CSO - Credit Services Organization

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The Texas CSO Model - CAB Credit Access Business for Payday Loans & a 100% Check Guarantee Program

Beginning in July of 2005, the major payday loan operators in Texas began registered as "Credit Services Organizations" commonly referred to as a "CSO". This includes Advance America, Cash America, First Cash, EZ Pawn, and EZ Cash in addition to many, many small payday loan operators.

Prior to the switch over to the CSO model, virtually all these cash advance operators utilized the bank-charter model; partnering with banks incorporated in states lacking usury laws (referred to as the "payday loan bank model". By partnering with these banks and acting as brokers, the payday loan operators were able to export the usury rate applicable to their partner bank into ; or whatever state the payday loan operator/broker located; simalar to the credit card industry.

What is a CSO Credit Services Organization
In essence, a CSO or Credit Services Organization is defined by the Credit Services Organization Act (Texas Section 393 of the Finance Code) as an entity or person that provides one of the following services:

  • Improving a consumer's credit history or rating
  • Obtaining an extension of consumer credit for the consumer
  • Providing advice or assistance to a consumer regarding the previous two services

An important aspect of the CSO or Credit Services Organization model is that there IS NO LICENSING of the "lender"required by the state! The "Lender" does have to register with the state (TX) and disclose their contact information. CSO's are required to "be licensed" with the Texas OCCC, AND THEIR FEES ARE NOT REGULATED.

How does the CSO Credit Services Organization work with payday loans?
The CSO Credit Services Organization operates as a broker/marketer, much as they did when partnering with the banks (payday loan bank model). The Credit Services Organization Act (CSOA) allows the payday loan lender to register as a CSO and act as a loan broker. Thus, the CSO, previously a payday loan company, can make loans via consumer lending companies that are UNLICENSED. The CSO Credit Services Organization acts as a broker for the consumer in need of funds by issuing a "letter-of-credit" on behalf of the consumer to a lender. This third-party lender funds the "loan" brokered by the CSO "broker".

    Typically the CSO Credit Services Organization collects 3 fees:
  • A referral fee for referring the consumer to the "lender" that actually funds the loan. This is not stipulated by any law but is currently $20 to $30 per $100
  • An application fee for filling out the CSO documents; typically $10 per $100
  • The interest on the loan; state law caps this lender's fee at $10 per $100 of loan principal.

The CSO Credit Services Organization model arises from a U.S. Fifth Circuit Court of Appeals opinion, in Lovick vs. Rite Money, which held that payments to a registered CSO loan broker could not be treated as interest.

The applicability of the CSO Credit Services Organization to use in other states is being explored now. Thirty-one states plus Canada have provisions for the CSO Credit Services Organization entity. Since it is typical of the CSO not to be regulated, and the fact that the CSO fees are not considered interest as per the 5th Circuit Court of Appeals, there is little doubt we will see this approach utilized on a grand scale in the future!

For a thorough discussion of the CSO Credit Services Organization Model including the applicable Statutes and the CSO Registration Form for , we invite you to purchase our CSO Report.

100% Guarantee Check Program for the CSO Model-Payday Loans in
Would you like to offer Cash Advance / PayDay Loans to your customers in ? Become a Credit Service Organization (CSO). You can charge $20.00 per hundred for loans you arrange from a third party lender. The average loan is $300.00 and the average fee is $ 20.00 per hundred or $60.00 on $300.00 and we will 100% guarantee all your loans. Once we have approved a loan and if it goes bad just send the check to us and we will put the principal and interest back in your bank. You have your money from us within 5 or 6 business days and ready to put back on the street. If you are utilizing a collection company now it takes 90 to 120 days for them to collect and they only collect less that 50% of the checks you submit to them. That's 90 to 120 days you do not have use of that money and 50% of the money you will never see again. How many times can you turn that money in 90 to 120 days if you had access to it?

We offer a CSO Analysis & Report at the bottom of this page: CSO Report This report includes an approximately 35 page overview and analysis including sample contracts and forms.

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