written by Dan Leibsohn
The issue of payday lending and other high interest installment loans for mostly low income people with poor credit has become a large issue throughout the country recently. The Consumer Financial Protection Bureau (CFPB) has brought this issue into even greater focus recently with the announcement of its intention to issue new regulations for payday and installment loans. Much of the discussion hinges on ways to curb these loans to the point that they may become economically infeasible. Based on our experience, we believe that low income people with low credit scores (400 to 600) desperately need access to credit and that alternatives are possible.
Community Development Finance’s Experience with Payday Loans
Our organization, Community Development Finance (CDF), has used these programs and dealt with these issues for several years. We operate a nonprofit check cashing store, opening in May 2009 in the Fruitvale neighborhood in Oakland, California; it is the only nonprofit check cashing store in the country that we are aware of not connected to a credit union. We charge much lower fees and offer other services, including financial coaching, small business services, referrals to banks and credit unions, and policy development. We estimate that our lower costs and financial coaching annually save people at least $150,000 to $200,000, and perhaps more.
We offer most of the financial services that other check cashing stores offer, including check cashing and loans. Beginning in the summer of 2010, we started making payday loans and we now have made over 3,650 payday loans totaling about $955,000 over the last four and one-half years through March 2015. We underwrite the loans and have to turn away many people; our loss rate is under 0.75%. We do not have the capital base to take more risk at this time as we cannot sustain large losses. Our loans tend to reach people who, as far as we can tell, are not only very low and low income but also have very low credit scores – typically between 400 and 600 – and who otherwise would not have access to credit through conventional sources or products. We charge a maximum of $7.50 per hundred dollars borrowed, half the permitted amount in the state, and we charge less to those people who cannot afford it. We also have a Debt Removal Loan for people who are in our financial coaching program; this loan product also uses the payday loan structure, has a 12% APR and up to a six month term. We also have used our payday loan structure to make a few loans to people who needed them for small businesses as there was no other credit source available to them. Through our financial coaching, we have talked to the borrowers frequently and enabled many of them to reduce their loan amount and/or the frequency of their borrowing and we have convinced many others to stop borrowing completely. However, the program is barely financially viable even with the low loss rate*.
We also have experience with the larger, lower interest, longer term installment loan programs that also exist in these markets. When we first decided to create a loan program, we went back and forth internally trying to decide between the payday loan structure and the installment loan structure. We started with the payday loan structure because people in the neighborhood understood the product and because we were concerned that we would suffer large losses if we opened up an installment lending program with larger loans to the general public. But we still wanted to see if installment loans could work, since it represents a superior loan product, and we knew some people who really needed them and asked us about this type of loan.
Therefore, we started an installment loan program in the second half of 2012 lending only to people we knew well and trusted to repay us. We also used the installment loan structure to make two smaller, payday sized loans instead of a payday loan – i.e. $300 loans with a one to three month term at a much lower rate. But every loan was delinquent and in some cases, severely delinquent. Moreover, not only were all the final loan repayments late, only two individual monthly payments out of the total number of loan payments were made on time. In total, we lent over $3,000 and we earned just over $160 in interest and fees. We charged an APR of 36% (the maximum allowed by California law) including an upfront fee and the interest rate, with a term up to six months. Our costs, even in that small time period, far exceeded the income we received**. In addition, the required staff time was extensive and drained our capacity to work on other programs and administrative efforts. We suspended the program in 2013.
We nevertheless retained an interest in offering installment loans. We started working with a local tech start-up involved with lending, SimpleFi, and we jointly initiated a new installment lending program in mid-2014. This partnership gave us the financial backing to support the staff work for the underwriting, servicing and financial coaching; furthermore, we did not have to raise more capital to lend or risk it on the loans. Through March 2015, we have made 68 loans, totaling over $212,850, with a maximum of $10,526 and a minimum of $631; the maximum term is two years. Several loans have already been repaid and there are only three substantial delinquencies. We charge 29% including a 5% fee which can be included in the loan amount. Recently, we have begun including a partial rebate of interest to be paid to borrowers at the end of the loan term if they make all loan payments on time. And we are developing a sliding scale for the loans so that the larger loans will have a lower initial interest rate. The program requires financial coaching, which CDF provides. We work in detail with the borrowers including creating a very detailed cash flow, and create a loan payment and term that fits the cash flow and works for them, for us and for SimpleFi. We are now working on creating the infrastructure needed for scaling to a much larger lending program that also requires financial coaching. (Note: as of July, SimpleFi suspended the program in order to fully concentrate its capital and resources on its primary effort; CDF has raised a small amount of capital and is proceeding independently with a slightly modified program. Through June 30, 76 loans had been made totaling $241,900.)
