Category Archive: Pay Day Loans

2016
09/30

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Pay Day Loans

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For African-American female entrepreneurs, funding challenges call for creative bootstrapping

Credit Stacker teaches people how to make wise credit decisions. Essentially, you have to swap various pieces around that represent monthly payments.

2015
12/27

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Pay Day Loans

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Chilliwack city council asking for crackdown on ‘predatory payday loans’

Marty van den Bosch was working a low-pay, entry level job 15 years ago.

Like a lot of young men, he was terrible with his money.He was a bachelor. And he partied hard.

One payday came along and the party went on a little too long, but he hadn’t yet paid his rent in full.

He needed a loan, he didn’t have good credit at any bank, so he went to Money Mart, one of the many payday loan businesses around at the time. He got a loan for $300, and that’s when the trouble started.

As he remembers it, that $300 payable two weeks later came with a $30 charge, a rate that may seem reasonable to the desperate and those who aren’t well-versed in financial matters. But $30 on $300 over that time period is an annual interest rate of 260.7 per cent, which, in the payday loan world, is relatively low.

Some payday loans charge fees that amount to as high as 1,200 per cent interest.

Next pay period van den Bosch rolled the loan over for another $30 fee. Then again. And again. And again.

“You keep slipping back just a little bit more and that fee starts to compound,” he said. “Then I thought, Money Mart lent me money, maybe Moneytree can lend me some more. The situation got worse and worse and this went on for two years.”

Van den Bosch eventually had to declare bankruptcy.

 

Criminal lending

Charging a rate of interest higher than 60 per cent is considered criminal in Canada, but payday loan companies were given an exemption by Conservative government in 2006 thanks to Bill C-26.

“Some payday loan companies appear to be charging interest in excess of 1,200 per cent per annum,” according to a report on Bill C-26 prepared by Parliament.

Part of the bill was meant to dump the responsibility for regulation to the provinces, and what it did was legalize what was already happening.

“These are loan shark rates,” said Coun. Sue Attrill, who is chair of the city’s Public Safety Advisory Committee (PSAC).

“It really puts people that are in a situation where they are already low income and marginalized already and it puts them at greater risk. . . . The reason they are popping up all over the place is because they are a licence to print money.”

While regulating the financial industry is a federal area of responsibility, the ramifications end up at city hall’s door. Municipalities face the daily public safety challenges that come with homelessness, crime and also usurious interest rates.

“Every social issue in the city becomes an issue for us,” Attrill said.

At Tuesday’s meeting, council voted to send a letter to the new federal Minister of Justice Jody Wilson-Raybould to reduce the maximum amount of interest allowed to be charged on loans.

“The pay day loans industry is a very aggressive sector,” the letter signed by Mayor Sharon Gaetz says. “Pay day loan companies are competing for the business of a vulnerable group of Canadians who are desperate for short-term loans but do not have the credit rating necessary to deal with a bank.”

The city also approved a resolution to present at the next Federation of Canadian Municipalities conference.

At the meeting Tuesday, Coun. Jason Lum added an amendment to the motion to send the issue back to PSAC to see what the city could do to help stop “predatory payday loans.”

 

Long-term problem of short-term loans

Local financial adviser Terrence Brown teaches people how to be better with their money. He also believes education at the school level is key.

“It doesn’t surprise me that these loan businesses are flourishing,” Brown said. “Many Canadians are living beyond their means, aren’t saving, have no emergency fund, and are taking out high interest loans as a last resort. It’s a sign of the times.

“Education is the key to fixing this problem. I would love to see the education curriculum revamped to include basic financial literacy. If not, trends show that the problem will keep getting worse.”

There is widespread criticism of the payday loan industry, some comes from ex-employees.

In a discussion on social media, one local individual told the Times she used to work at a payday lender and it isn’t just paycheques people can borrow against, but pension cheques as well.

“Seeing 80-plus-year-olds coming in and knowing that by the time they paid it back they would need it again in a vicious never-ending cycle made me ill,” she said.

