votes?

Most voters don’t understand credit as it relates to our industry. How would they feel if they were told suddenly that they could no longer use a Credit Card? Pawn is simply a credit card to our customers, but voters don’t make that connection. Just as a credit card is essential to many, Sub Prime Credit Loans are essential tools for a large portion of the population. People need actionable tools to manage cash flow issues. They do not need regulations denying them access to help.

What to do? I hope this does not sound like Doom and Gloom. I try to stay upbeat and offer solutions. It’s hard at this moment. I’m thinking about how much I’ve spent on additional security this year, I’m thinking about how much payroll cost has gone up, I’m thinking about how much property taxes have gone up, and how much more all taxes may / will go up. I’m thinking about how many proposed legislative items will directly raise costs and prevent parts of our industry from operating as normal.

I remember operation Choke Point and having my Credit Card Services Stop on a busy Friday without notice, then having it happen two more times in the next months, then getting a 30-day bank termination notice.

I’m also thinking of how proud I am of what I do; how proud I am of what all Pawnbrokers do. I’m thinking about how hard we work to provide a service that is desperately needed. I’m thinking about how many jobs we provide and how we fit perfectly in the economic cycle. I’m thinking of how accepting and understanding pawnbrokers are: of all people from ALL walks of life. I have never met a more well-rounded person than a pawnbroker.

So what can we do? Educate People and Leaders! If people understood that we provide a service that no one else is willing to do. If people understood that we don’t make “Obscene” profits. If they understood the crazy hard work required to operate. If people understood the high overhead and risk compared to other lenders. If people understood that collateral loans don’t discriminate based on anything: credit score, race, sex, age, income, religion, etc. If people understood how we provide safe financial access in an unsafe world. They need to understand all this BEFORE they get to make a knee-jerk vote that they don’t understand.

It should not be in the government’s interest to deny consumers access to a legitimate service they want and need. This must be kept in the mind of legislators, as the public does not understand this when voting. It should never even reach a ballot!

I once heard someone say to a pawnbroker, “You guys charge too much. My brother got a loan and couldn’t afford to pay it back.” The wise pawnbroker replied, “Well, why didn’t YOU just give him the loan?” The man thought for a moment and then said, “good point.”

We provide a much-needed and important service that no one else can or will provide. This is a Fact. This is the fact even in today’s crazy modern, almost cashless, digital, connected world.

The NPA tirelessly helps educate lawmakers and the public. You should help them do that. You should help your state organization do the same. Many already do this, but many don’t. If you don’t, now is the time to get proactive. Join the NPA, Join your state association. Once you join, help them, your money is not enough. Then, talk to your local officials, police, sheriff, county commissioner, mayor, fellow business owners, customers, and anyone you can. Don’t just tell them you are a pawnbroker; tell them how great pawnbrokers are and explain why.

I’ll end with a suggestion for further reading: PAWNSHOPS, BEHAVIORAL ECONOMICS, AND SELF-REGULATION by SUSAN PAYNE CARTER & PAIGE MARTA SKIBA, 2013. This research article is scientifically conducted and dives deep into consumer behavior in relation to pawn. Here is an excerpt from its conclusion:
“We view pawnshops as a potentially attractive alternative to other forms of high-interest credit. Pawnshops offer simple transactions in which anyone can participate. No credit is needed, and no credit check is conducted. Interest rates on pawnshop loans are lower than those associated with many other types of credit, even mainstream credit. The combination of the existing regulations on interest rates and what appears to be consumers’ self-governing repayment behavior or “self-regulation” seems to work well in this market. While we cannot say for sure what behavioral factors are at play, repayment rates on pawnshop loans, particularly those secured by sentimental items, are high. Some combination of sentimentality, loss aversion, and discounting seems to help borrowers make good on their pledges. A deeper welfare analysis is difficult for us to conduct without additional data, but we are convinced that pawnshops can be a good alternative source of credit. Further research on pawnbroking and its customers will give policymakers, consumers, and academics a better grasp of this ancient and yet still popular and important institution.”

