CashNetUSA is an online consumer lender that provides small-principal, short-term loans called cash advances or [payday loans] as well as larger principal, longer-term loans called installment [loans] to consumers in the United States. CashNetUSA’s base of operations is located in [Chicago], Illinois, with branch offices in Gurnee, Illinois and Reno, Nevada. Nearly 600 employees serve CashNetUSA and its affiliated brands.
History
editCashNetUSA, first operated under the name The Check Giant LLC, was co-founded by brothers Albert and Alexander Goldstein when they began testing online consumer lending in May 2004. By the end of 2004, CashNetUSA was operating in 10 states and had entered into over 5,000 loan transactions.
In 2005, new initiatives like the Preferred Member program, a customer retention program, were launched. By the end of 2005, CashNetUSA was operating in 20 states and had entered into over 150,000 loan transactions. On September 18, 2006, [1] by [Cash America International], Inc. (NYSE: CSH), a publicly traded specialty financial services company.
By the end of 2006, CashNetUSA was operating in 30 states and had entered into over 900,000 loan transactions. The Refer-a-Friend program, which rewarded customers for referrals, was launched later that year in select states.
In 2007, CashNetUSA expanded its operations into four more states, introduced 24/7 Customer Support and expanded its operations in the United Kingdom. By the end of 2007, CashNetUSA had entered into over 2 million loan transactions.
In 2009, CashNetUSA began offering installment loans to consumers in select U.S. states. Installment loans allow customers to access larger loan amounts, which can be repaid gradually over several months. In 2009, CashNetUSA expanded in Australia and Canada and is operating under DollarsDirect.
Also in 2009, Enova Financial was created to bring CashNetUSA, QuickQuid and DollarsDirect under one corporate brand. CashNetUSA continued to operate as a purely customer-facing brand. Enova Financial, on the other hand, became a corporate brand that manages a variety of online financial services businesses.
CashNetUSA is a member of the [Better Business Bureau] (BBB), [Financial Service Centers of America] (FISCA) and the [Community Financial Services Association] (CFSA).
Services
editPayday loans are typically used by consumers to cover emergency expenses between paydays. CashNetUSA provides customers with online payday loans in loan amounts ranging from $100 to $1,500.
Installment loans allow customers to access larger loan amounts, which can be repaid gradually over several months. Installment loans are available only in a select number of states.
In order to be eligible to receive a loan from CashNetUSA, loan applicants must have an active checking account and must have been employed for at least one month. CashNetUSA also requires loan applicants be a citizen or a permanent resident of the United States and to be at least 18 years of age.
A customer’s loan amount is based on information the customer provides in his or her loan application and on the laws of his or her state of residence. Information about individual state requirements can be found on the CashNetUSA’s Rates & Terms page, located on its website.
After successful repayment of a first loan, a customer’s future loan amounts may increase.
Payday Loans Controversy and Criticism
editPayday lending has historically been associated with some controversy and has encountered both legal challenges and public scrutiny due to the loan fees charged and the customer demographic served.
Pricing and Fees: Opponents of payday lending point to the [Annual Percentage Rate] (APR) associated with payday loans, which can reach triple digits, as an example of how payday lenders exploit customers, citing that traditional sources of credit (credit cards, mortgages, etc.) seldom exceed 20% APR.
Payday lenders counter by arguing that APR, which represents an annualized finance charge, is not an appropriate way to represent the fees of a credit product that has an average lifespan of two weeks. Also, payday lenders argue that overdraft fees and non-sufficient funds (NSF) fees, which borrowers of payday loans often seek to avoid when taking out a payday loan, could carry significantly higher APRs if the APR metric was used to measure these fees. Finally, payday lenders argue that if they are forced to accept APRs charged by traditional sources of credit, the interest received from such a small-principal, short-term loan would not be large enough to cover the processing underwriting costs, let alone the cost of defaulted loans or overhead. For example, a $100 loan taken for one week at an APR of 20% would generate approximately 38 cents of interest.
[Ernst & Young] concluded in an [2] on the payday industry that fees charged for payday loan services are generally fair and [3], processing and overhead costs and the short-term nature of payday loans. The report argues that rate caps proposed by various federal and state legislatures would make short-term credit prohibitively costly and would cause many lenders to go out of business, eliminating a key source of credit to consumers who are under-served by traditional financial services institutions.
Cycle of Debt: Another argument made by payday lending opponents is that payday lenders trap borrowers in a cycle of debt, forcing borrowers to borrow more money to pay off previous debts.
Payday lenders counter that, as a form of credit with definitive loan terms, payday loans are much easier for customers to understand and generally have clearer disclosures than other credit products. In addition, customers that default on payday loans are not profitable customers. As such, those customers that end up defaulting will find it more difficult to obtain subsequent loans, averting the cycle of debt argument.
A report released by the [4] argued that payday loans should not be considered predatory, since in many cases such loans can “raise household welfare by relaxing credit constraints,” allowing cash-strapped consumers access to licensed and regulated credit options, which they might not have otherwise had through the use of traditional financial services institutions.
Customer satisfaction is also a good indicator of whether customers feel trapped by short-term lending or not. A survey of recent Pennsylvania customers performed by the [5] found that over 92% of respondents were satisfied with the transparency of and clearly understood the fees and terms associated with their payday loans. A full 80% of respondents were satisfied overall with their experience – a percentage notably higher with those satisfied with their mortgage provider (70%), credit card provider (68%) or home equity line (67%).
Customer Demographics: Opponents of payday lending claim that lenders target the poorest, least educated consumers in an attempt to trap a customer base that is forced to rely on a short-term product due to financial need and a lack of fiscal knowledge.
But a report by the [George Washington University] [6] shows that payday loan customers actually come from a wide demographic. The report showed that over 50% of payday loan customers came from upper low-income or middle-income households (gross income between $15,000 and $49,000 a year) and 39% had gross household incomes of $50,000 or higher. The report noted that due to payday lenders’ requirements that customers must have a valid checking account and stable income, a vast majority of lower-income households are excluded from their target demographic.
Critics also claim that payday lenders target less-educated customers, since lower education levels are generally associated with poor long-term planning and decision making. However, of the customers surveyed in the George Washington University report, less than 10% did not have a high school diploma, while over 70% had a high school diploma and/or some college education. Those with a college degree represented 19% of the individuals surveyed.
References
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