Jul 30 2015

Andrew F. Quinlan: Poor will suffer from attack on payday loans – Opinion …

Far too many Americans live paycheck to paycheck. For most the cause is just overspending and too little saving, but others struggle simply to earn enough to survive. Unfortunately, it is the latter that will be punished by proposed rules from the Consumer Financial Protection Bureau targeting small-dollar, or payday, lenders.

The Brookings Institution estimates that while one-third of US households #x2013; 38 million people #x2013; live #x201c;hand-to-mouth,#x201d; two-thirds of those are not actually poor. Rather, they lack significant savings either because they overspend or because they prefer illiquid investments such as real estate or a retirement portfolio. That still leaves tens of millions with few assets and limited income that would be negatively affected by restricting access to small-dollar loans.

#xa0;In March the CFPB announced that it was #x201c;proposing rules that would end payday debt traps by requiring lenders to take steps to make sure consumers can repay their loans.#x201d; That explanation is generic enough to almost sound reasonable, but the details reveal that far from simply ending #x201c;payday debt traps,#x201d; what the rules under consideration actually would end is the availability of much needed credit for millions of Americans.

#xa0;Borrowers who rely on payday loans to cover unexpected bills don#x2019;t generally have access to alternatives. Where others might cover an unexpected expense by using a credit card, for instance, they are forced to take out small, short loans to get them to their next paycheck. This is because they are deemed too risky for traditional banks due to their financial history or limited income.

#xa0;The CFPB wants to protect such borrowers from digging themselves into an even deeper financial hole, but in so doing will further restrict credit to the very people who may need it most in order to pay bills, for a visit to the doctor, or to repair a car needed to get to work. Even their own analysis acknowledges that between 60 percent and 80 percent of the small-dollar loan market could be eliminated, which will force many to turn to even less desirable options on the black market.

#xa0;Among the considered rules is an effective cap on interest rates that would be set well below current market levels for payday loans. Because small-dollar borrowers are high risk and frequently default, lenders must charge a much higher interest than traditional loans. And because the loan period is so short, the annual percentage rate can be orders of magnitude larger. Setting on arbitrary cap, however, would prevent the loans from being offered in the first place because lender could no longer make enough to cover the risks and other costs.

#xa0;It is likely for this reason that Dodd-Frank, which created the agency, specifically prohibits a usury cap, but the CFPB has unusual autonomy and little congressional oversight.

Jul 29 2015

Legalizing Pets in Our Final Resting Place

Cemeteries serve as a final resting place for families, so its only natural that people would want that family to include their pets. However, its not easy to include animals in traditional burial plans. Most states dont allow pets to be buried in human cemeteries and, a few years ago, New York temporarily banned the spreading of human ashes in pet cemeteries. Its apparently a controversial topic.

However, this could soon change for Massachusetts residents. Sponsored by State Rep. Nick Collins, Massachusetts legislators met last week on a bill that would allow the states cemeteries to designate land for humans and pets to be buried alongside each other, including cremated remains.

Although the bill is in motion, its not a straightforward issue. Critics oppose the legislation due to environmental, sanitary, and religious concerns. The Massachusetts Cemetery Association has not yet taken a position on the idea and has been considering what exactly the law would mean. Theyre currently looking into the impact on other people who own plots or have relatives buried in cemeteries and if the law would permit humans to be buried in unregulated pet cemeteries.

If the bill were to pass, it would make Massachusetts the fifth state to allow pet burials alongside humans. There is also much variation among the current laws. Last year Virginia passed legislation that permits pets and pet owners to be buried side by side, as long as theyre not in the same grave or coffin. In Florida, pet remains can be interred with a human provided the pet died first.

What do you think about pet burials in human cemeteries?

Jul 28 2015

New product offers gap housing finance

INDEPENDENT MEDIA
The gap market comprises prospective homeowners who earn too much to qualify for a housing subsidy or RDP house from the government, but earn insufficient to qualify for a conventional home loan. Photo: Simphiwe Mbokazi

Johannesburg – A total of R1.35 billion has been secured for housing finance in the gap market through a public-private partnership between Old Mutual Capital Holdings, the National Housing Finance Corporation (NHFC) and Future Growth.

The gap market comprises prospective homeowners who earn too much to qualify for a housing subsidy or Reconstruction and Development Programme (RDP) house from the government, but earn insufficient to qualify for a conventional home loan.