In considering this type of program, however, several other issues should be considered:
- The great emphasis on payday loans in the national discussion misses a lot of the total credit problems facing low income and unbanked people in at least two important ways. First, there is an entire range of financial institutions that serves the unbanked population; together, these institutions are much more expensive than the traditional sources and make it much more difficult for low income people to advance economically, as the cumulative fees can be very high. So, the core issue involves much more than payday lenders and check cashers. Further, for low income, unbanked or underbanked people, the financial services can be separated into two types of products: credit and non-credit financial services. Non-credit financial services include check cashing, bill payment, money orders, money transfers, etc. They have fixed fees for the most part and their impact, while substantial, are known and, relatively, tend to be not as great as the credit services which comprise the larger issue and, in contrast, are much more expensive and dangerous to the financial well-being of people with bad credit and few credit choices. These services not only include pay day loans, but also car title lending, unsecured personal installment loans, rent-to-own, pawn stores (there may be many more pawn loan borrowers than payday loan borrowers, and pawn loans are almost as bad), subprime credit and debit cards, RALs, etc. Ideally, all of these issues about access to credit need to be addressed, not just payday loans. They can be addressed through legislative or regulatory approaches. However, they also can be addressed through legislation/regulation in combination with other approaches that create alternative lending options. Although it may help in some ways, a focus on payday loans alone – whether eliminating them or trying to appropriately regulate them – will not fully solve the predatory nature of these other lenders/products and ultimately will not solve the credit access problems of low income people.
- Second, the focus on payday loans also tends to miss an even greater need within this population for much higher amounts of borrowing; they most often are deeply in debt under very onerous terms. While payday loans represent a very dangerous loan structure that indeed does trap people, the total amount of debt is usually relatively low compared to other debt; people with payday debt often have other, much higher debts, and often with very predatory rates and terms – such as credit card, medical, student, auto and personal installment debt in addition to large amounts of debt in collections and sometimes loans from illegal lenders. As a borrower, if you owe $5,000 to $15,000 or more to these sources at high rates plus have other debt in collection, then paying out $300 or $400 more per year for payday loan fees may not seem too problematic. For those people we have seen in counseling and looked at their budgets and credit reports, the payday loans are a relatively small issue and the deep focus on these loans is therefore misplaced to some degree. The present political and policy agenda nevertheless focuses on payday loans, perhaps because they represent an easily identifiable product throughout the country, have a relatively uniform structure, and represent a widespread loan type for small loans. The other, usually much larger debt, is very diverse, comes from a wide range of sources, is often less obvious and identifiable, is sometimes illegal, and is more difficult to find and address with alternative policy and regulatory approaches or loan structures. These types of debt therefore seem to escape the spotlight that is focused on payday loans. But constructive policies and programs also need to be developed to address some combination of credit cards, medical debt, school loans, car title loans, installment lending, illegal lenders, etc. as well.
- Overdrafts (OD). Overdrafts, like payday loans, cover shortfalls in small levels of cash availability for short time period; they are both short term loans. Although they, too, are relatively ignored in most policy discussions compared to payday loans, they often are far worse in many ways: they have much, much higher APRs; account holders cannot control them the way they can control payday loans; they may not be very transparent; the average amount that is overdrawn to incur a fee is about $40 but ODs can wreck someone’s credit while defaulted payday loans do not, as they are apparently not reported; a bank account holder with numerous ODs can be placed on ChexSystems, which keeps someone from getting a bank account for 5 years; the banks make far more money in fees from ODs than payday lenders make from their loans (roughly $32 billion per year in all types of OD fees compared to about $9 billion in payday loan fees), although only a slightly higher number of people use payday loans (about 19 million compared to 15 million people who overdraft). There have been some measures of people called multiple over-drafters – those people who overdraft a minimum of six to ten or more times a year. Generally, those people tend to be far worse off going to a bank and over-drafting multiple times than getting payday loans. Yet there is not nearly the same emphasis or focus on overdraft fees as there is on payday loans despite how much more damaging they are.