“I thankfully got out of it exactly a year ago,” said another person. “Will keep my fingers crossed that I never have to use it again.”

“Good topic! My brother destroyed himself financially by defaulting on ONE payday loan at Christmas time last year,” said yet another.

But others point to other more established financial institutions and arguably unethical lending there, too.

Chilliwack resident Cherie Lynn told the Times she has rented a room to an individual who is receiving $570 a month in social assistance who was given a credit card with a $3,000 limit.

“Payday loan places you kind of expect them to be sharks, but our chartered banks are far worse,” she said.

As for van den Bosch who was nearly destroyed by them, he doesn’t disagree that payday loans are problematic but he sees them as symptoms rather than the real problem.

“I don’t think the interest is the biggest heartache,” he said. “That $300, I borrowed that. That $30 added insult to injury but I shouldn’t have borrowed that. I should have sucked it up.”

As for the city’s move to pressure the government to make changes to the industry, van den Bosch thinks it’s over-reaching.

“How much are we trying to bubble-wrap people’s lives?” he asks.

And while no one wishes debt, poor credit let alone bankruptcy on anyone else, his hitting rock bottom was the best thing that happened to him.

He stopped partying, stopped recklessly spending and turned his financial life around.

“My pay and my career level jumped and jumped and jumped, I started earning more and more income, changed my mindset and got to the point where my $40,000 student loan was gone. Then I started dumping into RRSPs and before long I had enough to put a down payment on a house. I’ve now been working in IT for 15 years.”

Canadian Payday Loan Association president Stan Keyes did not respond to an emailed request to comment on the subject.

 

2015
12/24

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Pay Day Loans

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New Program Launched to Counter Payday Loans

SPRINGFIELD, Mo. — Theres a new weapon in the fight against poverty in our area.

CU Community Credit Union announced today its rolling out its Fresh Start Loan Program in Springfield. It will serve as an alternative to traditional pay-day loans.

Judy Hadsall, president of CUCCU explains how it works. There are four pieces to this. One, now theyll be able to do short-term loans with us. The second one is were going to have a consolidation loan where the people who have gotten into trouble, well be able to work with them and consolidate those and get them out of the payday loans.

The other two parts of the plan include credit-builder loans and used-car loans.

The services will be available in both Greene and Christian counties.

The program is being funded with a $2 million grant from the US Treasury.

More about how the program works

Copyright 2015 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

2015
12/21

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Pay Day Loans

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Broadbent charms as baddie Scrooge

Image copyright
JOHAN PRESSON

Image caption

Jim Broadbent plays a a genial Scrooge but still seems to please the critics

Jim Broadbent has returned to the stage for the first time in a decade to play Scrooge in a new West End version of Charles Dickens A Christmas Carol.

The classic adaptation, which opened on Wednesday, is presented on a set designed like a Victorian toy theatre.

Broadbent plays his role with an undercurrent of his well-known affability, according to the critics.

Yet he said his Scrooge had been partly inspired by modern bankers and the issue of pay-day loans.

There are an awful lot of echoes of whats going on today. We dont mention pay day loans but its implied, he said.

2015
12/19

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Pay Day Loans

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ACORN pushing for new payday loan bylaws

ACORN members will try to educate Vanier residents about the dangers of pay day loans at an event Tuesday night.

2015
12/19

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Pay Day Loans

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If you must borrow this festive season, this is how to do it

If you need to borrow money to fund additional expenses over the festive season, the funding option you choose will significantly affect your cash flow over the following months. It is therefore critically important that you choose the right type of loan.

Assuming you need R3 000 to cover additional festive season expenses, there are a few options – a payday (one month), short term (six months) or medium term loan. Each has different implications and choosing the wrong one could place you firmly on a debt treadmill.

Rayanne Jacobson, the CEO of Izwe Loans, says, The first consideration is whether you will be in a good position to pay back the loan. If you are on a very tight budget, there may be a case for holding back on a holiday, expensive gifts or a lavish Christmas meal.

