Providing loans to people who are strapped for cash has proved to be a good way to make a living for the owner of Bellicose Capital. This man’s name is Matt Matorello. Matt’s company helps to run some Michigan payday lending websites for a Native American tribe. The websites offer small loans to customers and charges fees in return for making these loans. Over the years, Bellicose has collected a lot of money; to the tune of tens of millions. The tribe that this company works for keeps roughly 2 percent of the earned revenue. It looks like Matt is going to sell the business to the tribe for about $1.3 million dollars on the front end, with as much as $300 million dollars in payments down the road, depending upon the success of the business. The company projects that it will earn nearly $58 million each year down the road.
Martorello is not the only owner of a payday lending company who is looking to get out of the industry lately. There are many payday lending companies that are overhauling the ways they do business. These lenders are changing up the products they offer or moving their headquarters to countries outside of the US. A major reason that so many lenders are either getting out or changing their ways seems to be due to the Consumer Financial Protection Bureau getting ready to put now restrictions and regulations in place in 2016. These regulations have been over four years in the making, and the CFPB has not yet finalized all of the details. They have stated, though, that their new rules will prevent borrowers from taking out short term loans that they cannot afford to pay back and from taking out multiple loans at the same time. Lenders believe that the CFPB is on a mission to destroy payday advance loans and other short term loans. These regulations leave the lenders with few options other than to change the way that they do business.
According to an analyst at Height Securities named Ed Groshans, “The CFPB made it extraordinarily clear that the path they’re going down is going to eliminate the vast majority of payday lending.” Payday loans are short term loans that require the borrower to either write a postdated check or allow lenders to make automatic withdrawals at the agreed upon repayment date. The new regulations will cover other alternative lending products and services that allow people to pay back their loans over a longer period of time. Bellicose, the company we told you about earlier, is a consulting company and not a lender, though the company does specialize in short term installment loans.
Up until now, most payday lending regulation has happened at the state level, and the rules have been well understood by lending companies. Some lending companies have struck deals with Native American tribes. Some critics call these tactics “rent-a-tribe”, suggesting that lenders and consultants are only doing business with tribes in order to skirt existing payday lending laws. With the new regulations being handled from a federal level, though, it will be increasingly more difficult for lending companies to do business. Many experts believe that the CFPB has no business getting involved from a federal level, being as so many state laws have worked well for both lenders and borrowers over the years. As is usually the case, however, the CFPB is proving it is truly a branch of the modern day American government by doing all that it can to overstep its boundaries and to make doing business even more difficult than it already is for short term lending companies. It’s no wonder so many lending companies are changing things up in order to avoid dealing with the new regulations that are about to take effect.
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