What Are CSO Loans and Non-CAB Loans?
If you're looking to start a payday loan or title loan business in Texas—or expand your lending model legally and profitably—you've probably heard terms like CSO loans, CAB loans, and non-CAB loans. But what do they really mean?
In this guide, we break down how these models work, the pros and cons of each, and how you can use tools like loan management software to stay compliant and competitive.
Before diving into what is meant by CSO loans and non-CAB loans, let's take a brief look at the meaning of Credit Services Organizations (CSOs) and Credit Access Businesses (CABs). Both CSOs and CABs are licensed companies that assist consumers in obtaining loans from unaffiliated third-party lenders. In that sense, CSOs and CABs do not lend money, nor do they design loan products, but they are the company that the borrower will interface with when it comes to certain loan types.
That said, you may recognize CSOs more from their older name as so-called credit repair companies that help borrowers reclaim their credit scores by extending credit to those who may not qualify for credit via traditional lenders. To help them do that, CSOs are regulated by the government to ensure that all requirements are met and that the borrower can meet the demands of their loan.
On the other hand, CABs and CAB loans represent somewhat of a new model of CSOs. They include payday loan companies, title loan companies, and other lenders that are required to have a CAB license to offer CAB loans. Today, regulations stipulate that businesses that offer loans governed by CAB rules must adhere to certain protocols and restrictions, helping to save the borrower money over the lifetime of the loan.
The Rise of CSO Loans and the Fall of Non-CAB Loans
Starting primarily in the state of Texas -- yet also being used in Ohio and other states -- lenders that wanted to reach borrowers without hitting the FDIC limits sought a new kind of loan model. Instead of the bank model where the loan company was little more than a frontend for a larger bank in another state, lenders employed CSO loans and CAB loans, which led to the development of the Texas Credit Services Organization (CSO loans) or Texas Credit Access Business (CAB loans) loan model.
How a CAB Loan Works – A Clear, Profitable Model for Texas Lenders
If you’re thinking about starting a lending business in Texas, understanding how the CAB loan model works is absolutely essential—and incredibly empowering.
Unlike traditional lending models that rely on banks or impose tight APR caps, the Credit Access Business (CAB) structure allows you to act as a licensed broker, connecting borrowers with third-party lenders, while collecting service fees for managing the entire process.
This model doesn’t just keep you compliant—it gives you a sustainable, high-margin path to profitability. And thanks to CAB-specific regulations, you’ll know exactly what you can charge, how long loans can last, and how to structure them for recurring revenue.
Here’s a simple breakdown of how the model flows from borrower to lender to CAB—without the headaches of bank partnerships or capped profits.
Why the CAB Model Works for Lenders
Now that you’ve seen how the CAB model flows from borrower to lender to CAB, let’s unpack why this structure is so effective—especially for small-dollar lenders in Texas.
In this model:
The lender is responsible for setting loan criteria and funding the loan. However, they’re capped at a 10% APR, per federal FDIC guidance.
Late fees and non-sufficient fund (NSF) fees are regulated by the Texas OCCC, not left to guesswork.
What makes this model so attractive is that the CAB—not the lender—is allowed to charge a separate service fee, typically around $20–$30 per $100 borrowed. This fee covers the CAB’s role in managing the loan, handling renewals, collecting payments, and dealing with defaults.
Unlike traditional models with capped fees and heavy bank involvement, this framework allows CABs and CSOs to operate profitably and sustainably—all while staying fully compliant.
Key Benefits of the CAB Loan Model for Lenders
If you're still comparing lending structures, here's why many lenders in Texas choose the CAB model:
Higher earning potential through uncapped service fees
Faster cash cycles with 180-day loan limits
Control of the borrower experience via your own storefront or online portal
Clear, well-established legal framework upheld in federal and state courts
Flexible collateral options like titles or equipment
And when paired with automated loan management software, the CAB model becomes even more scalable, efficient, and profitable.
More Flexibility. More Revenue. More Control.
Loan terms are limited to 180 days, ensuring faster repayment cycles.
Loans may be secured with collateral like vehicles or equipment, depending on the state.
