In the case of Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, the Supreme Court ruled that Native American tribes are subject to bankruptcy laws like any other creditors.
Lac du Flambeau Band owns an online payday lending operation and argued that their sovereign immunity excluded them from an automatic stay of the Bankruptcy Code when a customer files for bankruptcy.
The Supreme Court, however, affirmed the lower courts’ decisions that such an exemption does not exist.
Justice Ketanji Brown Jackson, speaking for an 8-1 majority, asserted that a congressional statute only overrides sovereign immunity if Congress uses “unmistakably clear” language.
According to Jackson, the Bankruptcy Code satisfies this criterion as it unequivocally includes any and all government entities within its scope, including federally recognized tribes.
One point of contention was whether a federally recognized tribe qualifies as a “governmental unit.”
Jackson argued that the comprehensive nature of the definition of “governmental unit” within the Bankruptcy Code, which includes a broad range of governments of varying sizes and types and concludes with a catchall phrase that encompasses ‘other foreign or domestic governments,’ would naturally include such tribes.
An important part of Jackson’s argument was her interpretation of the phrase “foreign or domestic .”
She argued that pairing these two extremes indicates all-inclusiveness, providing examples like ‘rain or shine’ and ‘near and far.’
She contends that placing this pair at the end of an extensive list signals an intent to cover all forms of government.
Furthermore, Jackson reasoned that if enforcing regulatory authority during a bankruptcy or tax collection can be applied to governmental units, excluding certain governments from this definition would be inconsistent, particularly when these governments, like states and the federal government, also engage in tax and regulatory activities.
Given the governmental functions performed by federally recognized tribes, she concluded that the Bankruptcy Code also categorically applies to them.
Jackson dismissed arguments from the Band and dissenting Justice Gorsuch that the statute does not mention tribes explicitly, noting that the rule is not a “magic-words requirement” and doesn’t necessitate an explicit mention of Indian tribes.
She refuted Gorsuch’s claim of a rigid division between foreign and domestic governments, arguing that all governments fall somewhere on the spectrum between foreign and domestic.
The justices’ near-unanimity suggests a lack of willingness to twist the language of the Bankruptcy Code to exempt tribes from it, especially when such immunity is not granted to the states or the federal government.
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!
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:
ILLINOIS NEWS RELEASE: HISTORIC LEGISLATION TO PREVENT PREDATORY LOANS PASSES ILLINOIS HOUSE
The Predatory Loan Prevention Act establishes a 36 percent interest rate cap on consumer loans.
For Immediate Release
TUESDAY, JANUARY 12, 2021
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.
https://illinoispirg.org/news/ilp/historic-legislation-prevent-predatory-loans-passes-illinois-house Waiting for Governor to sign this Bill.
NEBRASKA NEWS RELEASE
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.
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.
I’ve been pounding the table lately regarding the need for ALL entrepreneurs in ALL industries to collaborate with competent experts who know how to legally prepare you for this litigious society we live in! Yes, I’m well aware of the propaganda! “There are more payday loan stores in the USA than there are McDonald’s.” B.S!
Store count is down. There is this “thing” called the INTERNET.
Everyone has a smartphone. We have a white-labeled app enabling the masses – even those lacking a bank account – to access a few hundred bucks within minutes via a virtual MasterCard, ACH deposits… We enable the borrower to select their own custom payment plan. They choose when and how to pay us back. Our lower loan production costs = lower CAQ costs = lower customer fees < APR’s
Implementation of strategies for asset protection and tax reduction is NOT illegal. Attorney Howard Rosen recently discussed this topic in-depth here: Howard Rosen, Esq.
It’s extremely expensive and time-consuming to secure lending licenses, compliance/regulatory IP state-by-state, followed by annual audits by incompetent government employees. For many entrepreneurs and consumers, the tribal model is a better solution. [Explore here: The Tribal Sovereign Lending Model.]
