Advance Financial no longer offers services including check cashing, bill pay, free money orders, prepaid cards, ATM, Western Union and Bitcoin.

We’ll see $3.2 billion and 34,000 jobs disappear in Tennessee

Advance Financial’s Mike Hodges challenges Consumer Finance Protection Bureau

Mike Hodges is chairman of Advance Financial, a family-owned and operated consumer finance center founded in Nashville in 1996.

Offering financial services such as FLEX loans, wire transfer, bill payment and money orders, Advance Financial operates more than 70 locations throughout the state and employs more than 600 people.

Mike Hodges is chairman of Advance Financial, a family-owned and operated consumer finance center founded in Nashville in 1996.

Post Managing Editor recently met with Hodges for a quick chat.

According to some folks, the Consumer Finance Protection Bureau is trying to radically alter — and some would contend shut down — the industry. Your thoughts?

Right now we are conducting 400,000 transactions each month within a 50-mile radius of Nashville. Eliminating our services would eliminate a highly sought after service that thousands of Middle Tennesseans depend on to deal with unexpected financial challenges in their lives, like replacing a broken refrigerator or fixing the car they drive to work. Without us, these folks would fall through the cracks, which is why 95 percent of them say they value the assistance we provide, according to a recent national survey conducted by Harris Polls. Very few industries of any kind have such a high rate of customer satisfaction.

Getting rid of our stores would not just wipe out the small-dollar loans that people value so highly [but also eliminate] wire transfers, money orders, free bill pay, check cashing — services our customers rely on every day. And they are all connected. If you take away the loans, you take away the revenue stream that supports our stores, ultimately removing access to the daily financial services our community needs. Opponents say they can go elsewhere for these services. They have tried to go elsewhere and they’ve been turned down. So where else do we expect them to go?

What will be the impact on your industry if the CFPB is successful?

Well, we’ll see $3.2 billion and 34,000 jobs disappear in Tennessee (according to Nashville Area Chamber of Commerce calculations). To put this in perspective, $3.2 billion is more than the state budgets to spend on TennCare in 2016-17 and there are roughly 30,000 elementary school teachers in the entire state. That’s a lot of lost money and jobs.

The CFPB is attempting to override the decisions that individual states have made about consumer finance, decisions that have led to a higher quality of life for everyone, not just our customers. When people can’t pay their bills, it affects the entire economy — jobs, rent, benefits, charitable giving — all of it. The CFPB is seeking to take away a vital and highly valued service without providing a viable option to fill the void it would leave behind. There seems to be no thought as to the damage this policy would wreak on state economies, let alone the lives of the individuals who depend on our services.

At Advance Financial, we offer good- paying, career jobs with excellent benefits. For instance, 100 percent of our employees’ health insurance is paid for by the company. We generate $110 million in revenue and distribute almost every dollar of that back into the economy through jobs, rent for our stores, job benefits, community giving and marketing. If we get shut down, all of those jobs and all of that money we invest in Tennessee goes away.

There are some critics of the consumer financial services industry. Specifically, and related to Advance Financial, they view short-term, high-interest and/or flexible loans with a certain disdain, noting such instruments can lead to trouble for the less-than-savvy user. Though I’m sure you would disagree, can you respect their right to make such criticisms? And how do you counter that?

I think reasonable people can disagree on many complex issues, and financial services is certainly one of those issues. We support equitable and effective regulation for our industry, but not outright bans that are not good business decisions. Are our loans the right choice in all situations? Absolutely not. But they are an excellent, safe and, yes, rationale alternative for many people. In my experience, people who are living without the financial safety net that many of us enjoy are very resourceful about how they manage their resources — probably more resourceful than you or I. To imply that these folks are not smart enough to know what they are doing is not only wrong, it is patronizing and insulting.

Furthermore, we are a highly regulated, extremely transparent business. It is in our best interest to assure that our customers understand the exact terms of their loan. In fact, the Harris Poll I mentioned earlier found that 97 percent of small-dollar loan borrowers agree that their lender clearly explained the loan terms to them — including 88 percent who ‘strongly agreed.’

We provide an option that rational consumers weigh against the cost of bounced checks, disconnect fees, late charges on utilities and the credit you can’t get when you need it — which is the most expensive credit of all. What will it cost the person who can’t afford her car repairs, which means she can’t get to her job? What is the cost for a child not getting the medication he needs because the family can’t afford it? For people in these situations, the real cost comes in not having the essentials they and their families need. People don’t think about the chain of events surrounding something someone cannot do, and how those weigh against the cost of the items they pay for.

Advance Financial has multiple Midstate locations. Are they company owned or franchised, and what type growth are you targeting?

Advance Financial is a privately owned family business. We are the quintessential mom-and-pop shop, owned by my wife, Tina, and me. When we started the company here in Nashville 20 years ago, it was financed entirely through friends, family, banking relationships and money we had saved. Our employees are friends, family and members of the local community.

Assuming we are not regulated out of business, we are working to open 40 stores throughout the state in the next four years. We currently operate more than 70 stores in the Nashville, Chattanooga and Knoxville markets, and we plan to expand to the Tri-Cities and West Tennessee areas in two or three years. From there, we will look at expanding outside of Tennessee.

All stores are company-owned; we are not a franchise operation. We are growing across the state as prudently as we can under the eye of a federal rule-making agency that considers small-dollar loans ‘Public Enemy Number One.’ Fortunately, Tennessee’s legislature and regulators understand both the needs of consumers and the needs of the businesses that serve them. They have found that delicate balance that’s necessary for this industry to function effectively. As a matter of fact, Tennessee leads the nation as the first state to regulate our industry.

What are some of the characteristics of your business model?

We are hyper-focused on both the consumers who buy our services and the individuals who work for us. All of our business decisions are fueled by us constantly asking ourselves why someone would want to do business with us and why someone would want to work for us.

Our products are a commodity. All of our competitors are selling the same thing and operating under the same laws. By approaching our business in the way we do — that is, by treating our employees like family — we have a competitive advantage that leads to more customers and a larger, stronger workforce. The work culture you create and the way you treat your customers is something that is harder to mimic.

In working your way through school and starting your own business, you’ve had to be resourceful and independent. How has your background helped your business succeed in the consumer financial services industry?

I have the mindset for this industry in a way my competitors do not. I grew up with a single mom, went to public high school in Nashville — yea, Hillwood! — and worked my way through my time at the University of Tennessee. After college, I did not have a diploma but did have a lot of bounced checks. The consumer finance industry was being born in Tennessee at that time and, even though I had no prior business knowledge, I decided to take a chance on this new line of business. My first partners and I funded the venture ourselves by scraping together $5,000 to $10,000 at a time from family and friends. We added stores one at a time and always asked ourselves, “What do our customers want and how fast do they want it?” The faster we could answer these questions, the better we got at this business.

Since I came from a poor to working-class background, I know what it’s like to need things and not have the money to buy them. This has helped me compete against management types who can’t see things from the customer’s point of view. If the things you’ve wanted and needed have always been there, you can’t relate. Many people wonder why someone would get a small-dollar loan or why would they need $500 that quickly? We don’t need to ask those questions. We’ve been there; we know why. That makes it easier for us to meet those customers where they are.

As the market shifts, trade-offs and sacrifices have to be made in order to know how to serve the customer better and faster. My past experiences and my current team enable me to make the best decisions for our company and our consumers.

Original Source: Nashville Post