While your intentions may be good, your family would rather have you in better financial health and should understand if you forego some of these expenses.

However, if you are thinking of taking a loan, it is imperative that you weigh up the financial consequences so that you are in a stronger position next year.

Here are the three scenarios facing you, with less than a month to go until the end of the year.

Let us assume you earn a net salary of R10 000 a month and manage to save R1 000 each month as disposable income but do not have the liquidity for additional festive season costs.

Using the R3 000 loan requirement example, and taking into account the average interest charged by numerous lenders as quoted on their websites, a payday loan, a short-term term loan and a medium term loan have very different financial implications.

In the first scenario, going to a payday lender, you will need to repay R3 629 at the end of the first month. This will probably mean that you need to take out a further loan in month two and in subsequent months, as your monthly disposable income of R 1 000 will not cover the repayment.

Assuming you do need further loans to fill the gap, it is possible you will only achieve a positive cash position by month six, and the cumulative cost of your loan could likely be in the region of more than R5 500.

In the second scenario, going to a short-term lender (usually a six month loan), your monthly instalment will be approximately R740.16, which is far more manageable. And by month six, your total cost on the loan will be in the region of R4 441. Assuming your R1 000 disposable income per month, you will be in a net cash position of around R260 from the get go.

In the third scenario, going to a medium term lender, and assuming an eight month loan term, your monthly instalments will be a much more affordable R539.51 and you would have paid back just R4 316 after eight months. Whats more, you will have a net cash position of around R460 each month after making your loan repayment. This is clearly the best option not only in terms of your total cost, but also in terms of you being able to have enough for other expenses over the loan period.

Although the payday loan appears to be the cheapest, it is the most difficult to service and inevitably ends up being the most expensive, and pushes you onto the debt treadmill.

Another thing to consider is that the more payday loans you take out, the less chance you may have to qualify for a longer-term loan.

Credit providers look at a consumers credit records, amongst other things, in establishing his/her credit score. There is the possibility that regular and ongoing use of pay day loans is indicative that the consumer is in a debt trap and could, therefore, pose a greater risk, Jacobson says.

Both the six and eight month loan terms ensure you do not overcommit, and the payment terms will not leave you in a cashflow crunch. Your ability to have financial flexibility, responsibility and maturity is impaired when you go into payday lending, so check out all the options – and implications. The cheapest loan may not be the cheapest a few months down the line.

2015
12/18

Category:
Pay Day Loans

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Jim Broadbent charms as baddie Scrooge

Image copyright
JOHAN PRESSON

Image caption

Jim Broadbent plays a a genial Scrooge but still seems to please the critics

Jim Broadbent has returned to the stage for the first time in a decade to play Scrooge in a new West End version of Charles Dickens A Christmas Carol.

The classic adaptation, which opened on Wednesday, is presented on a set designed like a Victorian toy theatre.

Broadbent plays his role with an undercurrent of his well-known affability, according to the critics.

Yet he said his Scrooge had been partly inspired by modern bankers and the issue of pay-day loans.

There are an awful lot of echoes of whats going on today. We dont mention pay day loans but its implied, he said.

2015
12/16

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Pay Day Loans

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Clash over council’s new ethical investment policy

A new ethical investment policy for Crawley Borough Council was criticised as a possible slap in the face to the UK defence industry.

The authority’s Cabinet agreed not to directly investment in organisations whose core activities include armaments and weapon systems, gambling, pornography, tobacco, and pay-day loans, last Wednesday.

But Duncan Crow (Con, Furnace Green), leader of the Conservative group at the council, said it would effectively be a ‘boycott’ of the UK defence industry, and could be perceived as a ‘slap in the face’ to both the sector and the country’s armed forces.

2015
11/29

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Pay Day Loans

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Penryn operation is more than just a food bank

Rob said he started the service having carried out similar work when he was a member of a church in Penzance.