The payday loan product IS A DINOSAUR! Even ENOVA, the publicly traded lender that originally launched as CASHNETUSA in the ’90s disclosed on their last Quarterly Financial Report that single payment [payday loans] represents 2% of their loan portfolio. And they lent $380,000,000 in this 3-month period! CURO is about the same!
Here’s the latest: More than 12,000 Arizona Car Buyers Eligible for Millions in Relief
PHOENIX—Attorney General Mark Brnovich, along with a coalition of 34 attorneys general, announced today a settlement with Santander Consumer USA Inc., one of the nation’s largest subprime auto lenders, that provides $550 million in relief for consumers, with millions more expected in additional deficiency waivers. More than 12,000 Arizona consumers will receive between $22.7 million and $41.5 million of relief (through restitution checks, in-kind relief, or debt forgiveness). The settlement resolves allegations that Santander violated consumer protection laws by giving high-interest loans to car buyers it knew could not afford them.
“Buying a car is one of the most important purchases a person makes in their life and companies involved in any transaction need to be as transparent as possible,” said Attorney General Mark Brnovich. “Santander knowingly put Arizonans into loans they couldn’t afford, setting them up for years of financial hardship. This settlement holds Santander accountable and provides thousands of Arizona consumers with much-needed financial relief.”
Based on the multistate investigation, the coalition alleges that Santander, through its use of proprietary credit scoring models to forecast default risk, knew that certain consumer segments were likely to default, yet issued high-interest loans to them anyway. Santander exposed these borrowers to unnecessarily high levels of risk through high loan-to-value ratios, significant back-end fees, and high payment-to-income ratios. The attorneys general also allege that Santander’s aggressive pursuit of market share led it to underestimate the risk associated with loans by turning a blind eye to dealer abuse and failing to monitor dealer falsification of income and expenses. Finally, the coalition contends that Santander engaged in deceptive servicing practices and actively misled consumers about the risks of partial payments and loan extensions.
Under the settlement, which is pending court approval, Santander is required to provide relief to consumers and is required to factor a consumer’s ability to pay the loan into its underwriting moving forward.
Santander will pay $65 million to the 34 participating states for restitution for certain subprime consumers who defaulted on loans between January 1, 2010, and December 31, 2019. For consumers with the lowest quality loans who defaulted as of December 31, 2019, and have not yet had their cars repossessed, Santander is required to allow them to keep their car and waive any deficiency balance on the loan, up to a total value of $45 million in deficiency waivers.
The settlement also includes significant consumer relief by way of loan forgiveness. In all, Santander has agreed to waive the deficiency balances for certain defaulted consumers, with approximately $433 million in immediate forgiveness of loans still owned by Santander, and additional deficiency waivers of loans that Santander no longer owns but is required to attempt to buy back from third parties.
Santander will also pay up to $2 million for a settlement administrator who will administer restitution claims, and pay an additional $5 million directly to the investigating states.
Arizona Consumer Settlement Terms
Consumer Restitution: Over 12,000 Arizona consumers who defaulted on loans between January 1, 2010, and December 31, 2019, will receive a check for at least $224.80, totaling over $2.7 million in restitution for Arizonans. This dollar amount is subject to increase depending on how many consumers can be located nationwide. If additional funds become available, a second check will be mailed out.
Loan Forgiveness: Arizonans could receive up to $38.7 million in loan forgiveness. Of that amount, approximately $19.9 million for 1,425 loans will be forgiven immediately ($13,964.91 average per loan), and an additional $18.8 million for 1,966 loans that have been securitized by third parties will be forgiven if Santander can repurchase them ($9,562.56 average per loan).
In-Kind Relief: $45 million of in-kind relief will be provided to consumers with the lowest quality loans who defaulted as of December 31, 2019, and have not had their cars repossessed. Consumers can keep their vehicles and Santander will give consumers the title and waive any outstanding balance on the loan.
Consumer Protection: Additionally, the Arizona Attorney General’s Office will receive $30,000. The funds will be deposited into the Attorney General’s Consumer Revolving funds to be used for future consumer enforcement actions.
