Payday | Business Observer

Summary
Company. Amscot Industry. Financial services, loans of small dollars Key. The company is pushing back against regulations it says could cripple its business.


Ian MacKechnie’s first business venture in the United States was a dismal and costly failure.

It was 1988. After selling a chain of cafes and bakeries he had founded in his native Scotland for $18 million, MacKechnie had moved to Tampa for a new life challenge. Besides the weather, he chose the area because he had just finished reading John Naisbitt’s bestseller “Megatrends,” which named Tampa the fastest growing city east of the Mississippi.

MacKechnie bought Lincoln Baking Co., which distributed fresh baked goods to 7-Eleven and Circle K convenience stores. But it struggled to get enough volume.
Rather than invest more money in it, he sold the business, with a loss of $1 million.

MacKechnie rebounded quickly. In 1989 he founded Amscot Financial. He saw the need for a low-cost alternative for people cashing checks at liquor stores and pawnshops, in what was then a largely unregulated field. What started as two check-cashing stores, one in Ybor City and the other near the University of South Florida, has grown into a state leader in low-cost financial services. and fast service.

The company handles $7.5 billion in transactions annually, with a slate of services including free cash advances, bill payments and money orders. It does this through nearly 240 locations the company operates statewide, with the bulk in the Tampa, Orlando and Miami-Dade-Broward markets. All the stores are open at least from 7:00 a.m. to 9:00 p.m., and a third are open 24 hours a day, to cater to its mainly working-class clientele.

“We succeed because we do what our customers want us to do,” says MacKechnie, a vivacious 72-year-old who uses a treadmill desk at work to stay active. “We don’t work bankers’ hours. We are open 365 days a year. There is a demand for that. »

Amscot made $209.3 million in revenue last year and has 1,800 employees. Payroll includes about 150 people at its Tampa headquarters, where it occupies two floors of an office tower in Tampa’s Westshore neighborhood with its name at the top. The company also has a 30,000 square foot ground facility nearby, where it houses IT services for its branches, equipment and a printing facility for marketing materials. MacKechnie is president and CEO of the company. His two sons, Ian A. MacKechnie, 48, and Fraser MacKechnie, 41, are senior executives.

More capitals
Today, after 27 years, Amscot faces what may be its greatest challenge ever – pending federal Consumer Financial Protection Bureau regulations that would most likely put the company out of business or, at least, minimum, would cripple its business model.

Ian A. MacKechnie, executive vice president and treasurer of Amscot, says the rules as written are a death sentence. It would turn the company’s niche quick deals into the equivalent of signing a 30-year mortgage, he says.

“These rules are really onerous and complicated,” he says. “It’s not a regulation, it’s a ban.”

The Florida Office of Financial Regulation oversees all licensed payday lending activities in the state. The OFR caps the fees that lenders can charge customers at $10 per $100 borrowed over 31 days. The state also caps the total amount a customer can lend at one time to $500. Borrowers are required to comply with a state database that flags customers with verified payment histories, and lenders are required to use the database with every transaction. And customers who default on a loan get a two-month grace period and financial counseling.

But a segment of the CFPB’s proposed rules would impose even more restrictions and caps on lending, both to thwart what it calls predatory lenders and essentially to protect customers from themselves. CFPB Director Richard Cordray, in public comments on the rules, said the very economics of the payday loan industry were forcing some borrowers to default. Then those clients come back for more loans, fall behind, and quickly fall into a downward spiral of debt.

“These rules would curb the most abusive payday lenders,” says Karl Frisch, executive director of Allied Progress, a Washington, DC-based lobby group that supports the rules. Frisch, in an interview with the Business Observer, adds that he hopes the CFPB won’t give in and water down the rules, so companies can find loopholes.

The public comment period for the proposed rules ended on October 7. The CFBP, created in 2011 from the Dodd-Frank Financial Industry Reform Act, is expected to announce the official rules later in 2017.