Andrew Chimphondah, the chief executive of Housing Finance Partners (HiP), the public-private partnership, said yesterday that they had developed an innovative product to expedite home ownership in the affordable housing market.

Of this total amount, Future Growth has provided R650 million, Old Mutual Capital Holdings R430m and the NHFC R270m.

Chimphondah said this product was developed in 2009 but was officially launched, in terms of paying out loans, in January 2013 and R900m of the R1.35bn funding secured was already committed.

The product

Without any advertising, HiP had received 21 200 applications worth R2.4bn and its loan book was already worth R480m and had benefited 1 191 customers, he said.

Chimphondah said unlike a traditional mortgage bond that had a variable interest rate and the instalment rose or fell in line with interest rate fluctuations, HiP’s product had a fixed instalment for a year.

He said the instalment was linked to the customer’s salary and increased in tandem with their salary increases over the 20-year term of the loan.

He said the instalment would not comprise more than 24 percent of a customer’s gross salary and there was an assumption customers’ salaries would increase by the inflation rate plus 2 percent a year.

Their commitment never exceeds that proportion of their gross salary. We don’t want to impact on the customer’s affordability so if their salary goes up, the instalment goes up by a small percentage, he said.

Michael Goemans, a director of HiP and the finance head at Old Mutual’s Mass Foundation Business, said if interest rates had increased materially over the term of the loan and had not come down again, there might be a residual amount that would have to be paid at the end of the term.

But Goemans said it was not expected that a residual amount would be payable at the end of the loan term because South Africa had, for some time, been in a period of more stable interest rates.

He added that there was massive demand in the gap between the low-end RDP and subsidy houses and the house market served by the banks.

A lot of these customers were creditworthy but had been priced out of the market because of affordability, he said.

Affordability

Goemans said HiP’s product created some initial affordability but did not compromise on credit risk, stressing customers had to be creditworthy, formally employed and have stable earnings.

The instalment is a stable percentage of their salary so it doesn’t become more or less affordable over time.

He said the interest rate payable on the loan was the prime rate plus 4.5 percent, which included credit life cover. Six months cover is included in the credit life policy to allow customers who are retrenched to address their situation.

Goemans said the interest rate charged by HiP was in line with what would be charged by banks and less than half the cost of unsecured lending.

Chimphondah said there was demand for about 850 000 houses in the gap market, with a price of between R200 000 and R650 000.

Business Report

Jul 27 2015

A Good Time to Buy a Car if Your Credit Isn’t Great

The latest report from Equifax reveals low auto loan delinquency rates across the board including those of credit-challenged consumers.

A good time to have bad credit

It looks like now might be a good time to finance a car even if you happen to be a borrower with less than perfect credit.

According to the latest National Consumer Credit Trends Report from Equifax, despite the fact that new auto loan originations are hitting record highs, the rates of severe delinquencies are the lowest theyve been in nearly ten years.

Latest Equifax Credit Trends Report

Theres been much concern about the growth of auto lending, particularly in the subprime space, over the past year, yet historically low delinquency rates reveal that the sector continues to perform well, said Dennis Carlson, Deputy Chief Economist at Equifax. More consumers are staying current on their payments, which is due to both improved economic conditions and the fact that lenders and dealers are qualifying the right borrowers across the entire credit spectrum. Additionally, the inclusion of non-traditional data, as well as instant verification of income empowers lenders by providing a more accurate picture of a consumers financial standing.

Equifax also has the data to support such rhetoric.

According to its latest report, the April severe delinquency rate (auto loans and leases 60 or more days past due) was 0.81 percent – the lowest its been since September 2005. This is also occurring alongside the continued growth in auto loans. Point of fact: new loans through February 2015 hit the 4.1 million mark, a 5.2% year-over-year increase and the highest number since Equifax began tracking this data in 2005.

Subprime auto loans

The report also directly addressed the auto loan market that services consumers with credit problems:

  • Over 980,000 auto loans have been originated year-to-date to consumers with an Equifax Risk Score below 620. These are generally considered subprime accounts. This is an 8.1% increase over 2014.
  • In 2015 through February, 24.2% of newly-originated auto loans were issued to consumers with a subprime credit score, a slight increase in share compared to the same period last year.
  • The average subprime loan amount was $17,363 in February 2015. This is a 4.4% increase compared to February 2014.