Santander has already identified the eligible consumers for each category listed above, and Santander or the claims administrator will attempt to contact those consumers. If you think you may be eligible or would like additional information, please visit http://www.santandermultistateagsettlement.com. Additional information on restitution checks and expected timelines will be available in the near future.
Moving forward, Santander cannot extend financing if a consumer has a negative residual income after taking into consideration a list of actual monthly debt obligations. Additionally, Santander is now required to test all loans that default in the future to see if the consumer, at the time of origination, had a negative income. The test must include an amount for basic living expenses. If the loan is found to be unaffordable and the consumer defaults within a certain amount of time, Santander will be required to forgive that loan.
Santander is barred from requiring dealers to sell ancillary products, such as vehicle service contracts. Santander will also implement steps to monitor dealers who engage in income inflation, expense inflation, and power booking, and Santander will enact additional documentation requirements for those dealers. Further, whereas Santander previously allowed these problematic dealers to waive documentation requirements on income and expenses, Santander no longer will allow such exceptions. If Santander has to use a defaulted mortgage or rent payment value, the amount of input must reasonably reflect the payment value for the geographic location. Finally, Santander will maintain policies and procedures for deferments, forbearances, modifications, and other collection matters that all employees must follow.
Joining Attorney General Brnovich in the settlement are the attorneys general of Illinois, California, Maryland, New Jersey, Oregon, and Washington, who comprise the executive committee; as well as the attorneys general of Arkansas, Connecticut, the District of Columbia, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, West Virginia, and Wyoming.
Are you ready to jump into “the business of lending to the masses?” Are you tired of kicking tires, Googling your time away day after day trying to figure out how to loan money PROFITABLY while you sit on the beach, “work” in a coffee shop anywhere in the world, and build an asset that ordinary folks everywhere on our planet ALWAYS want and need? MONEY! Go big or go small. It’s your call.
There has never been a better time to invest in yourself and open up this new paradigm of tools for lending delivered immediately to your Inbox. This is not rocket science. The pieces to this puzzle have been built. You choose how to assemble them. Websites, apps, customer acquisition, underwriting, processing, funding delivery systems, cloud-based loan management software, collections, defaults, capital, pro formas, integrations, lead providers… These topics and more are in Version 74 of our “bible!”
CORONA? Yes, a real shame! Many incumbents will not survive, Their cost of capital was too high, they were caught over-leveraged and they failed to embrace the latest MOIP [Money Over Internet Protocol] strategies. What’s that mean for those of us left standing? OPPORTUNITY! The masses still need MONEY. More than ever! And, we will survive and prosper post-Corona! Are you ready?
Anyone participating in financing or servicing a tribal lending enterprise (TLE) is aware of the controversies involved in “the business of lending to the masses.”
PS: Know that the likelihood that your business, NO MATTER THE INDUSTRY, will be attacked by plaintiff class action attorneys at some point in time is CERTAIN! The USA graduates more attorneys than scientists or doctors! These are bright students carrying a LOT of student debt. The USA economy is the most litigious country on planet earth. And, there is the topic of divorce, inheritance, taxes… As you read the following, consider your position. Howard’s theme is NOT to scare you out of your wits nor counsel you against participating in an industry having inexhaustible demand while offering investors and entrepreneurs a SUPERIOR ROI with the additional opportunity to be of service to your investors, employees and your community. Howard’s goal is to implore you to lay the appropriate foundations – no matter your industry – BEFORE catastrophe causes you, your loved ones, and your employee’s undue distress.
Notwithstanding the facts that numerous court cases have supported tribes’ ability to carry on these businesses, and that, in 2013, 31 congressmen and women signed a letter opposing federal attacks on tribal lenders, state-based and class action attacks continue. The Think Finance and American Web Loan settlements of $55 million and $141 million, respectively, are real-world examples of just how risky these businesses are.