A woman and her young daughter had moved to the area and were living in a new home without curtains. Although they had been able to get curtains and a curtain rail, they did not know anyone who could fit them.

Rob said: “As a church, if you can’t help your community then what are you doing here? That’s what it’s supposed to be about, these are the people you’re supposed to be helping. If you don’t know what your communitys problems are then its a problem.”

The group, which is a community interest company, started with funds from the Highway Community Action Trust which is funded by charity shop Penryn Treasures, also takes in donations of furniture, which is then given out to people in need.

New addition

A new addition to the foodbank family is the Cornwall Befriending Service, another community interest company operated by former care worker Rowena Koning, which mainly provides face-to-face money and debt advice, along with job related advice. With a background in social work, Rowena also has links to a wide network and can often advise people on getting help with issues such as anxiety and stress, or other underlying mental health problems.

She gives one example: “A lady had a predicament with adopting a child practically overnight. She had problems with finances, was going to be a carer to a 14-year-old, and was worried about what the child would arrive with barely the clothes on her back.”

Rowena helped get her a carer’s allowance, as well as arranging for clothing, and of course help from the foodbank, and is keeping in contact with the pair so that she can also keep social services abreast of developments, if necessary.

She adds a new aspect is people finding it difficult to pay for funerals, with some families taking out up to four pay day loans to cover the costs of a basic burial.

But there is an answer for that too, in the form of another community interest company, the Little Cornish Funeral Company, which provides cheap reed or similar coffins, working with the hospital to keep costs down.

She said in a way she feels she is stepping into a void left by a shrinking public sector: “The Citizens Advice Bureaux were invaluable but they had cutback after cutback after cutback.

“Job centres have less computers for people. You haven’t got person to person contact.”

Sarah said she feels it is important that she has seen foodbanks from both sides. “You understand it if you used to use it, she said. “If we have come out the other side, there’s no reason they can’t.”

Laid off

Mark and Melissa Manship, parents of two young children, turned to the Cornwall Befriending Service due to a combination of Mark being laid off by a failing employer, increased living expenses, bank charges, and debt incurred at the height of the credit boom.

Melissa said: “We got into a spiral of living off the credit because all of the wages were paying back the loans and bank charges, and every time we got to an overdraft limit the bank gave us more.

Melissa, a nurse, said she tried working more hours to help with repayments, but the increased hours and stress made her ill and she could not continue like that.

They lost their home because they could not afford the upkeep and the mortgage payments, and moved into a rented house. They were evicted at around the same time Mark was made redundant, and had to register themselves homeless as they were unable to rent on Melissa’s wages alone, before being moved into emergency housing.

They were also using the foodbank at the same time.

“It meant we could put food on the table for the kids,” said Mark. “We only went three times, when it was that or not eat.”

Melissa added: “The kids had quite a few years of complete uncertainty.”

At one point, Melissa was even advised that it would be better for them if she was out of work and pregnant.

“But,” said Mark, “we pointed out that we need to work.

That’s the way we were raised andit’s for both of our sanity. For Mel, being a nurse, to give up 20 years service would be disastrous.”

They spent 18 months in emergency accommodation before being offered a house, but were still in a lot of debt.

They had tried the Citizens Advice Bureau, but said they had found it difficult to get through to speak to anyone, and had talked to debt management companies but there was no-one local for advice, before finding Rowena.

Melissa said: “We saw Rowena for debt advice but what she has done has been so much more. She’s gone through everything from emotional support to getting us to where we can liaise with these companies to try and resolve the debt situation, empowering us to stand up to them a bit.”

She has also helped with mental health support.

Mark is currently back in work, and said: “We’ve got to the point where we have licked our wounds, and are ready to start again.”

Melissa added: “It’s someone in your corner, fighting with you, for you.

2015
11/27

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Pay Day Loans

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Arlington Eyes New Rules for Payday Lenders

The Arlington City Council will vote Tuesday night on new rules for businesses that specialize in pay day loans, that council members hope will help people limit their debt and make better financial decisions. (Published Tuesday, