Payday Loan Rates

Payday loan rates are under major scrutiny. I do not intend to break down the rates for each state, nor will I go into the legal ramifications if a company is caught charging higher rates within a specific state. There was a past comment on an article that outlines the rates in each state. There is a link in the comment which will allow you to view the current payday loan rates within each state. I suggest you view the link if you are interested in looking at an advance.

As we uncovered in previous articles, payday loans are very expensive. In some cases a lender may charge upwards of over 400% for a cash advance. While this may seem to go against usury laws, there are many states that allow companies to charge exorbitantly high rates for their money. There are two sets of arguments.

There is an argument from the perspective of the lender. Payday loan companies argue they have to charge high rates because many people default on their loans. The industry argues without the high rates companies could be in jeopardy.  It is also important to understand the vast majority of people receiving payday loans don’t pay the full amount back on their next paycheck. This will ultimately increase the amount the borrower will have to pay back. There are some states that will allow a lender to rollover payments which in turn result on more interest and a higher payback.

I have looked at several consumer sites and they believe payday loan companies aren’t telling the whole truth. While the industry argues rates are high because of defaults, some consumer advocacy groups would beg to differ. There were two studies that I read which stated that payday loan company’s only write off a small percentage of their loans each year. While these groups argue that the percentages are much smaller than what the industry is alleging, there is very little information or statistical data on this topic. In fact, the two studies that I came across were from the mid to late 90’s.

As we mentioned in a previous article, each state makes up the laws that oversee the industry. These laws are being disputed on both sides of the aisle. If a company violates state laws they could be forced to pay harsh penalties and possible legal recourse.

Consumer groups recommend an alternative to paying high rates for payday loans:

• Negotiate payment plans with your creditors – The problem is that most applicants aren’t trying to get a payday loan to pay off their creditors. They are trying to get an advance to pay for groceries, gas, gas and electrical bills and other expenses. If you are trying to secure an advance to pay off credit card bills etc. there is no question you should try setting up a payment plan instead of getting an advance.
• Secured credit cards – The problem is that most credit card companies will not lend money to a person that has already defaulted with another credit card company.
• Get an advance from your employer – I believe this is probably the best alternative however some people may feel uncomfortable asking their employer for an advance and some companies may not provide advances to their workers.

I guess when I look at the industry as a whole, I can understand both perspectives. I also know if a company has a choice to lend at a lower or higher rate, they will probably always charge the higher rate. The rates for payday loans are likely to change; it’s just a matter of time. Whether the change has a negative impact on the borrower or the lender is to be seen.

Payday Loan Brokers

Payday loan brokers are individuals or companies that serve as the mediator between the client and the direct lender. A broker is responsible for passing the names and information of applicants to a group of lenders, who in turn compete for their business; or at least that is what some brokers advertise.

Payday loan brokers serve an important role for some lenders because they are the marketing vehicle and lead generation source. A broker can help a company eliminate advertising and client acquisition expenses, ultimately increasing their operating budgets and hopefully profits. Most of the larger brokers in the industry have a network of direct lenders that will be given an opportunity to review the lead before purchasing it. Unlike other types brokering models in which a company gets paid a percentage of a transaction, payday loan brokers typically get paid on each lead.

While the set-up for each broker may be different the industry norm for the larger companies tends to follow the same model. When a broker receives a lead it’s disseminated through a chain. This chain is set up through a tiered system. These tiers allow selected lender to review an application and make a purchase. If the companies in the first tier opt out of a lead, the application will be sent to a second tier of direct lender. At this point the cost of acquiring the lead begins to decrease. This is called the tiered approach and most of the larger brokers have implemented a system that handles the different tiers. The first tier will always pay the most for a lead, while the last tier will get the lead at a large discount.

How do payday loan brokers advertise?

The majority of the top brokers in the industry use the internet as their number one advertising vehicle. Their websites are optimized to catch keyword phrases of potential clients searching for payday loans. When a client hits a site they will be giving an option to make a call through a toll free number or fill out an application. The application typically includes all the information that is needed to quickly underwrite a case and make an approval.

The other form of advertising is broadcast emails. Many of these brokers have a database of names of past clients and prospects. They will send out weekly, monthly, quarterly and yearly emails. In these emails are direct links to their website which a person can easily fill out an application and submit.

As social media takes off we are finding an increase in brokers that are using Twitter, Facebook and other social media platforms as a way to advertise their services.

