Check Cashing, Payday Loans, Pawn Shops Industry Terminology

Ability-to-Repay (ATR)

A lender’s assessment of whether a borrower can repay a loan on time without reborrowing, based on income, obligations, and loan terms. Used to reduce default risk and avoid debt traps.

["Our underwriting includes an ATR check before approval.","The examiner asked how we document ATR for single-pay loans.","Customers failing ATR screens are offered smaller amounts or EPPs."]

ACH (Automated Clearing House)

U.S. electronic network for batch processing bank-to-bank debits and credits used for loan funding and repayment. Lower-cost than cards, governed by NACHA rules.

["We collect repayments via ACH debit on payday.","Disburse funds through same-day ACH.","Monitor ACH return rates for compliance."]

Adverse Action Notice

Required notice under ECOA/FCRA when credit is denied or offered on less favorable terms, stating specific reasons and credit bureau info if used.

["Send an adverse action notice within 30 days of denial.","Include key denial reasons like 'insufficient income.'","Keep copies for audit trails."]

AML (Anti-Money Laundering)

Program to detect and report money laundering and terrorist financing, mandated by the BSA. Core pillars: risk assessment, internal controls, BSA officer, training, and independent testing.

["Update our AML risk assessment annually.","Cash structuring alerts feed into AML review.","Staff complete AML training each year."]

APR (Annual Percentage Rate)

Standardized yearly cost of credit including interest and certain fees, disclosed under TILA. Enables comparisons across products, even for short-term loans.

["The TILA box shows the APR and finance charge.","APR differs from fee cap—know both.","APR looks high on single-pay loans due to short term."]

Armored Carrier (Cash-in-Transit)

Third-party service that transports and replenishes store cash safely between locations and banks. Key to cash-heavy operations.

["Schedule CIT pickups on high-volume days.","Seal deposits under dual control before CIT arrival.","Reduce robbery risk via frequent armored runs."]

Beneficial Ownership Rule

CDD requirement to identify and verify the individuals who own or control a legal-entity customer (e.g., 25% owners plus one control person).

["Collect beneficial owner info for corporate pawn customers.","Retain certifications in the CDD file.","Update ownership data upon changes."]

BSA (Bank Secrecy Act)

Primary U.S. AML law requiring MSBs to maintain AML programs, file CTRs and SARs, and keep records. Enforced by FinCEN.

["CTR and SAR filings are BSA obligations.","Independent BSA audit due every 12–18 months.","Train all front-line staff on BSA red flags."]

CFPB (Consumer Financial Protection Bureau)

Federal regulator overseeing consumer financial products, including payday and certain installment loans, for UDAAP, TILA, EFTA, and ECOA compliance.

["CFPB exam prioritized our payment practices.","UDAAP is a CFPB hot topic.","Update disclosures per CFPB guidance."]

Charge-Off Rate

Percentage of loan principal written off as uncollectible within a period. A core credit performance metric.

["Target a monthly charge-off rate under 12%.","Higher first-pay defaults drove charge-offs.","Provision aligns with expected charge-offs (CECL)."]

Check Kiting

Fraud scheme exploiting check float by depositing and cashing checks between accounts to create artificial balances.

["Refuse cashing when kiting is suspected.","Velocity controls help prevent kiting.","Add maker verification for borderline items."]

CIP (Customer Identification Program)

KYC requirement to collect and verify identifying information (name, DOB, address, ID number) before account or transaction.

["Scan government IDs to meet CIP.","Match data to third-party databases.","Document CIP exceptions and resolutions."]

Collateral (Pawn)

Tangible personal property pledged to secure a pawn loan. The item can be forfeited and sold if not redeemed.

["Appraise collateral before setting LTV.","Store high-value collateral in the safe.","Clearly describe collateral on the pawn ticket."]

Collections (In-house)

Processes for recovering past-due debts (calls, texts, emails, letters) consistent with law and policy. Focus on right-party contact and cure rates.

["Escalate accounts at 10, 20, and 30 DPD.","Use EPP offers to improve cures.","Track RPC and promise-kept rates."]

CTR (Currency Transaction Report)

BSA report filed for cash-in or cash-out transactions over $10,000 in a single business day, aggregating related activity.

["Aggregate multiple same-day cash checks for CTR.","Verify ID and complete FinCEN CTR.","Detect structuring to evade CTRs."]

Debt Trap

Cycle where a borrower repeatedly rolls or refinances short-term loans, paying fees without reducing principal.