MacKechnie says Amscot is not going to “sit back and do nothing” about the proposed rules, including potential legal action. The Community Financial Services Association of America, one of the industry’s leading lobby groups, could also take action.

‘Fill the void’
MacKechnie has already found himself on the wrong side of regulators during his 50-year business career.

This happened about a decade after Amscot launched, when it began offering car insurance to high-risk motorists. MacKechnie was charged with insurance fraud and conspiracy to commit racketeering following an undercover operation of Florida Insurance Commissioner Bill Nelson’s office in 1998.

Charges in the case were eventually dropped, and MacKechnie agreed never to return to the insurance business. But MacKechnie says experience and legal fees have made him overzealous when it comes to complying with regulations.

That’s part of why Amscot has 20 people on the company’s payroll who handle compliance with Florida’s strict payday loan regulations. This includes 10 retired FBI agents who do forensic accounting at all chain stores.

“If we leave,” asks MacKechnie, “will the people filling the void be as diligent?

Like many executives in financial services, including banks and credit unions, MacKechnie says he welcomes regulation. “All good business supports good, well-intentioned and fair regulation,” he says. “We don’t want bad operators in our industry.”

MacKechnie also admits that it doesn’t hurt that strict regulations create a significant barrier to entry for competitors. MacKechnie says, “It’s enlightened self-interest.

The other barrier to entry, and challenge for Amscot, is capital. According to company officials, it takes significant start-up capital and ongoing capital to reach $7.5 billion a year in transactions.

Amscot, MacKechnie says, has received between $80 million and $100 million from institutional investors over the past decade to fund loans and business operations. On the
On the operations side, he says it costs at least $1 million to open a branch. This covers training, security and construction of pitches, which are rented. The company also spends significant amounts on advertising, especially when entering a new market.

“Margins are relatively low,” says MacKechnie, “so we understood the need for critical mass.”

many letters
This critical mass of customers is now Amscot’s best weapon against the proposed rules.

For starters, MacKechnie claims that Amscot’s customer default rate is around 1%, making the CFPB’s claims of a payday loan debt trap mostly false.
Then there are the letters.

Amscot, through branch clerks and managers, asked customers to write letters about their experience with the company that it could use for the comment period of the CFPB’s proposed rules. The response was a deluge of letters and handwritten notes, 103,000 in all, praising Amscot. Copies of the letters are stacked on a large table in a conference room at Amscot headquarters.

Most of the letters share a theme: Amscot provided a loan that allowed customers to turn on power or buy groceries for a week or get medicine for a family member. The ratings, at MacKechnie, are proof positive that it’s in the right business, and Amscot does the right thing for its customers. “We want to be something people want in their community,” he says. “We don’t want to be a nasty payday loan place.”

MacKechnie also says the CFPB’s proposed rules run counter to a fundamental American value: freedom. “I came to this country 30 years ago because I thought it was the last bastion of capitalism,” MacKechnie says. “The Constitution clearly states that this is a free market economy.”


Survival stories

Here are examples of reviews Amscot customers have written about the company in response to proposed federal regulations that would cripple the company. (Last names were not provided for confidentiality reasons.)

“If you limit loans, you are going to make many families homeless, without food, without running water or heating or air conditioning.”
Janie, Riverview

“I am disabled, so I receive a small disability allowance per month. It really helps me survive throughout the month.
Tania, Palmette

“I’m a single mother working two jobs, unfortunately that’s not enough. Cash advances allow me to do what I need when I’m short.
Amber, Sarasota

“If the water heater breaks down or the family car doesn’t work, what are we going to do? Families need these services, so any limits imposed will destroy the fabric of the family household. We should have the right to choose.
Derron, North Port.

“The payday advances have been a great help to our family in times of need. If we had to wait 30 days or even limit the number of days per year, we would be in bad shape. »
Catherine, Palmette


big salary
A breakdown of the $7.5 billion that passes through Amscot each year includes:

$2 billion in money orders;

$1.5 billion in loans of $100 to $500 each;

$1 billion in bill payments;

$1 billion in check cashing.