Ongoing Legal and Regulation Issues

After doing research on this topic, I found a few interesting facts regarding payday loan brokers. As we discussed in a previous post, the payday loan industry is highly regulated. There are dozens of consumer advocacy groups that are fighting against the industry for lower rates and in some cases ceasing payday loans altogether. These regulations are directed towards the lender and not the broker. A broker doesn’t have to register with a state nor do they have to be licensed to sell leads. This is not uncommon because there are dozens of different industries within the financial markets in which an entity doesn’t have to be licensed. The big concern is lenders trying to pass as brokers in order to charge higher interest rates.

After federal regulators found that some lenders were partnering with national banking institutions in order to evade consumer protection laws, lenders began looking at other avenues in which can be used to sustain the rates they were used to charging applicants. According to a recent study by CRL, some lenders were posing as brokers in order to avoid interest rate caps. This is an ongoing problem that regulators are concerned about.

It’s my opinion that regulations will begin affecting brokers as well. As companies continue to game the system, regulators will be forced into making it mandatory to vent brokers as well; and this could have a grave effect on those companies that rely on brokerage firms to supplement their lead generation.

The first step is already happening. Today many states require brokers to list a disclaimer on their website stating they are not a direct lender.  I’m sure more laws will follow.

Payday Loan & Direct Lenders

Did you know that most of the payday loan companies on the internet (or those that you can find doing searches) are not direct lenders? Based upon the information I found, the majority of the direct lenders in this industry count on brokers. We will talk a little more about pay day loan brokers in articles to come.

The payday loan industry is a big business. The rates are high and the returns are plentiful. When a direct lender receives a lead from a potential prospect it’s in their interest to qualify and approve the client as fast as possible. You will find dozens of websites around the internet advertising they can approve an applicant within minutes. This has some validity. The majority of people will apply with more than one company, and it’s the company that approves the client first that has the best chance of securing the business.

There are different models when it comes to investments. A direct lender may receive their money through angel funding, banks, private investors or in some cases the principles may be the primary funding source. While most people believe that an investor will make money on every investment it’s just not true. Lenders are lending to individuals with less than good credit so it’s not uncommon for a loan to default. I have seen averages between 20% -40%+ of all loans will end up in default. Take this number with a grain of salt because these numbers are based upon the lenders.

As you can imagine, the payday loan industry is highly regulated. The majority of states have regulatory boards that oversee the industry in their respected states. If a payday lender decides to do business within a state, they must abide to the laws of the land. There are close to 20 states that prohibit high cost payday lending. Georgia is one state which prohibits direct lenders from doing business. According to CFA, a direct lender that is caught doing business in Georgia will be in violation of racketeering laws. In other states there are criminal usury laws in place which prohibits a lender from charging over a certain rate annually. There are other states that have no laws in place; hence there are no caps on what a direct lender can charge.

While I’m finding information on the Internet that makes suggestions that a company will do business in all 50 states, it’s highly unlikely the transaction is taking place in that state. A company that is a direct lending source must abide by state laws and if they don’t, legal problems are certainly to follow.

Payday Loans

I have made a decision to write a few articles about the payday loan industry. In these series of articles, I intend to write about the legal aspects of loaning money against future paychecks. I also plan on writing about the following:

• Direct lenders
• Payday loan brokers
• Online payday loan companies
• Storefront Companies
• The 24 hour guarantee
• Payday loan rates

In order to discuss this topic with some intelligence (I don’t have much) I did some research on the industry. I am taking an unbiased perspective and will provide the pros and cons of the industry. It is important to first understand what a pay loan is. A payday loan also referred to as a cash advance is a short-term loan (typically 1 or 2 weeks) that is borrowed against an applicant’s next paycheck.

Payday loans are very expensive and should only be intended as a short-term borrowing tool and not a long-term solution. There are some people that say that payday loans were first introduced in the early 1900’s under different names, however the term “payday loan” was introduced sometime in the 90’s.  Today there are over 20,000 storefronts throughout the United States that offer cash advances.

The underlying legal issues with payday loan advances are usury laws. Usury laws are in place to regulate the industry from charging excessive rates for borrowed money. There are interpretations on both sides as to what is excessive. These laws are typically set by each state. A state may determine that payday loan and cash advance transactions are illegal in the state. There are some states that make pay day lending illegal however there is an abundance of information on the internet that states some companies will still loan in that state because of loopholes.

The industry as a whole believes if a transaction occurs in a state in which cash advances are legal, than it shouldn’t matter where the borrower is located. The industry is regulated by each state and regulators range from state Banking Departments, Departments of Financial Institutions, State Boards of Collection Agencies to Departments of Corporations and so on. The regulators oversee the industry and are available for consumer complaints on any company providing pay day lender.