Recent cases show that anyone providing services to a TLE, or even to a service provider of a TLE, should be concerned about potential lawsuits. This includes owners and C‑level officers of lead providers, marketing companies, loan management system providers, payment processing companies, funding providers, consultants, etc. Given these large payouts, we anticipate that the class actions firms will only get more aggressive. They smell blood in the water.
Given the above, please ask yourself these two questions:
Are you confident that you will never be sued?
Are you confident that if you are sued, you will be treated fairly by the U.S. legal system?
Assuming you answered NO to either of these questions, and you are financing, servicing, or in any way connected to a TLE, what should you do to protect yourself because of these risks?
Our law practice has been 100% concentrated on wealth preservation planning for almost thirty years and has represented third-party lenders, servicers, and mangers in these TLE businesses. No creditor of a client has ever been successful in reaching assets held in one of our clients’ trusts.
The key to successful wealth preservation is advance planning: implement the protective plan in advance of any claim!
Everyone’s case will be different, but certain principles are always applicable to wealth preservation planning. First and foremost, this is a legal matter, and it must only be handled by an experienced and qualified attorney. How can you be certain your attorney is experienced and qualified to properly implement this type of planning for you? Ask the attorney the questions set forth here:https://protectyou.com/2019/04/how-to-select-an-asset-protection-attorney/
Some general principles of wealth preservation planning: A properly structured offshore trust is the Gold Standard for wealth preservation. Why? First, considering protecting cash and publicly traded securities, if (and this is a big IF the offshore strategy is properly structured and implemented,) no court in the United States will have the power to undo the plan. Stated another way: No court in the United States will have the ability or power to force the trustee to return the assets, nor will any U.S. court have the ability to seize trust assets properly held outside the United States.
Here’s an example of how this works:
Jim’s company had provided services to a TLE for 10 years. During that time, Jim managed to save $30 million from the servicing fees he earned. Jim invested his savings in publicly traded securities held in a US brokerage account. Being aware of the risks from his business, Jim decided to be proactive and protect his wealth, so he implemented the offshore trust protective strategy described above.
As part of the implementation of his offshore trust, Jim’s brokerage investments are transferred to an account held in the name of his offshore trust at a Swiss financial institution. Two years later, he is dragged into a class-action lawsuit. The US case goes badly for Jim! He loses and is hit with a $50 million judgment. Jim has no substantial assets located in the US, so the judgment creditor will have to try to collect the judgment from Jim’s Cook Islands trust.
The first thing the creditor will do is to try and domesticate the judgment in the Cook Islands. Since Cook Islands law does not recognize such foreign judgments, that will not work.
Where does that leave the creditor? Having to start litigation all over again in the Cook Islands using Cook Islands lawyers (who will not take the case on a contingency basis – payment upfront is required). In this case, the statute of limitations will have already expired in the Cook Islands, so the creditor is out of luck – the case cannot be brought.
If the statute had not yet expired, and the creditor starts litigation in the Cook Islands, the trust can be moved out of the Cook Islands (even in the face of a local restraining order) to another suitable jurisdiction, thus requiring the creditor to start the litigation all over again with yet another set of new lawyers.
What about Jim? Since Jim is a beneficiary of his trust, the trustee can make payments directly to Jim, or, for Jim’s benefit. The latter means that the trustee can pay the auto lease on Jim’s car, his mortgage payment, his children’s tuition at college, Jim’s credit card bills, etc.
THE POINT? Jim can go on with his life! Unfettered…
In these cases, a settlement is often reached – on our client’s terms. Otherwise, the creditor will never collect a dime, and those plaintiff lawyers only get paid if they collect!
Effectively protecting real estate requires the utilization of an ancillary strategy together with the offshore trust. The belief that real estate can be effectively protected by enclosing it in a box called a limited liability company, limited partnership, or corporation does not take into account the reality that a “result‑oriented” judge (remember being treated fairly?) can disregard the entity.