- Many people open checking accounts just to obtain a payday loan. They seem to not do much with the account, at least not what is considered the typical way of using a checking account. For example, a very large majority of our borrowers does not use checks to pay bills. Also, many use direct deposit and then withdraw most of their money in cash very quickly and apparently conduct a large part of their financial lives through cash. And many still fall into the habit of over-drafting their accounts.
- Repeat borrowers create a similar issue for us with borrowers who continue to roll over their loans, even with our lower fees. We have made extensive effort to try to help our borrowers stop this continuous borrowing. Some accept this advice and curtail or stop borrowing; larger numbers ignore us or basically tell us to mind our own business. Our fees are much less, so they don’t spend as much with us. But it is difficult to get some of them to stop and we do have the same general problem described in payday loan reports.
- Market segmentation is also a potentially important issue. In the discussion on payday loans in particular, borrowers are often presented as a single, stereotype based on averages of data collected. In our experience, borrowers do not pose a monolithic structure and it may be possible to use different products and approaches for different parts of this market and for people in different situations.
- Financial coaching is also a key consideration. The large majority of our customers – and most especially the payday loan borrowers – is completely uninterested in financial coaching. We explain that payday loans may not be a good product for them and that we have the capacity to assist them to get out of some of the financial problems they may find themselves in if they will enter our financial coaching program. (We charge a one-time, $5 fee for the coaching, reduced from $25.) The very large majority of our customers is uninterested. They listen to our description, take our flyer, say they will contact us, but never bring the topic up again. (I have had at least two people literally run out of our store when I have brought the topic up.) However, we have been able to reach many more people informally through discussions at the teller window and many do become motivated to change their payday loan borrowing: many have lowered the amount they borrow, reduced the frequency of their borrowing, and in many cases, stopped borrowing altogether either over a short period of time or right away if they are able to. (This has hurt our business and lowered our revenue from this program by removing many of our “best” borrowers). Overall, our experience with financial training differs from the more widespread financial literacy programs. The people who go into the financial education courses probably are predisposed to finding some type of assistance and they are able to effectively use the training; they probably are at the margin of being able to create an improved financial condition for themselves and the training can be extremely helpful to them. But the other people, the very large majority of people coming into our store at least, generally have little interest. They often have much deeper financial issues and have given up or think that their situations are hopeless. Others may be too embarrassed. However, the people involved in our larger, installment loan program face a different requirement than the payday loan borrowers. We require the installment loan borrowers to have financial coaching with us in order to receive the loan – and they have all been very interested, or at least willing to go into the program. Many were payday loan borrowers in the past, many with deep debt problems. The difference, we believe, is that they could see the value of coaching with a large loan that could have a true impact on their financial lives that a smaller payday loan could not accomplish. We have already witnessed credit score improvements and increased cash flows for some of our borrowers. Many have modified their financial behavior in other ways as well. These changes have occurred with many people who were well below the margin where financial coaching easily might have aided them.
Consumer Financial Protection Bureau (CFPB) Regulatory Changes
The CFPB is preparing regulations to limit payday lending and some longer term, larger installment loans. (See “Factsheet: The CFPB Considers Proposal to End Payday Debt Traps”, March 26, 2015.) For payday and/or larger, longer term installment loans, the regulations that are being considered apparently include:
- Limits on the loan amount to a maximum of $500 for payday loans and a range of $200 to $1,000 for installment loans.
- Limits on the maximum rate for installment loans to 28% plus a $20 application fee. Alternatively, installment loans could be made if the monthly loan payment is no greater than 5% of a borrower’s gross income.
- The option of underwriting either type of loan at the outset or later, for any roll-overs to determine whether the borrower has the “capacity to repay without defaulting or re-borrowing after covering other major financial obligations and living expenses by verifying the consumer’s income, major financial obligations and borrowing history”.
- An increase of the maximum term for a payday loan to 45 days and limiting the maximum term of installment loans to 6 months with a minimum of 45 days.
- Creation of affordable repayment options for delinquent loans.
- Limits on the total number of loans an individual borrower could receive;
- Limits on the number of outstanding loans at any one time;
- Limits on the number of rollovers allowed.
- Limits on the total number of days a payday loan borrower can be indebted in a year.
- Limits on allowing access to borrowers’ bank accounts for repayment.