If you do a search on the internet for payday loan companies you will find the majority of the websites listed on the top pages of the search engines are brokers. Payday loan brokers are typically lead aggregators that have an automated process of getting leads out to the direct lenders. Because the payday loan industry is so competitive, most companies pay top dollar for these leads.

Most cash advance brokers have a disclaimer at the bottom of their websites that state the company is not the direct lender. This relieves most brokerage firms from potential legal issues that may arise from a transaction in a state which makes it illegal to perform payday loan advances.

While a simple cash advance may seem easy to grasp there are a lot of gray areas in the industry. As the industry matures I believe there will be stricter guidelines for the lender.

Medical Receivable Factoring Companies

Medical factoring is a financing tool that provides doctors, physicians and other medical professionals’ instant cash against their accounts receivables. These companies will buyout invoices and liens for a percentage of the total amount of the receivable. Medical receivable factoring companies advertise they will purchase billings at a discount of the face value of the receivable and by doing so they hold the lien on the claim.

There are several aspects to medical factoring. A company may purchase receivables from a medical professional that treats individuals. There are companies that purchase receivables from medical supply companies; and other companies that provide financing and factoring options to those companies that provide medical staffing services. Whatever the scenario, there are invoices and receivables that need to be collected, and when a company needs an infusion of cash and can’t wait for an invoice to be paid, they can elect to factor their invoices. The fact is if you can’t wait up to 90 days to get your receivables paid, these companies may help.

Medical Accounts Receivable Financing

• Acupuncturists
• Diagnostic centers
• Doctors
• Drug counselors
• Medical equipment suppliers
• General practitioners
• Hospitals
• Medical centers
• Medical clinics
• Medical staffing companies
• MRI centers
• Nursing homes
• Psychologists
• Surgeons

While medical receivable factoring may be attractive to some professionals it comes with a cost. While the costs may vary depending upon the A/R company the rates are generally much higher than a standard bank loan. Over the last several years we have seen an influx in these types of companies. During tough times, some people are forced into making decisions that they would otherwise avoid. Other companies like payday loans, structured settlement factoring and legal financing are under the microscope of law makers throughout the United States. The idea that a company can profit on a person or company that is having a financial meltdown, is legal yet frowned upon.

There are no current laws that make this form of financing illegal and there is no over site that specifically oversees the medical factoring industry. While this form of financing may be under the radar, it’s likely it won’t be for long.

Why Do Insurance Companies Make Bad Offers

A good friend of mine, who happens to be a paralegal at a personal injury firm in Virginia, was involved in a motor vehicle accident about 6 months ago. I won’t go into details about the firm but they have a decent reputation and certainly would have been willing to take his case from the start. When I asked him about the accident he told me the other driver ran a red light and slammed into the driver’s side of his car. He was injured but nothing too serious (broken bone, whiplash). The police report indicated the other driver admitted to causing the accident so he assumed it was a slam dunk!

With great resistance from his employer, he decided to handle the case on his own. He assumed, as would most people, the other driver’s insurance company would be ready to make a quick offer and settle this claim because their client admitted liability.

He told me when filing the claim he was looking for compensation that covered loss of wages (didn’t make it to work that day along with several follow-up visits at the doctor’s office), medical expenses (hospital, doctor’s, pain medications etc), property damage (what a joke), and money for transportation costs (car rental, cabs etc).

I remind you that this is a very good friend of mine. When he told me what the insurance company offered on the claim, I started cracking up. I couldn’t help to laugh because I’m pretty sure considering his tenure at the firm, they would have taken his case for free.

Let’s fast forward to now. It has been 6 months and he still hasn’t received a nickel from the insurance company. I must admit if there was one person that wasn’t a licensed attorney that had to take my case; it would be him (well maybe not anymore). Well you can imagine he took some heat from his employer and rightfully so. Today, his employer is now his attorney.

The moral of the story is quite simple. Why does it take an Act of Congress for some insurance companies to pay victims like my friend, full compensation on their claims? I know that some attorneys have a bad reputation for being tenacious, but let’s admit it; they need to be when dealing with some insurance companies.

If you were involved in an accident, think twice about handling your own injury claim. Why not at least take the time and talk with an attorney before diving into a situation you are unfamiliar with? While my friend ended up hiring his employer, he at least had some knowledge of what to say and not what to say when speaking with the insurance company. If you are handling your own claim and the insurance company begins asking you questions about the accident, what will you say? Remember everything you say, can be held against you during settlement time.