The only effective method of protecting real estate is to make the real estate “not worth going after” for a creditor. The only way to do that is to reduce the value of the property. That value reduction is accomplished by encumbering the property with a loan from an unrelated independentlender (the key to the effectiveness of this strategy) and transferring the loan proceeds to the offshore trust (a strategy our firm developed decades ago in conjunction with an offshore bank and independent lenders).
Think about it: Would you spend your time and money to sue someone if all they had was a piece of real property worth $1 million encumbered by a $950,000 mortgage? This real estate strategy has been used successfully against the U.S. government. For more on this strategy, watch this short video:
Some assets cannot be protected with an offshore trust. Take your IRA, for example. You cannot transfer a traditional IRA to your trust without incurring a tax liability. So what can you do to fully protect your IRA? Utilizing a strategy developed by Donlevy‑Rosen Rosen, P.A. almost 20 years ago, effective protection of the IRA assets is accomplished by causing the IRA (using a specialized U.S. IRA custodian) to establish a single-member offshore limited liability company governed by properly structured specialized operating documents containing specific protective provisions.
The IRA contributes (transfers) all of its cash and securities to the LLC in exchange for a 100% ownership interest (member interest) in the LLC, leaving the U.S. IRA custodian directly holding only a member interest in the offshore LLC. The LLC is now the “investment” of the IRA. The independent offshore manager of the LLC will place the transferred cash and publicly traded securities into an offshore financial account (likely in Switzerland) which can be professionally managed by a U.S. investment manager. At this point, the cash and securities in the LLC (the IRA assets) will be beyond the reach of any U.S. court & fully shielded from U.S. creditors (analogous to the offshore trust). For more on our exclusive IRA protection strategy, see the short video on our home page: https://ProtectYou.com/ and see our newsletter at:
Again, the key to effective wealth preservation planning is to move your assets (or, in the case of real estate, the equity) beyond the reach of the U.S. legal system. Take the power away from the U.S. legal system to undo your planning and reach your assets.
To repeat what was said above: Only an experienced and qualified attorney should be retained to implement this type of planning.
For more information, call Howard Rosen, Esq. at 305-459-3289 (eastern time zone).
A personal plea from Jer: When you reach out to Howard, PLEASE mention Jer 🙂 Perhaps Howard will show me some MERCY in the future… and YOU as well.
And, if you and your Team would like to explore a collaboration with a federally recognized Native American Indian tribe to offer loans to U.S. residents without having to secure state-by-state licensing or investing years in an attempt to partner with a bank, reach out to Consultants4Tribes.com for a personal introduction.https://www.Consultants4Tribes.com
Scott Tucker has been portrayed by Netflix, American Greed, The WSJ, The NYT… and on and on as a pure, 100% scum bag payday loan lender and loan shark for years. When I speak to investors, Wall Street, Family Offices, reporters, employees and peers, the name “Scott Tucker” is always part of the conversation.
Below, I give you your opportunity to hear directly from Scott.In his own words, you will gain insight into his side of his story. No matter your preconceived thoughts about Scott Tucker and his payday loan business escapades, the interview below will most likely change your mind in some respects and inform you as to the lengths our government will go should they choose to make an example of you! [NOTE: BOOKMARK THIS PAGE in order to listen to all 5 podcasts!]
Scott Tucker Payday Loans
No doubt about it, Scott employed some pretty outrageous business practices. Scott has a big ego and he pushes life and business to the limit!
And, as we all now know, so do the FED’s.
Scott did a 2.5-hour interview with a white-collar criminal consultancy group focused on helping defendants in criminal cases prepare for sentencing, prepare for prison, and prepare for the best possible outcomes. [Link below.]
I know the payday loan space very well. I know Scott Tucker.
I too opened my first location in 1998. There were “rules” and “best practices” and yet it’s true that there was a bit of a “wild west” mindset in the early days of payday loan lending. The industry grew from virtually zero to billions of dollars in funded loans overnight!
Borrow $100 and two weeks later, payback $115. No big deal. Currently, 14M to 20M+ USA customers use payday loans, installment loans, and car title loans to solve their financial challenges. [Imagine China, Brazil, India small-dollar loan volume!] It was simple for an entrepreneur to scrape together $10K – $50K, open a little payday loan store in a strip mall and start handing out money to people! You had no clue if they would honor their agreement with you and pay you back. Collections! Ugh!!
IT WAS NUTS!
Some of us made MILLIONS of DOLLARS doing this! Others went broke! And a few, like Scott Tucker, went to jail! Scott was a pioneer who pushes everything in life to the limit! His downfall? Ego? His pioneering implementation of the “tribe model” after the alleged consumer abuse claimed by the FED’s had occurred? The FED’s decided to make an example of him? Likely a combination…
[NOTE: That the “tribe model” has matured vastly since the so-called “Scott Tucker days!” The combination of $Capital + sovereign federally recognized Native American Indian Tribes + sophisticated technology and extremely positive outcomes in the Courts supporting the tribal lending model have resulted in tremendous advances in the stability of the “sovereign model.” I’ve participated in tribe portfolios and consulted for multiple entrepreneurs who have successfully and lawfully scaled minimal capital infusions in collaboration with Indian Country to achieve $50M+ loan portfolios in just a few years! Small-dollar loans averaging $300 – $800 with 400%+ APR’s. Click here to learn more about the Tribe Model.]
Boy how things have changed! And yet today, it’s still easy to start a consumer loan business LAWFULLY!
How do I know this?
The laws and regulations are more clearly defined.
Demand by consumers for small-dollar loans increases daily. [Simply review the Quarterly Reports for CURO/SPEEDY, ENOVA, ONEMAIN
Each of these companies reported over $1 Billion dollars in loans last year! We’re talking small-dollar loans… often averaging $300- $800+!]
Today, there is a multitude of financial products and services for the so-called underbanked/unbanked/subprime as a result of the fact that nearly half of all U.S. households cannot access $1000 cash in an emergency. Approximately 40% can’t access $400 cash in an emergency!
A suite of 3rd party vendors can be assembled by a Lender who chooses to enter this “business of lending to the masses.” Within weeks, an entrepreneur can secure a State/Province license if required, select a loan management software company to automate the business, connect with consumer identification underwriters, gain instant visibility on a borrower applicant’s bank account [IBV: Instant Bank Account Verification], employment and cell phone carrier history, employer and residence patterns, determine if the borrower applicant already has outstanding payday and/or car title loans… Lenders today know if their loan applicant just visited Starbucks!
Frankly, it’s astounding how much data is available to a Lender today! Loan decisioning in 90 seconds! Same-day funding! Online or in a storefront environment. AI is certain to vastly reduce a Lender’s dependence on call center services if not eliminate completely.
SCARY! In these United States of America today, millions of folks must have access to a few hundred dollars for everyday emergencies!!
The single-payment “payday loan product” is rapidly becoming a dinosaur. However, demand for quick, easy access to a few hundred dollars is going nowhere but UP! Demand continues to increase all over the world. Moneylenders and the ordinary folks who need them have been around since the beginning. Read “Debt: The First 5000 Years” and “The Ascent of Money” for perspective. Two excellent books and highly recommended on the history of money lending.
But as in every industry, there are outliers. Both consumers and business executives who test the limits of common sense and fairness. Fraudsters and thieves.
Example: There was a phone sex call center in my first payday loan location’s building; 100+ female employees. [This was way back in the days of the 1-900 premium pay-per-call business models. “Call 1-900-XXX-XXX to talk to a psychic hotline, adult chat lines…] 20% of these ladies hit up my payday loan store every week. I’d give them $255. Two weeks later, they owed me $300. 70% paid me back as promised. My Team spent our time chasing down the 30% who tried to blow us off. 🙂
Banks & credit unions in my area? They did not like me! They did not like my customers.
But they did like the $35 NSF fees my payday loan customers were avoiding by doing business with me.
I know, dear reader… you’re first thought! My conscious? How could I be a money lender? Profiting off the backs of these poor sex workers! Scum bag!!
