Payday Lenders Are Changing the Game Ahead of a U.S. Crackdown

Getting cash-strapped people into very expensive debt has been a good business for Matt Martorello. His company, Bellicose Capital, helps an American Indian tribe in Michigan run websites that offer small loans to the public at annualized interest rates as high as 780 percent. Bellicose has collected tens of millions of dollars, with the tribe keeping about 2 percent of the revenue, according to documents provided by a person involved in the deal. Now Martorello is selling Bellicose to the tribe for just $1.3 million upfront, plus as much as $300 million in future payments, depending on how the business does. Bellicose projects the tribe will eventually earn $58 million a year, the documents show.

Martorello isn’t the only person in the high-cost-loan industry who seems to be eager to get out these days. Many are making drastic changes to their businesses, such as switching products or moving overseas. One possible reason: The Consumer Financial Protection Bureau is poised to release new regulations this year, after more than four years of studies and speeches. The agency, which hasn’t finalized the details, says the rules will stop borrowers from taking out short-term loans they can’t afford and racking up fees week after week to buy more time. Lenders say the CFPB will kill off payday advances and similar loans, hurting borrowers with no other options.