So, while consumers with credit issues currently have a better chance of getting a car loan approval, chance does favor those borrowers who are prepared if they:

  • Know their credit scores and the information in their credit reports
  • Plan on contributing at least a 10 percent down payment in cash or actual trade equity
  • Keep the loan term as short as possible (ideally, 36 to 48 months)
  • Choose a subcompact, compact or affordable midsize car

The Bottom Line

The latest report from Equifax is positive news for car buyers with bad credit. But at the same time, these buyers need to be familiar with their credit situation, come into a loan with at least ten percent down and keep the loan term as short as possible to ensure success.

One more tip: Auto Credit Express specializes in matching applicants with poor credit to dealers that can offer them their best chances for car loan approvals.

So, if youre ready to reestablish your car credit, you can start now by filling out our online auto loan application.

Jul 26 2015

Independence Day is a stressful time for pets

TAMPA, Fla. – While Independence Day is an exciting time for Americans, its often a distressing time for many pets.

Many in the animal-care industry cite the 4th of July as a time when many pets run away from home, often frightened by loud fireworks displays.

Dogs and cats have especially sensitive ears, and those loud booms often lead to many pets running off and getting lost. Its often a very busy time of year at Tampa Bay-area animal shelters for that same reason.

The Humane Society of Tampa Bay is having a special July 4th-inspiredadoption price of just $4 for dogs the day after Independence Day, July 5. Find out more about that event by clicking HERE.

Jul 25 2015

Nonprofits, Waco team up on cheaper alternatives to payday loans

A nonprofit program could begin offering Waco-area residents a lower-interest alternative to payday and auto title lenders as early as next month.

Community Loan Center of the Heart of Texas would provide short-term loans of up to $1,000 to employees of participating employers, starting with the city of Waco.

The system will allow borrowers to fill out an application online and quickly receive the money in their bank account once their employment is verified.

The nonprofit Texas Community Capital will provide the initial capitalization and oversight and will work with a local nonprofit group to administer the program.

The Heart of Texas Goodwill board of directors will vote later this month on becoming the responsible agency.

Waco City Council members have pushed for the program as a way to prevent Waco-area residents from getting trapped in a cycle of debt with payday loans.

“Any of us can have something happen,” said Dan Niseley, president and CEO of Heart of Texas Goodwill. “Let’s say your cars break down and you have a baby. When that happens, you might need some quick money. But you get in there, and it’s hard to get out in a two-week period.”

The past decade has seen a proliferation of firms that give high-interest loans backed by a paycheck or a car title. Greater Waco now has 36 such lenders, which collected $9.8 million in interest and fees last year, Texas Community Capital officials said. The firms repossessed 690 cars in this county last year and on average refinanced each loan 1.9 times.

In Texas, a payday or title loan of $500 taken out for 14 days costs $115 in interest and fees. The typical annualized interest rate, or APR, is 664 percent on a $1,000 loan, according to the loan center.

By contrast, the Community Loan Center will offer up to $1,000 for up to one year at an APR rate of 21.8 percent. Borrowers can pay off their loan at any time with no penalty.

With the online Community Loan Center, no credit check is required, but payment history will be reported to credit agencies, giving employees a chance to improve their credit history.

The Community Loan Center program has been established in seven Texas communities so far, including Austin, Dallas, Houston, Laredo, Bryan-College Station and the Rio Grande Valley.

In the past few years, the centers have written more than 5,500 loans and saved employees more than $3 million, with a loan loss of only 3.5 percent. Texas Community Capital officials say the unpaid loans are typically the result of people losing their jobs.

The repaid loans are used to build a rotating loan fund, along with a “modest” payment to the sponsoring nonprofit group for overhead expenses, said Howard Porter, Texas Community Capital program manager.

He said the program also pays for financial counseling to borrowers to keep them from needing high-interest loans in the future, Porter said.

Waco City Council gave its informal blessing last week to participate in the program.

“We have been very receptive to this,” Mayor Malcolm Duncan Jr. said.

He said the program meshes with the Prosper Waco initiative to reduce poverty.

He said 57 percent of Waco residents are “asset poor,” meaning they could not survive 90 days above the poverty rate if they lost their job.

District 4 Councilman Dillon Meek expressed enthusiasm for the program, calling payday lending “a real problem in my district.”

Councilman Wilbert Austin, whose district includes East Waco, said he recently saw a woman crying in her yard and learned that her car was about to be repossessed because of $350 she owed on a title loan.

“A good Samaritan paid that off,” he said. “But it really bothers me that our state senators can’t do anything more about this. . . . I’m glad to see this happening. This is not in the talking stage but in the moving stage.”