One lady needed an abscessed tooth fixed. I loaned her the cash to get it taken care of. [Remember this is early 1998 when $255 was really $255!]
One lady needed a prescription filled. We helped her…
One lady’s car broke down. She couldn’t get to work. We loaned her the cash…
I recall a phone sex worker who borrowed $255. Then, every two weeks we tracked her down for our $255. She never had it. She chose to pay us our $45 fee instead and “rollover” her payday loan. This went on for 10 pay periods [so… we collected $450 over 20 weeks]. Don’t think this was easy. She dodged us EVERY payday and would NOT respond to calls, letters… Eventually, I reviewed her transactions. We loaned her $255. She had paid us $450. As she sat at my desk, I told her she had paid enough and I literally tore up her contract. “We are done.” I learned later, from a buddy of mine who owned a payday loan store about 5 miles from me, that she was, and continues to get payday loans from his store.
On the other hand, I had a client who borrowed $3000 2 to 3 times/year using his truck as collateral; a “car title loan.” There were times when he had to make payroll or buy supplies for a construction job he had just “landed.” He’d pay us back $3240 for a 30 day $3000 loan. [We charged him 8%/month.] No worries!
Today, I have equity in stores and online platforms in multiple states and via Native American Indian tribes. I’m an investor in several internet lending platforms and Silicon Valley startups. I offer consulting services for entrepreneurs, venture capitalists, family offices, investors, and existing operators in need of help.
Ready and able to explore the business of lending to the masses! Fintech, workplace advances, car title loans, installment lending, payday loans… CLICK HERE TO LEARN MORE
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And no, unlike Scott Tucker, I am not a billionaire. And apparently, Scott no longer is either.
From the Podcast: “Scott Tucker built a billion-dollar business. He started with a single storefront. In this episode, the third episode in a multi-part series, we learn how.
Despite his not being a good student, Scott Tucker always had ambition. Like many young entrepreneurs, he started with lawn mowing businesses that he launched as a child. While in college, Scott found an opportunity to get involved in real estate. Scouring the classified ads, he secured an opportunity that netted him more than $100,000 for six months’ work. Then he invested those resources to build other businesses.
After a brief period in the car business, Scott discovered a new market. People were asking if they could provide him with a post-dated check for a deposit. They needed a bit of liquidity until they received a paycheck.
Scott decided to start a company. People could write a post-dated check for $120. It would not be good until the person’s payday. Scott would give the person $100 in exchange for that post-dated check. That was how the payday loan business began.
Scott said that 1 out of 3 people who borrowed money for the first time chose not to repay the money. The business model had to build profits that would cover those anticipated losses. The strategy he deployed resulted in massive growth for the industry. It also resulted in massive amounts of revenues for his company and employment for thousands of people.
Unfortunately, the government did not like the industry. Scott went through numerous trials. As described in the first episodes of this series, a jury convicted Scott of violating various federal laws. It’s a white-collar crime, but he faces decades in prison.”
Fintech “lenders” are pushing the boundaries of what state AG’s consider to be loans. Earnin.com, Dave.com, PayActiv.com, MeetHoneyBee.com, DailyPay.com, Flexwage.com, HelloBrigit.com, BranchApp.com, WageStream.com and on and on all offer “wage advance,” “payroll advance” in essence a “kinder, gentler version” of a payday loan.
Fintech, California CFL’s, Wage Advance Products Embroiled in Class Action Lawsuits.
Bottom line, these Fintech companies offer employees early access to their earned income from employers such as Walmart, McDonald’s, Wendy’s, Allstate…
Are these loans? Should these Fintech companies be forced to navigate through the EXPENSIVE, TIME-CONSUMING HASSLE of securing state-by-state lending licenses? Or, collaborate with federally recognized Native American Indian tribes enabling geographically challenged tribes to participate in this new world of E-commerce?
Fintech companies typically charge their customers a monthly enrollment fee, strongly “suggest” a payment to “accelerate the ACH into their customer’s bank account” and additionally, a “tip” for using their platform!