Getting back to the title of this post. Why do insurance companies make bad offers? I believe insurance companies make bad offers in hopes the victim will take it. If the victim really needs the money, chances are they may jump at the first offer. Insurance companies have a bottom line to protect and the more money they pay out, the less profit they make.

Tips on Hiring a Personal Injury Attorney

If you were involved in an accident you have the right to file an injury claim against the negligent party. Prior to filing a claim, you may consider hiring a personal injury attorney to help you through the process. The process can be complex and hiring the right attorney can be an important step in receiving full compensation for your claim.

A personal injury lawyer can provide the expertise in assuring you the full payout for your claim. One of the first steps when evaluating the right attorney is understanding that not all attorney’s practice personal injury law. Furthermore, a personal injury attorney may not specialize in a specific area of personal injury law.

If you are considering hiring a personal injury attorney consider the following tips:

One of the best ways of finding a reputable attorney is asking for a referral from a friend, colleague or family member.  You may find that someone you know has gone through the same process. They may be able to provide you valuable information on the process and their success with their attorney.

When a person can’t obtain a referral they should consider the internet as a viable source. There are list serves, forums and organizations that rate attorneys based upon their track record. These forums and organizations can provide you with a list of attorneys that have received awards from past successes.
Another source is visiting websites of local attorneys. When a person begins searching online for attorney in their area they can do a search by location and practice area. If you have been involved in a car accident you can easily search for a car accident attorney in your state or town.

When you begin looking through different websites try locating the experience of each lawyer. There are many attorneys’ that provide their experience on their website. You may find this information on the about us page. Attorneys may also provide information on the different practice areas. There are some attorneys that practice specific areas with personal injury law. A firm may be dedicated solely to motor vehicle accidents or wrongful death cases.  Another way of evaluating attorneys is locating their past settlements and verdicts. Some law firms will list past clients on their website and provide information on settlement reached and verdicts won.

When you have located a few different attorneys contact them and set up a phone conversation or meeting. Most attorneys will provide a free consultation that can be done in the office or by phone. When you contact a lawyer you should have a list of questions. These questions should be used to evaluate and make an informed decision whether you are working with the right attorney or not.

Some of these questions may include:

How many cases do you handle each year? Make sure the cases they handle are specific to your accident (wrongful death, slip and fall, auto accident etc.)

If a settlement can’t be reached with the insurance company, ask the attorney if they are experienced in going into litigation. This means if a settlement can’t be reached through negotiation, will the attorney file a personal injury lawsuit and be prepared to go to trial. There are some attorneys that may refer the case out if a settlement can’t be reached.

If you are filing a personal injury claim against an insurance company, ask the attorney if he or she has ever been involved in settlement negotiations and lawsuits with the company. If the attorney has successfully represented clients against the said insurance company, you may consider hiring the attorney.

Most personal injury attorneys will work on a contingency fee basis. They will provide their services to clients on a percentage of the proceeds. If the attorney successfully get a settlement or wins a verdict, they will receive a percentage of the cash award. If you are going to sign an agreement with the attorney, make sure the fees are spelled out on the agreement.

No matter who you hire, you should always feel comfortable with the attorney. A comfort level of experience and personality is always recommended.

Plaintiff Funding

Plaintiff funding content is provided by LawLeaf – For additional information on plaintiff funding, visit them on the web.

You may have heard the term plaintiff funding in the past. It’s most commonly referred to as legal funding or lawsuit cash advance. The term describes a form of borrowing and lending that is contingent upon a lawsuit. Plaintiff funding comes in varies forms. A person if qualified, may borrow against a lawsuit that has not yet settled. This is most commonly referred to as pre settlement funding. If a person is qualified to borrow money against a case that has already settled, it is most commonly referred to as post settlement funding.

Preliminary Qualifications:

First and foremost the only way you can borrow money against a lawsuit is to be the plaintiff in the case. This means you are the one that is seeking compensation from a personal injury or a commercial litigation suit. A plaintiff must also be represented by a licensed attorney. If you are not the defendant in the suit or representing yourself (pro se), a lender will not allow you to borrow money against your case.

Approving an applicant:

The approval process may be different for each company. A company that lends money against pending or settled claims employ or hire underwriters to evaluate each case. The evaluation process begins with an application. Once a company receives an application they will request documentation from your lawyer. The documentation is key in the underwriting process because it allows the representative to fully evaluate the validity and the strength of the case. If during the evaluation process the lender believes you will win your case, they will advance a sum of money that is determined based upon the size and the strength of your case.