CABs and CSOs handle the servicing burden—freeing the lender to focus on growth.
And here’s the kicker: The CSO/CAB model has been upheld in both state and federal courts. That means it’s not only compliant, but legally protected—giving lenders a reliable business foundation in a market where regulation is always shifting.
Compared to the outdated “bank model,” the CAB model gives lenders more fee potential, stronger margins and greater independence—without the red tape.
What Is a CSO Bond—and Why Does It Matter?
To operate legally as a Credit Services Organization (CSO) in Texas, you're required to carry a CSO surety bond. This isn’t just red tape—it’s a legal guarantee that your company will follow all applicable lending laws.
The CSO bond protects both borrowers and the state by ensuring:
All fees are disclosed and within legal limits
Borrowers are treated fairly
Disputes can be resolved with financial recourse
The bond strengthens trust with regulators and consumers—making it a must-have for compliant, scalable lending.
How Much Does It Cost To Get a CSO Bond?
Unsurprisingly, working with a CSO and getting a CSO bond comes with its own costs. Primarily, they're based on the qualifications of the applicant as well as the total loan amount. While bonds for less than $25,000 are based on the applicant's credit score, bonds for larger loans of more than $25,000 have a more in-depth process that may require additional documentation or information from the CSO or borrower. That means the cost of a CSO bond will be related to the borrower's qualifications, such as their income, work history, and overall financial history. That said, most CSO bonds are approved for somewhere between 1% and 5% of the total loan amount.
Note that bonds and regulations are set at the state level, therefore costs can vary depending on the state that you operate in.
Credit Services Organization (CSO) vs. Credit Access Business (CAB)
If you're confused about the differences between CSO loans and CAB loans, you're not alone. In the state of Texas, for example, CSO loans are subject to the Texas Finance Code, which regulates payday and title loans. If a CSO is engaged in obtaining a loan on behalf of the customer, then the CSO is deemed to be acting like a credit access business (CAB) and would therefore be subject to enforcement under the OCCC. Other types of loans that aren't payday or title loans are known as non-CAB loans.
In November 2019, the Texas attorney general issued an opinion that allows CSOs to obtain non-CAB loans for consumers. However, they're not allowed to avoid the requirements for CABs in doing so, though they are allowed to assist in obtaining a so-called "signature loan" where no collateral is given, such as a personal check, debit account access, or an auto title.
Essentially, the CAB is there to help borrowers obtain credit without putting up collateral in advance, though all CABs have to register with the appropriate authorities, maintain accurate records of transactions, and verify the income of borrowers. Additionally, CABs may also be required to supply information about financial education and training services to their customers depending on the rules and regulations in their state.
On the borrower side, regulations mean that CAB loans cannot exceed more than 20% of the gross monthly income of a customer, and a title loan cannot exceed more than 3% of the yearly income or 70% of the total retail value of the vehicle, whichever is less.
For lenders, these requirements can be strict and make it difficult to meet the needs of borrowers, which is why many lenders and borrowers seek out non-CAB loans that may not fall under the CAB requirements.
Demystifying Credit Services Organizations and Credit Access Businesses
Known more commonly as credit repair companies, credit services organizations or CSOs are basically any lender that requires a payment before credit is extended. They're regulated by the government and are not able to charge fees beyond the defined limits set forth by the states.
On the other hand, a credit access business or CAB is part of the new model of CSOs. Today, payday loan and title loan companies are required to obtain a CAB license that governs and dictates how the loan works and it's all basically a replacement for the CSO model.
CSO vs. CAB Lending: Frequently Asked Questions
What’s the main difference between a CSO and a CAB?
A CAB is a type of CSO that specializes in payday/title loans and must follow stricter OCCC guidelines.
Do I need a license to operate as a CAB in Texas?
Yes. You must register with the Texas Office of Consumer Credit Commissioner (OCCC) and meet all licensing requirements.
Can I use the CAB model online?
Absolutely. Many successful lenders operate fully online using tools like Infinity Software to manage origination, renewals, and collections.
What are the fee limits for CAB loans?
While lenders are capped at 10% APR, CABs may charge service fees—typically $20–$30 per $100 borrowed—depending on state rules.
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