Written by Steven Adsit, a 20-year Pawnbroker, NPA Colorado State President.


Illinois Lenders: How to Remain in Business after the 36% APR Cap

 36% APR rate cap got you down?

We have a solution blessed by one of the premier attorneys in our industry.

Interested in learning more? Email

PS: If you’re a seasoned small-dollar Lender in ANY of the States entertaining a 36% APR Cap, reach out.

Let’s explore…
Jer – 702-208-6736 Cell 

Payday Loan APR Chart

                                                                     True APR Chart for Loans


Consumers Feel The Pain: Nationwide 36% APR Cap Theme Continues: Illinois and Nebraska Go Dark.

Consumers Feel The Pain: Nationwide 36% APR Cap Theme Continues: Illinois and Nebraska Go Dark.

By: Jer Ayles

Fellow small-dollar lenders, vendors, and MOST importantly the 50%+ of U.S. households who do not have access to $500 when the car breaks down, the utility bill is due, the kitchen is bare, the… well, you know what I’m saying! The politics surrounding “the business of lending to the masses” continues to create havoc for the unbanked and underbanked.

[Hint: There is good news below. It “ain’t ALL bad.” Our industry is blessed to have a cadre of savvy, creative entrepreneurs who continually strive to serve the millions of ordinary folks facing daily financial struggles.]

As you read the following, know that simply because our competitors [banks & credit unions who earn billions of dollars in overdraft/NSF fees every year while yielding 1800% APR’s] continue to make it challenging for the masses to access emergency cash, I HAVE SOLUTIONS!

If you’re a seasoned Lender with a portfolio of customers you want to continue to serve and help through these trying times, consider:

  • Go digital. You must be able to carry on via the Internet. Most likely your current loan management software already provides a sleek, easy transition.
  • Secure a lending license in a friendly State. A State that truly cares about its people. I like Texas right now. Our Team has been securing Texas CAB/CSO licenses for 12+ years. We offer a turn-key package. We have “feet on the ground” in Austin. Allow us to handle the intricacies & “go live” in 30 days. City ordinance issues in your State? Not a problem! We have a simple, EZ solution for you.
  • Collaborate with a federally recognized Native American Indian tribe. The “Tribal Model” has come a LONG way since the Scott Tucker days.
    • We’ve assembled a highly experienced Team of financial, legal, tax, asset protection, and business development savants offering introductions to Indian Country. State-of-the-art consumer finance loan products, in combination with integrity, honesty, and community service is our mantra. This is not your Mama’s old school payday loan; although many of our clients do still offer them by the millions annually.

NOTE: For those of you currently partnering with Indian Country and are unhappy with your current relationship, don’t hesitate to reach out! You’ll be pleasantly surprised how easy we can make your transition and more profitable for all parties. Use your existing LMS provider, your proprietary solution, or opt-in to ours. Your choice!

Know too that if you’re in need of:

  • A turn-key, white-labeled Loan App [both IOS & Android: No developers needed!]
  • Superior Instant Wage Verification [IWV] Real-time wages earned data pipe from 70K+ employers including Amazon, CVS, Walmart, UPS, Target, Best Buy… Visit Website
  • Instant Bank Verification [IBV] 100% guarantee we’ll save you money no matter who you currently use for IBV!
  • AI-powered consumer debt negotiation platforms. Our white-labeled platform enables your “Robot” to negotiate 24/7/365 with ZERO HUMAN intervention by your team. Your customer in default does not ever have to speak to a human. Negotiate, make a deal, collect your money! Visit Website
  • All the above white-labeled for YOUR brand!
  • If you’re an investor on the hunt for a superior return on your capital, reach out. The taxpayer-funded stipends will end. Demand for credit will scale. Negative interest rate bonds and CD’s do not make any sense for those of us having capital that must work for us. Inflation is a CERTAINTY!
  • We have the relationships with the Founders of each enabling you to bypass any middlemen!