This is not the place for a full review of all the proposed regulations, but in our opinion, they would be difficult to be workable and/or could create new issues. For example, there are many potential issues with the underwriting guidelines. For example, using the Bureau’s guidelines, a $1,000 loan at 28% for 6 months with a maximum monthly payment of 5% of income would require a minimum monthly income of $3,610 – an income requirement which would eliminate many potential borrowers. And the underwriting requirements for small loans are not practical. A $200 loan for 45 days under the payday loan options or 6 months under the installment loan option would not generate enough revenue to make the loan economically feasible. In addition, tracking loans with other companies can be difficult without a statewide or national database, and borrowers often do not report other loans on our application form. Without some form of tracking for these loans, these limitations could send the borrower to different lenders to obtain the total desired loan amount. With the limits on rollovers, the same borrower will be forced to go to a new set of lenders frequently during the one-year period and then start the cycle over when the one-year limit is up. If this type of borrowing activity occurs, it will create additional financial, transportation and timing burdens for borrowers.
From a lender’s perspective, it is not clear what the full impact of these proposals would be. The CFPB appears to be adopting a tactic which would most likely severely reduce if not come close to eliminating these loan products, at least up to $1,000, while encouraging loans over that amount. But there is a demonstrated demand for small dollar credit that is met by payday lenders and not by many others and that source may be closed due to these proposed regulations.
Many public officials, politicians and advocates understandably have long wanted banks and credit unions to make alternative loans at reasonable terms and to replace payday lenders. A $260 loan at 18% for 3 months is usually considered to be an example of a favorable alternative for the average pay day loan. However, this solution is unlikely for a large number of reasons. For example, a $260 loan at 18% for 3 months generates $7.84 in interest; at 36%, the same loan generates $15.75. For a six month term, a $260 loan generates $13.84 at 18% and $28.00 at 36%. These returns are not viable revenues for a lender to make these loans on any meaningful scale.
Additionally, regulatory issues may come into play. Most of CDF’s payday borrowers have credit scores between 400 and 600, as far as we can tell, and likely are similar to most other payday borrowers. Institutional lenders most likely would not be allowed to make large numbers of these loans by their regulators given the high risk. And internally, there could be resistance at these institutions due to the risks that tend to be associated with these credit score levels.
In 2013, there were 12,163,382 payday loans made in California totaling over $3.165 billion. While there are certainly some interested credit unions and banks that might make some installment loans for three to six months at 18% to 28%, they likely would not make enough loans to cover the amount borrowed in the past due to costs of lending and regulatory constraints as well as other reasons. Even if the number of loans were around 1.2 million for California based on an average 10 loans per payday loan customer, that level of lending also is unlikely to be achieved by institutional lenders or other lenders who are active in low income neighborhoods.
The proposals might work if the goal is to create a loan program that acts as a smaller demonstration and generates a reasonable number of loans from existing lenders including credit unions and banks. Some institutions will take up the challenge and offer a limited number of loans; in fact, scattered credit unions have been making small numbers of these loans around the country for years. But again, it is unlikely that the needed scale can ever be achieved by these programs. The CFPB proposals could further limit the development of viable, large scale programs to serve people who need it the most.
And, without payday lenders and with no viable institutional lending programs, people with low incomes and bad credit will be forced to seek out even less viable lending sources or find other, mostly problematic, solutions.
The desired loan structures that have been proposed are excellent from a borrower’s perspective and are approaches that we wish we could implement. But they do not work financially, at least for us and probably for most other lenders as well; they might work for certain borrower market segments (e.g. higher incomes, higher marginal credit scores perhaps between 580 and 680) but may not work at scale for the people who need it the most.
It is our opinion that these proposals might end and certainly diminish this type of lending. However, we believe that it would be preferable to first attempt to create viable loan alternatives that work for both borrower and lender before trying to eliminate these loans altogether. To develop a workable loan program that will achieve scale and help low income people, especially those with bad credit, a program has to work for both the borrower and the lender. CDF is designing a program fitting these parameters in an attempt to find a workable balance.
This type of program will require planned interventions of some type. It is unlikely that the “free market” will create a reasonable way to address these issues on any scale without any assistance. And, since it is unlikely that banks and credit unions will be able to play a major role, the solutions most likely will come from some type of non-regulatory or non-legislative alternative created as new programs and institutions, probably by nonprofits, community organizations, religious institutions, public agencies and socially responsible investors, with some limited participation from credit unions and a few banks.
