Greenline Loans is moving in an important direction concerning their repayments, which is the acceptance of accepting debit card transactions as a form of repayment for their short-term loans.
This is an especially timely move on the part of Greenline Loans because many tribal lenders are getting caught out in the rain by the legal maneuvers of the New York Attorney General in conjunction with the top financial regulator of New York, Ben Lawsky. Together these two (and their powerful army of attorneys) have made strong inroads against the business model of the Native American lenders, specifically against the use of third party payment collection services, which happen to be the top 30 traditional banks in the U.S.
The unofficial push against banks being involved with electronic transactions for tribal lenders is creating a situation that leaves the tribes looking for alternatives to fund customer accounts and deduct from that same account.
Companies like Citibank, Bank of America, Chase, PNC, Wells Fargo and others are starting to hesitate (or decline outright) the use of their ACH (automated clearing house) transactions to allow payment to, or procuring repayments from, their millions of customers across the country.
This brings us back to one of the Native American lenders with the strongest growth story, which is Greenline Loans. This tribally-based lending firm has been on a tear for about 10 months and at some point they must have run into the problem involving the ACH transactions with some banks.
The move that this tribal lender made to solve the problem is to prominently promote the fact that accounts can be funded with and debts can be repaid with debit cards. Using a debit card for the payment is still a good way to keep the tie to the customer's checking account and for the transaction to be free for the customer. Plus, it is going to resemble the ACH transaction in that the customer can conduct all these transactions from their home or work, or at whatever time or location they choose.
All they need is a telephone (if they are working with a phone clerk) or access to the internet. Using a debit card is most likely going to be the financial wave that washes over Native American lending as the ACH transactions become more infrequent, spotty and potentially lost to the tribes altogether.
The other alternatives for customer repayments are not very good because they involve the use of time, the requirement to drive to some payment station or retailer, and above all they cost money.
Using a service like MoneyGram or Western Union requires most customers to drive to a wire transfer location, like a Walmart or grocery store. This isn't convenient at all. The fact that the customer needs to stop what they are doing and schedule this event is just a headache for most consumers who are already too busy.
Then there is the cost, no one wants to part with more money, especially someone who is already paying super high interest rates to a short-term lender. Using a service like MoneyGram or Green Dot will always carry a user fee and this is going to make customers unhappy.
Another big problem that tribal lenders don't like to discuss is the fact that the harder it gets for a customer to repay a loan the less likely that customer will even bother to repay the loan at all. And that's a huge problem for the tribes already is the deficiency in repayments, whether it's late payments or below the minimum required payments, there are already problems in this arena.
Debit cards are going to keep Greenline Loans growing at the strong rate they've already been experiencing. It's true I don't know this for sure but the statistics for the last 10 months don't lie and the fact that the company has strongly embraced the debit card as one of their big tools to transact business only reinforces my belief that the company is set-up to keep new customers coming in and keep existing customers happy enough to return to them.
It's surprising because tribal lending is largely a business based on speed and convenience, not so much competitive forces or pricing points. There are tribal lenders out there that offer better terms than Greenline Loans, with higher dollar amounts to lend out, with an application process that is just as simple, with lower interest rates which would lead directly to cost savings and there are companies that would provide much more time to repay the loan than what Greenline does. But that doesn't matter, especially as this business becomes more muddled and messy.
Customers that search for online lenders are looking for ease, efficiency and speed. They don't want questions or disruptions, much like getting a shot they just want to get it over it and move on. This is where Greenline Loans is poised to push past so many other tribal lenders who have dug in and gotten themselves entrenched with the ACH banking transaction.
This could be a distinct problem for them because whether the tribal lenders win in the courts or not, if enough state governments push banks to stop these transactions as a matter of principle (and as a matter of deference to state laws) then the tribes will still lose their ability to cross these ACH transactions despite having won a technical victory in the courtroom.
Keep an eye on Greenline Loans and the use of debit cards in general in the world of tribal lending. This will be the backdoor that keeps the industry going after the virtual collapse of the ACH transaction model fades out.
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Posted by: theodore busch | 05/20/2016 at 03:09 PM