Reach out to for a confidential exploration. [Be sure to include the topic you are interested in!]

And, if my message here was forwarded to you, signup for my free, monthly take on “The Business of Lending to the Masses” here: Blog [Signup is on the right-side]

Now! Regarding the latest 36% APR developments in Illinois & Nebraska:


The Predatory Loan Prevention Act establishes a 36 percent interest rate cap on consumer loans.
For Immediate Release
The Illinois House of Representatives passed the Predatory Loan Prevention Act today, implements a 36 percent interest rate cap on consumer loans, including payday and car title loans. The legislation passed with a bipartisan vote, without a single member voting no. It is part of an omnibus economic equity bill, one of the Illinois Legislative Black Caucus’ four pillars, sponsored by Rep. Sonya Harper.

In Illinois, the average annual percentage rate (APR) on a payday loan is 297 percent, and the average APR on an auto title loan is 179 percent. Federal law already protects active-duty military with a 36 percent APR cap. This bill extends the same protection to Illinois veterans and all other consumers. Seventeen states plus the District of Columbia have 36 percent caps or lower.
Waiting for Governor to sign this Bill.


What did Initiative 428 change about payday lending practices in Nebraska?

Initiative 428 amended state statute by removing the existing limit that prohibits payday lenders from charging fees in excess of $15 per $100 loaned and replacing it with a 36% annual limit on payday lending transactions. It also prohibited payday lenders from collecting fees, interest, or the principal of the transaction if the rate charged is greater than 36%. Payday lenders are prohibited from marketing, offering, or guaranteeing loans with interest rates exceeding 36% in the state regardless of the lender having a physical office in the state.

Here’s the link: Nebraska Initiative

At the time of the election, Nebraska law limited the loan amount to $500 and the loan term to 34 days.

Payday lending has been legal in Nebraska since 1994 with the passage of the Delayed Deposit Services Licensing Act. The last amendment to the statute was in 2018 by the state legislature. Under the existing law, lenders are prohibited from charging fees in excess of $15 per $100 loan. Loans are also limited to $500. According to the 2019 annual report on delayed deposit services produced by the Nebraska Department of Banking & Finance, the average loan size was $362, and the average contracted annual percentage rate was 405%. The total number of transactions for the year was 507,040.

How many other states have limited the annual percentage rate (APR) of interest charged on payday loans?

As of October 2020, a total of 37 states permit payday lending. Four states—Colorado, Montana, New Hampshire, and South Dakota—have enacted 36 percent annual interest rate caps that prohibit additional fees or charges. Three of those caps were passed through citizen initiatives: Colorado (2018), South Dakota (2016), and Montana (2010). Four states authorize payday lending with limits on APR, but permit lenders to charge extra fees on top of interest. The remaining 29 states authorize payday lending without limits on APR.

Here’s a link to the current Rate Caps by State: Payday Loan Statewide Rate Caps

FINALLY, this 36% APR theme is going to be a dominant issue during the Biden Administration. PREPARE for it!

That’s all, dear readers!

Jer: Trihouse Consulting 702-208-6736 PDT





How to Start a Loan Business Online & Government to Dictate Consumer Lending

Don’t Allow the Government to Dictate Consumer Lending: <36% APR Coming

Thanks for being a loyal reader. I appreciate hearing from you. Let me know if you ever have any questions, ideas, or comments…

As Nobel prize-winning economist Paul Samuelson famously testified in 1969:

“The concern for the consumer and for the less affluent is well taken. But often, it has been expressed in a form that has done the consumer more harm than good.”

“For fifty years, the Russell Sage Foundation and others have demonstrated that setting too low ceilings on small loan interest rates will dry up legitimate funds to the poor who need it most and send them into the hands of the illegal loan sharks.”

“History is replete with cases where loan sharks have lobbied in legislatures for unrealistic minimum rates, knowing that such meaningless ceilings would permit them to charge much higher rates.”

It’s already happened in several States!

Read the original & full text at American Commitment.Org


How to open a loan business


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