The goal is to create a large scale program that offers fair prices and terms to borrowers. The program should meet a number of criteria:
- Generate large numbers of loans to achieve scale;
- Generate loans at the lower end of the loan amount spectrum (e.g. about $50 to $500);
- Offer larger size loans up to $10,000 (credit unions can offer loans between $200 and $1,000 up to six months at 28%; above this loan amount, the rate limit is 18%);
- Offer loan terms at least up to 2 years;
- Reach people who have bad credit history, especially those in the 400 to 600 credit score range.
- Challenge the existing market rate lenders to improve their own loan products;
Furthermore, to make payday loans and slightly larger, but still small, loans that work reasonably well for borrowers, the rates have to be reduced substantially. At the same time, there must be some capacity for the lender to break even and generate some amount of profit; otherwise, it will take a massive subsidy to make the loans feasible and that type of subsidy is not likely to be available. Therefore, any lending program must make economic sense – break even or generate a small profit – over the long term to be viable at a large scale.
There are two primary types of loans – payday loans and installment loans – that are available in check cashing/lending stores in California. A payday loan is smaller and is available up to $300 maximum with slightly higher amounts – sometimes up to $500 and occasionally higher in a few states. They are short term, usually up to one month but more typically 2 weeks and the fees normally are $15 per $100 borrowed, although the fees can vary by state. The unsecured (or signature) installment loans start at $2,501 and tend to go up to $5,000 with APRs of 152.39% to 185.56% while secured (usually auto title) installment loans go up to $25,000 with APRs of 130.84% to 142.09%. The term for both types of installment loan is 3 years. In between these amounts – i.e. between $301 and $2,500, there is a cap on the rate of 36% and these lenders are not making loans in this range. Below $300 and over $2,500, there are “exemptions” of one sort or another.
An alternative lending program needs to address the entire loan size spectrum, not this patchwork approach. Based on its experience to date, CDF has begun to work on the program design for a two-tier program to address this range of needs. The programs would use 1) a payday loan structure for the lower loan amounts, but at a dramatically reduced rate (possibly between 25% and 30% of the market rate) and with no required financial coaching, combined with 2) an installment loan program for higher loan amounts at very reasonable rates with required financial coaching. The design is still in process and we plan to create the framework for the installment loans during 2015-16 before we try to go to scale, perhaps in 2017. It is designed to cover costs and generate a small profit.
For the payday loans, we believe that a rate of about $3.75 to $4.50 per hundred dollars borrowed for two weeks and perhaps $8.00 to $9.50 borrowed for 30 days could work if losses were kept to about 3% or less. These rates compare to $15 for two weeks and over $31 for 30 days, respectively, for existing payday loan programs – about 25% to 30% of the market rates. We know from our extensive experience that half the rate works adequately and we believe that, with enough scale, the fee can be lowered further, close to these target levels. However, these numbers are preliminary and more feasibility analysis and market testing needs to be done.
We are presently making installment loans at 29% APR with the potential for rebates of some portion of the rate at the end of the loan term if all payments have been made on time. We believe that these higher rates can be reduced for borrowers of larger loan amounts who perform. The program requires financial coaching, which is time intensive and, therefore, costly. We are developing a sliding rate scale with lower rates as the loan amount increases. The term has been up to two years with a maximum amount of $12,000 for the unsecured signature loans. More feasibility analysis needs to be undertaken to determine the final contours of this program, but this general guide has worked to date and appears to be achievable on a larger scale. Greater scale with relatively low loan loss are keys to achieving these rates for both types of loans.
In addition to the proper program design, several other key components are necessary to make these programs viable:
- First, to assist in increasing the volume and to lower the risk and potential losses, a new delivery system needs to be created. Check cashing companies and pay day lenders already have a delivery or sourcing network: their stores are located in areas of high use of financial services and many maintain an extensive internet presence. A network of nonprofit organizations and other institutions can be developed to create an alternative delivery system to help generate referrals and source potential loans. It could consist of nonprofits working in impacted neighborhoods (e.g. social service providers, financial education agencies, housing developers, small business assistance providers, etc.), public agencies, churches, CDFIs and other organizations which already work in the neighborhoods closely with local residents and which could also work with people who would benefit from access to affordable credit. Referrals from these trusted sources who are working directly with potential borrowers could lower the risk of defaults. The network might also assist with preparation of application forms and submission of necessary back-up documentation needed to underwrite the loans. This approach will work best in areas where a potential network already exists; however, it could also work in areas with less well-developed networks, although it may be more difficult.