Jul 25 2015

Moodys UK consumer debt boom leaves borrowers vulnerable to economic shocks

UK consumers are taking on more unsecured debt to maintain spending, making credit card pools riskier, says Moody#039;s Investors Service in a special report published today. The rise in unsecured consumer debt is leaving borrowers increasingly vulnerable to economic shocks.

Consumer spending has surpassed pre-crisis levels, at a time when growth in unsecured consumer debt is outstripping wage growth, states Greg O#039;Reilly, an Assistant Vice President — Analyst at Moody#039;s.

Low interest rates are hiding the risk to consumers, making consumer debt appear more affordable on the surface, but masking potentially negative long-term consequences, observes Mr. O#039;Reilly.

The new report: Rising Consumer Debt Is Increasing Risk in UK Credit Card Pools, is available on www.moodys.com.

Moody#039;s research shows unsecured lending to consumers has jumped to nearly 7% year-on-year since December 2012. This increase in growth is credit-negative for UK credit card pools because consumers will have less capacity to repay their card balances given declining savings and wages.

The growth in consumer lending has coincided with a period in which challenger banks#039; card balance growth rates have overtaken those of high street banks. Since high credit card growth rates imply higher average risk, Moody#039;s considers challenger banks#039; recently originated credit card debt to be more at risk from an economic shock than those of the high street banks.

Despite growing indebtedness, the rating agency expects that delinquencies will stay stable this year in asset-backed securities (ABS) backed by credit card pools owing to market trends and the portfolios#039; strong credit quality. Delinquencies have remained stable at historically low levels, after declining between 2009 and 2014. Low unemployment and low interest rates are also keeping delinquencies down.

The performance of Moody#039;s rated credit card pools will remain stable because the credit quality of the securitised debt is stronger than the average UK credit card debt, notes Mr. O#039;Reilly.

UK credit card pools#039; strong performance also reflects issuers#039; improved underwriting standards since the crisis, which lowers the likelihood of a return to peak-delinquency levels in 2009. Since 2011, issuers have voluntarily agreed to adhere to a code of practice that requires a higher level of lending standards.

Jul 25 2015

Peter Crook: The down-to-earth boss making money lending to folk unloved by …

Certainly, as a disarming gambit, it worked. Normally, bankers as senior as Jenkins exude total confidence and tell you at length about their strategy and how they’re making a unique, positive difference.

What I took from the encounter was that Barclays was in a mess.

It’s not alone. All the main banks are experiencing a crisis of identity and positioning. They don’t know what they are any more. They cling to the notion of upholding old-fashioned values and doing the simple things they always did, yet they keep being caught out by the gung-ho antics of their investment bankers.

Increasingly, it seems, they’re turning their backs on ordinary people.

One company that is reaping the reward of their rejection is Provident Financial, headed by Peter Crook.

Now hovering just outside the FTSE 100 index and almost certain to enter very soon, Provident has a market capitalisation of £4.26 billion, (it was £1 billion when Crook became chief executive in 2007). But it has remained resolutely at the unfashionable, unglamorous end of the banking business.

It’s the subprime lender that stayed the course.

“We’re the leading lender to those customers who are unloved or unwanted by the High Street banks,” says Crook. “There are probably between 10 and 12 million people who can’t get a loan from the High Street banks. But we’re willing to serve them because we’ve got a set of businesses that’s geared up to do so.”

Crook is big and broad, without hair. He would have made a great prop forward.

A jolly, down-to-earth sort, he went to Loughborough University to study economics and later obtained an MBA from Cranfield. He qualified as a chartered accountant, worked for the Halifax and then Barclays, becoming UK managing director of Barclaycard.

He’s got four children and still lives in Northamptonshire, near Barclaycard’s offices.

Provident is based in Bradford, a long way from the gleaming towers of Canary Wharf. Unlike the banks, it has never deserted its traditional customer base. It was founded in Bradford in 1880 “to provide affordable credit to families in West Yorkshire”. That was supplied door to door by agents.

It spread across Britain and abroad, moving from doorstep lending into credit cards. Possibly it expanded too much and diversified away from its core business.

Crook arrived there in 2005 as financial MD of its consumer credit division just as the firm was on its knees. It had closed its Yes Car credit division and issued a profits warning, and the Competition Commission had launched an inquiry into doorstep landing.

After becoming chief executive, he demerged the international arm and drove the credit cards: “Today, they’re our largest business. Typically, our customers will have had credit problems in the past but are over them now for us to take them on.