["ATR and EPP policies mitigate debt traps.","Monitor repeat-borrowing rates.","Cap rollovers per state rules."]

Default

Failure to meet repayment terms. In pawn, default typically leads to forfeiture; in loans, it triggers collections/charge-off.

["Default at 31 DPD triggers charge-off at 60 DPD.","Defaulted pawns convert to inventory.","Offer hardship plans before default."]

Deferred Presentment (Deferred Deposit)

Payday loan structure where a post-dated check or ACH authorization is accepted and presentment is deferred until the borrower’s payday.

["State law licenses us as a deferred presentment provider.","The check is held until the due date.","Rollovers limited under deferred deposit statutes."]

Delinquency

Status of a loan past due by a set number of days (e.g., 1+ DPD, 30+ DPD). Tracked in buckets for risk management.

["30+ DPD rose 150 bps.","Auto-cure on NSF followed by same-day re-presentment.","DPD buckets feed roll-rate models."]

ECOA (Equal Credit Opportunity Act) / Regulation B

Prohibits discrimination in any aspect of a credit transaction and sets adverse action notice requirements.

["Don’t condition credit on marital status.","Adverse action letters list principal reasons.","Keep ECOA decision records for audits."]

EFTA (Electronic Fund Transfer Act) / Regulation E

Governs electronic fund transfers, including ACH debits, authorization requirements, and error resolution rights.

["Obtain written ACH authorization for recurring debits.","Honor Reg E revocation of authorization.","Provide error resolution disclosures."]

EPP (Extended Payment Plan)

A no-cost repayment arrangement (often state-mandated) allowing borrowers to repay over multiple installments instead of rolling over.

["Offer EPP after two consecutive loans.","No additional fees during EPP.","Document EPP terms in writing."]

ESIGN Act

Federal law validating electronic signatures and records; requires consumer consent and demonstrable access to receive legally required disclosures electronically.

["Capture ESIGN consent before e-signing TILA box.","Email disclosures in readable format.","Store e-signed contracts securely."]

FCRA (Fair Credit Reporting Act) / Regulation V

Regulates use and furnishing of consumer report information and accuracy/dispute obligations.

["Have permissible purpose before pulling a report.","Send FCRA adverse action when a report is used.","Respond to disputes within required timelines."]

FinCEN (Financial Crimes Enforcement Network)

U.S. Treasury bureau administering BSA/AML regulations and collecting CTRs, SARs, and BOI data.

["Register as an MSB with FinCEN.","File SARs electronically via BSA E-Filing.","Review new FinCEN advisories for fraud trends."]

Forfeiture (Pawn)

Transfer of collateral ownership to the pawnbroker when the borrower fails to redeem within the redemption period, allowing the item’s sale.

["Forfeited items move to retail inventory.","Notify customers before forfeiture as required.","Track forfeiture rates by category."]

Fraudulent/Counterfeit Check

A non-genuine or altered instrument presented for cashing. Requires training, tools, and procedures to detect.

["Use UV/infrared features to spot counterfeits.","Call the maker for high-dollar items.","Leverage a negative database for repeats."]

Hold Period (Police Hold)

Mandatory waiting period before reselling purchased or forfeited items to allow law enforcement to identify stolen property.

["No sale until the hold period ends.","Flag items on hold in POS.","Comply with local police reporting systems."]

Identity Verification

Process to confirm a customer is who they claim to be using IDs, database checks, biometrics, or liveness/selfie match; core to KYC/CIP.

["Scan ID and verify with a third-party.","Selfie-to-ID facial match for online loans.","Secondary proof required on mismatches."]

Loan-to-Value (LTV) Ratio

Pawn lending measure: loan amount divided by the item’s estimated resale value. Balances competitiveness and loss risk.

["Set LTV at 40–60% based on demand.","Lower LTV for volatile electronics.","Gold LTV varies with spot prices."]

MAPR (Military Annual Percentage Rate)

All-in cost metric under the MLA that must not exceed 36% for covered borrowers; includes certain fees beyond APR.

["MAPR includes ancillary fees.","System blocks loans >36% MAPR.","Check covered-borrower status before funding."]

MLA (Military Lending Act)

Federal law protecting active-duty servicemembers and dependents, imposing a 36% MAPR cap and restricting terms like arbitration and vehicle title liens.

["Run MLA checks on all applicants.","Prohibit rollovers for covered borrowers where restricted.","Provide required oral and written disclosures."]

MSB (Money Services Business)

FinCEN registration category that includes check cashers, money transmitters, and currency dealers/exchangers, with specific AML obligations.

