Tribal Lending | How to Start a Loan Business

Tag: Tribal Lending

$550 Million Settlement with Santander Subprime Auto Loans: Arizona AG

Posted by Team Jer / Strategy, Tribe

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!
Big Brother, PEW, CRL, CFPB … continue to dwell and waste taxpayer money on OLD NEWS!

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.

Copy of complaint.

Copy of Arizona AG Press Release.

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.

ALL your questions are answered here: “How to Loan Money to the Masses Profitably.”

Your “inventory” is MONEY. It’s not rotting vegetables, yogurt machines, pizza ovens, a franchise… It’s CASH. And everyone needs CASH.

Here’s the “Table of Contents.”

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?

Begin your journey here: “How to Loan Money to the Masses Profitably.” Devour it! Study it! Then, CALL ME on my Cell: 702-208-6736. Free 15 minutes. [Just tell me what is the last word in our “bible” on page 412.] I normally charge $400/hr.

Who am I? Jer Ayles.

And Jer Ayles.

Click the IMAGE to Invest in our Course: “How to Open/Improve a Consumer Loan Business”

13
May

THE TRIBAL LENDING ENTERPRISE. ASSET PROTECTION-WHAT YOU NEED TO DO TO PROTECT YOURSELF

Posted by Team Jer / Tribe

FINANCING / SERVICING THE TRIBAL LENDING ENTERPRISE:

WHAT YOU NEED TO DO TO PROTECT YOURSELF

By: Howard Rosen, Attorney, 8 2020 Donlevy-Rosen & Rosen, P.A. https://ProtectYou.com/

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 independent lender (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:

https://protectyou.com/2013/09/how-can-loans-protect-real-estate-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:

https://protectyou.com/2014/10/enhancing-creditor-protection-of-ira-funds-inherited-and-otherwise/

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