Who provides plaintiff funding?

There are a variety of different sources that provide plaintiff funding. The different sources that originate this type of lending include, hedge funds, private investors, investment firms, institutional funds, and in some cases banks. Usually banks are the source of cash for such groups.

How long does it take?

The amount it takes to receive an approval is case by case. Personal injury lawsuits tend to take less time. These cases are easier to underwrite. Personal injury cases are also the most popular type of plaintiff funding available. Commercial litigation claims tend to take longer because the request amounts tend to be larger. There are also very few companies that will underwrite commercial litigation cases. The average amount of time is between 1-3 days from the time the applicant applies for plaintiff funding to the time an applicant receives a check.

Is plaintiff funding right for me?

Plaintiff funding should always be used as a last resort. Because of the risk factor, rates tend to be higher than a normal bank loan. If a plaintiff has no other options and can’t afford to wait the case out, plaintiff funding may be right for you.

Don’t Settle for a Bad Settlement

Content provided by LawLeaf. LawLeaf is an online legal funding company.

Over the course of any lawsuit a victim has an interest of reaching a quick settlement. When you reach a settlement the plaintiff in the case will agree to accept an offer and give up the right to legal recourse at a later date. This means once an offer is agreed upon, the plaintiff will not have the right to receive additional compensation at a later date. When you do eventually settle don’t settle on a bad settlement offer!

Millions of people each day struggle to pay their bills and provide for their families. When you have been involved in an accident and it resulted in injury, the struggle may get harder. Personal injuries can be catastrophic and in many cases the victim is forced to take time off of work. If you are living pay check to pay check and you don’t have short or long term disability coverage, it can become very challenging. If you lose a job and incapable of returning back to your profession, it can become financially devastating to the victim.

When you read about personal injury cases oftentimes you think compensation is only available for medical bills, pain and suffering and property damage. While these are a few of the expenses that should be included in a compensation package, loss of job and loss of wages should be a high priority on the list. The average household income from state to state ranges from around $36,000-$69,000 with the average personal income lower. If you own a home, car, renting an apartment and your the breadwinner of a family, cutting out your income can be very problematic.

Insurance companies have the reputation of forgetting to include loss of income into the total compensation package. They may include a few days but what about time lost for follow-up visits to a doctor, hospital, physical therapist. If you are involved in an accident it may require additional visits for x-rays, MRI’s and medical evaluations. These costs should certainly be included. Consider the costs for retraining yourself to enter into a new occupation because you are no longer able to go back to work.

If you are considering a settlement make sure you consider all the costs associated with an accident and not just the ones you have bills for.  So when you reach the settlement table be sure not to settle for a “bad settlement”.

Lawsuit Loans

Content Provide by LawLeaf, a lawsuit funding company.

A lawsuit loan is a non recourse cash advance against a pending lawsuit or a case that has recently reached a settlement. Lawsuit loans are provided to plaintiffs that want to borrow against future proceeds from a personal injury or commercial dispute. Unlike a standard bank loan, if the plaintiff loses their case, they don’t have to pay back the lender.

How can you qualify for a lawsuit loan?

There are several factors in qualifying for a lawsuit loan:

• A person must be represented by a lawyer.

• A person must be the plaintiff in the lawsuit. Companies will not provide advances do the defense.

• The representing attorney must submit paperwork to the lender on your behalf. This paperwork is known as case documentation.

• After reviewing the documentation, the lender must believe liability exists and the plaintiff will win the lawsuit.

Why do people apply for lawsuit loans?

There are many reasons why some plaintiffs secure lawsuit loans:

• The plaintiff in the case has lost their job or wages resulting from an accident.

• The insurance company is unwilling to offer a fair settlement on the case.

• The plaintiff is not interested in settling for less money and a lawsuit loan is the only way to hold out for a better offer.

• The case has recently been appealed by the defense and the plaintiff has run out of all other financial options.

• A person may need money for investment purposes or for a down payment on a home.

• A person may need to pay down medical expenses or need money for additional treatments.

• A person may need money to help pay for living expenses while waiting for a settlement.

How quickly does it take to get a lawsuit loan?

When a person applies for a lawsuit loan they must be aware that the process can take anywhere from 24 hours to several days. In order to get the process moving along the lender will need to immediately request the appropriate documentation from your attorney. Once the documentation is received, a lender should be able to underwrite the loan within a few hours. If the case is complex it could take several days, as some lenders may need to outsource the underwriting process to someone more specialized in the lawsuit.

For additional information on lawsuit loans, visit LawLeaf today.