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Texas > CSO-CAB Credit Services Business Credit Services Organization as it Relates to Payday Loans & a 100% Check Guarantee Program Beginning in July of 2005, the major Texas payday loan operators began registering 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. Since then, payday loan operators in several other states in addition to Texas are beginning to realize the benefits to using the Credit Services Organization Model. These include South Carolina, California, Wisconsin, Colorado, Oregon, Oklahoma, New Mexico and more. 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 Texas; or whatever state the payday loan operator/broker located. Those payday loan companies that were not using the bank model and having found themselves in state/provinces not having favorable payday loan legislation have begun to investigate the benefits of the CSO Model. Payday loan operators in Texas were the first to begin employing the Credit Services Organization Model so our discussion here will make several references to the Texas methodology. However, you should be aware, as discussed earlier, the CSO Model is being used or certainly considered even in states having favorable safe-harbor payday loan legislation. What is a CSO Credit Services Organization
An important aspect of the CSO or Credit Services Organization model is that CSO's are required to "REGISTER" with the Secretary of State AND THEIR FEES ARE NOT REGULATED. How does the CSO Credit Services Organization work with payday loans?
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 Texas Statutes and the CSO Registration Form for Texas, we invite you to purchase our Payday Loan Bible. Purchasers with a Texas address receive our 90 page CSO/CAB Report at no additional cost. 100% Guarantee Check Program for the CSO Model-Payday Loans in Texas Contact us for the details on this program. CheckGuarantee@PaydaAndPaycheckLoans.com
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