Yet they fail to enable their “borrowers” with APR comparison tools in order to evaluate their “tip” model versus other loan products such as payday loans, installment loans, line-of-credit loans, title loans…
We reversed engineered Dave.com. Here’s what we found.
A few weeks back, we applied for a $75 loan via a cell phone at Dave.com
We filled out the Dave.com application
Tied it to a Chase acct
Dave “asked,” us if we would pay $3.95 to accelerate the ACH into Chase immediately.” We opted out
Dave “asked” us to give them a tip. The default was 15% of the $75. Via my phone, I could “slide” left to right… tip Dave 20%, 15%, 10%, or zero. We opted for zero.
All the above took 3 minutes 12 seconds WITHOUT any human intervention. No call center CSR… no human intervention!
The following day the $75 was in my Chase account in spite of the fact we opted NOT to pay the $3.95 to accelerate the ACH deposit into our Chase account.
We authorized Chase to pay Dave the $75 4 days later.
My total cost to borrow this $75? ZERO!!!!!!!!!!!!!!!!!!!!!! Free
THE CATCH if any? Dave charges me $1/month for their service.
In January 2019, Dave had 1M account holders at $1/month. As of September? 5 million! At $1/month per user. So… $5M/month top-line revenue w/o funding a single loan! Via AI and automation!!
Could they up the monthly fee to $2/month and achieve $10M/month?
Their default rate? No clue.
How low will they go regarding sub-prime borrowers? No clue.
I do know they serve a lot of “gig” workers because I’ve asked some folks I know to go through this process.
Are they making money yet or is this model, as of today, all about customer acquisition and data collection? No clue.
Mark Cuban is an early investor… SMART DUDE!
Regarding Earnin? We “borrowed” $100 for a week. The “default tip suggested” was $14.00. That’s a 700%+ APR!
A California class-action lawsuit captioned “Stark v. Activehours, Inc., d/b/a Earnin,” asserts the company is actually an unlicensed lender: “Earnin seeks to skirt applicable financial, banking, and payday lending regulations through a linguistic trick: calling a payment to use its service a ‘tip’ instead of a cost of borrowing. Semantics aside, Earnin is in the business of loaning money.”
In July of 2019, Crunchbase estimates Earnin was downloaded 776,711 times in a single month! “Pay what you think is fair.”
PS: If you’re one of my MANY readers who have paid millions of dollars in licensing, compliance, legal, audit, fines and store leases and… try NOT to be PISSED!
Instead, scale your knowledge! Embrace the changes brought about by THE PHONE!
THE DIFFICULTY IS THE OPPORTUNITY!
The magnitude of the problem solved is the magnitude of the money you can make!
If the business of lending money to the masses was easy, EVERYONE would be doing it! [MJ]
Thanks for being a loyal email subscriber since December 11, 2019. I appreciate hearing from you. Let me know if you ever have any questions, ideas, needs… Jer at 702-208-6736 Cell TrihouseConsulting@gmail.com. NOTE: California CFL lenders send an email. We have solutions! Subject: “CFL” Text: Provide a few details about your Calif. business and your product line.
CURO, a publicly traded lender, originates $1 Billion dollars [+/-] in consumer loans every 3 months. They have approximately a 3% market share. What's this mean for you? OPPORTUNITY!
The near-prime will soon be the subprime. Demand for loans of $500 to $5000+ continues to escalate. Opportunities are boundless for lenders.
As a lender, your inventory is MONEY! Not tulips dying. Not bananas rotting. The 99% will ALWAYS need money. Debt is the reality of living in America.
What do we do? We teach entrepreneurs how to lend money to the Masses. We lend money. We offer Courses, consulting, investments, access to our vast network of vendors, lawyers, Instant Bank Verification, payment processors, website designers, and underwriting...
We are 100% focused on the business of lending to the masses! Installment loans, car title loans, payday loans, line of credit loans...