“There’s probably something in their credit history — sometimes they have what we call a thin credit file. This is nothing bad against them but nothing good either. It means they’re a bit of an unknown quantity.”

It’s dangerous, he says, but not that dangerous.

“We’re running at about 10%-15% of loans defaulting. It’s a bit higher than the mainstream but we’re playing an important role, allowing people to access credit where otherwise they’d be turned down. Sometimes people have bumps in the road. They might have lost their job, been ill, got divorced.”

Jul 24 2015

Financial literacy

ING THIS MORNING FIRST IN ADDITION CREDIT UNION IS GIVING SKILLED A SIMULATION HELD IN ST. JOHNS COUNTY AND JOINING US THIS MORNING IS THOMAS SCARBOR ROGUE WITH FIRST FLORIDA CREDIT UNION, THANK YOU FOR JOINING US. GOOD MORNING. WHAT CAN WE EXPECT AT THIS EVENT? THIS EVENT YOU CAN EXPECT IT IS PRETTY MUCH A REAL-WORLD SIMULATION. THE KIDS GET A CAREER. AS YOU CAN SEE THIS GUY IS A GRAPHIC DESIGNER AND HE GOES AND FIGURES OUT HIS SALARY, HIS AND THEN THEY TAKE THEIR KIT UP AND GO STATION TO STATION AS YOU SEE HERE AND THEY MAKE REAL WORLD CHOICES LIKE YOU DO IN REAL LIFE, NEW TOUGH, LUXURY CAR, PICKUP AND FIGURE OUT LIFE ISNT ALL FREE, LIFE ISNT CHEAP AND THEY NEED TO MAKE THE LIGHTING DELETE S RIGHT CHOICES. I LIKE HOW YOU SAY LIFE IS NOT FREE OR CHEAP. WHAT DO KIDS NEED TO KNOW WHEN IT COMES TO FINANCIAL LITERACY. THAT THEY NEED TO BUDGET, THEY LEARN HOW THE BUDGET AND THEY LEARN THAT WHEN MOM TELL THEM THEY CANT GET THINGS, THERE IS MORE BEHIND IT RN, SHE IS NOT BEING MEAN, SHE MIGHT NOT BE ABLE TO AFFORD IT. IT LOOKS LIKE A REALLY COOL CONCEPT TO WALK AROUND AND PURCHASE THINGS. WHO CAME UP WITH THE YOOD FOR THIS CONCEPT TO TEACH KIDS ABOUT MONEY LIKE THIS? ACTUALLY, APPROXIMATE WE TOOK IT ON AND WE TRY TO DO THESE ONCE A MONTH THROUGHOUT THE STATE. I HAVE A QUESTION, DO THE YOUNG PEOPLE NEED TO GET A CREDIT CARD TO ESTABLISH CREDIT OR IS THAT SOMETHING THEY NEED TO WAIT UNTIL EDGE CL WHEN IS A GOD AGE FOR THAT? I WOULD SAY COLLEGE, BECAUSE CREDIT, ILL IT ACTUALLY IS GOOD, YOU NEED CREDIT, SOME JOBS REQUIRE IT AND CREDIT STAYS WITH YOU THE REST OF YOUR LIFE SO A LOT OF PEOPLE THEY DONT WANT A CREDITED CARD BUT YOU NEED TO BUILD YOUR CREDIT IF YOU WANT A GOOD DEAL ON A CAR. CREDIT ACTUALLY IS GOOD. IF PEOPLE CANT MAKE IT OUT THERE TODAY, I THINK YOU WERE EXMANYING THERE ARE OTHER EVENTS THAT ARE HELD. CAN YOU TELL US ABOUT THAT AND WHERE PEOPLE CAN GO TO GATHER OTHER INFORMATION. IF THEY GO TO OUR WEB SITE OR COME TO ONE OF OUR BRANCHES OR SIGN UP FOR OUR E-MAIL CAMPAIGN AND THEY CAN GET THAT INFORMATION. THANK YOU SO MUCH FOR UNIONING US, I HOPE YOU AN MAKE IT WITH YOUR THE KIDS AND FOR THEM TO GET THAT EXPERIENCE HERE AT THAT EVENT HOPEFULLY THEY CAN

Jul 24 2015

Student debt: Number of UK university students taking out payday loans ‘much …

The number of UK students taking out payday loans in order to make ends meet is much higher than previously thought, according to new research.