- Second, parts of the process need to be automated to allow parts of the loan processing, financial coaching and lending decisions to be available quickly and on scale. The resulting algorithms would need to be able to target those most in need (very low income, very low credit scores, etc.) who also would be most likely to repay. Technology is central in helping to lower costs of origination and servicing as well as financial coaching. We have begun work on automating the application process and parts of the financial coaching process.
- Third, the effort would need to be capitalized. There are many potential sources for this effort. The amounts needed could be relatively limited. The amounts needed for pay day loans could be relatively low because the loan amounts are low and the funds recycle quickly (these loans would be made with 30-day terms, instead of 14 days, or whatever maximum term is permitted by state law). The amount needed for installment loans would also not be massive since the bulk of these loans most likely would average between $1,000 and $5,000. Funding could come from banks, for example, which could set up bank pools with multiple lenders to fund participation loans for the program so the banks could spread their risk; some guarantees might also be used, especially during an early demonstration phase. In addition, many other sources are possible including foundations, religious institutions and socially-minded investors. Nonprofit bonds might be another source; and online lending also might offer another source.
- Fourth, some form of financial counseling would be ideal. With high-risk lending, some form of counseling could increase the effectiveness of this type of program – reducing delinquencies and defaults while offering great benefit to borrowers. However, borrowers of smaller loans may not be interested in the counseling and providing the service is costly. Nevertheless, receipt of loans over a certain amount and/or with a specified risk level should require some level of counseling.
- Fifth, ACH access is crucial; it allows crediting and debiting the accounts of borrowers. Presently, banks do not extend the use of this function very easily but this access would be essential to the program’s operations. There have been abuses of this function and protections would need to be built in to assure no abuses of the system would occur.
- Finally, a distinction about the types of underwriting is important to note. For payday loans, CDF underwrites to determine the likelihood that we will be repaid. For the larger loans, we also look at underwriting the borrower’s capacity to repay. It is expensive to underwrite smaller loans; so it is simpler and less expensive to try to determine the likelihood of repayment than to underwrite the impact of the loan on the borrower and the capacity to repay. The latter type of underwriting can be used with the larger installment loans but is much more difficult for the smaller payday loans without subsidy.
These proposals are preliminary based on limited lending activity to date. However, we believe that this experience is adequate to project future possibilities at this time. This approach likely would not be a perfect solution, but it would offer a satisfactory alternative to the present loan products or to eliminating existing lending programs through regulatory or statutory approaches. It would offer far better products than those that exist today and it would offer access to credit for those without access to traditional, mainstream, lower-cost credit sources who are presently excluded from most reasonable capital sources. With the use of new technologies, it would offer an economically viable program for some types of lenders allowing the program to reach scale adequate to satisfy much of the demand.
* In terms of fixed costs associated with the payday loans, CDF had interest on its own loan to pay; the state license ($941 annually); the state audit ($1,155.31 in 2013); losses (which vary each year, but have averaged about $1,725/year although about twice that is budgeted); office supplies; part-time program staff; bookkeeping and accounting; collection efforts and costs; etc. We grossed $14,988 in payday loan fees in fiscal year 2013 ending on June 30, 2013 and about $18,000 in fiscal year 2014. Net income in 2013 for the loans was about $5,000 to $6,000, not including staff time and overhead while we probably netted a slightly higher amount in 2014. Staff time and overhead are more of an opportunity cost in this context, as CDF would have to cover them under any circumstance, whether we did nothing else or if we used the time to pursue other products or activities. It’s possible that if the extensive time put into this program had been otherwise used, more than $5,000 in net income would have been generated. If the full costs, including staff and overhead, were included, we would have lost a lot of money on the program.
**Costs included the license, which costs $250 each year, requires a surety bond, which also costs $250 per year; interest on our own loan; state audit of over $1,000 that year; losses if any occurred; collection efforts; accounting; staff time and overhead; etc. – the costs were far more than the $160 in earnings we were able to generate with this loan product on the scale we are operating under.