["Maintain active MSB registration.","List each agent location on the MSB filing.","Follow MSB SAR thresholds."]

NACHA Rules

Operating rules for the ACH network covering authorization, formatting, and return thresholds.

["Keep unauthorized return rates below NACHA limits.","Use written authorizations for recurring ACH.","Classify entries as PPD, WEB, TEL correctly."]

NSF (Non-Sufficient Funds)

Condition where a borrower’s bank account lacks funds to cover a debit; drives ACH returns and collections actions.

["Retry NSF debits per policy.","Track R01 (NSF) return codes.","Trigger text reminders after NSF."]

OFAC Screening

Sanctions screening of customers and counterparties against U.S. Treasury’s SDN and other lists; blocking or rejecting prohibited transactions.

["Screen at onboarding and before payout.","Resolve potential hits promptly.","Keep OFAC logs for audits."]

Pawn Ticket

Legal receipt and contract for a pawn loan, detailing item description, loan amount, fees, APR or charges, maturity, and redemption terms.

["Print a ticket for each transaction.","Ticket describes serial numbers and condition.","Retain tickets per state record rules."]

Post-Dated Check

Dated in the future and used as security or repayment mechanism in deferred presentment/payday models.

["Hold the customer’s post-dated check until payday.","Voids issued upon EPP enrollment.","Deposit or ACH-convert per policy and law."]

Provision for Loan Losses (PLL)

Expense recognized for expected credit losses; under CECL, estimates lifetime losses at origination and updates with performance.

["Increase PLL when roll rates worsen.","CECL model uses vintage curves.","PLL aligns with charge-off experience."]

Redemption Period

Time window during which a pawn borrower can repay and reclaim the pledged item before forfeiture; set by state/local law.

["Send reminders before redemption expires.","Extend redemption per hardship policy.","Different periods apply to jewelry vs. electronics."]

Refinancing vs Rollover

Refinancing closes the old loan and creates a new one; a rollover extends the due date (often by paying a fee) on the same loan. Many states limit rollovers.

["Refi resets TILA disclosures.","State law caps rollovers at two.","Use EPP to avoid serial rollovers."]

SAR (Suspicious Activity Report)

Report to FinCEN for transactions suspected of involving crime, structuring, or money laundering, typically at or above $2,000 for MSBs.

["File a SAR for synthetic ID attempts.","Narrative must tell the story clearly.","Aggregate related activity across days."]

Small-Dollar Loan

Consumer credit with relatively low principal (often <$1,000) and short maturities; includes payday, pawn, and small installment loans.

["Design safer small-dollar alternatives.","Track repeat usage patterns.","Disclose total costs clearly."]

Structuring

Illegally breaking transactions into smaller amounts to avoid reporting thresholds like CTRs; a key AML red flag.

["Multiple $9,800 cash checks suggest structuring.","File SAR and refuse service if needed.","Train staff to escalate suspicious splits."]

TILA (Truth in Lending Act) / Regulation Z

Requires clear disclosures of credit terms (APR, finance charges, payment schedule), governs advertising, and grants certain rights.

["Show the TILA box on every loan.","Correct any TILA disclosure errors.","Marketing must include trigger terms properly."]

UDAAP (Unfair, Deceptive, or Abusive Acts or Practices)

Standard prohibiting practices that harm consumers; enforced by CFPB and states. Applies to pricing, collections, disclosures, and add-on products.

["Avoid misleading fee quotes.","No excessive contact pressure in collections.","Test disclosures for consumer understanding."]

Underwriting

Process of assessing borrower risk and capacity, including identity, income, bank data, employment, and prior performance.

["Use bank-statement cash-flow scoring.","Verify income via VOI provider.","Apply LTV and ATR constraints."]

Usury Cap

State-imposed maximum interest/fee limits and product restrictions; varies widely by jurisdiction and loan type.

["Our state caps fees at $15 per $100.","Title loans banned under state usury law.","System enforces state-specific caps."]

Vault Cash

Cash stored in a secure safe for daily funding and payouts; managed with limits, logs, and dual controls.

["Set vault limits by day-of-week demand.","Reconcile vault daily to the penny.","Stage change orders before weekends."]

Verification of Income (VOI)

Methods to confirm stated income using paystubs, employer verification, bank transaction data, or payroll APIs; supports ATR/underwriting.

["Use payroll-link VOI for speed.","Cross-check pay frequency with due date.","Flag inconsistent deposits for review."]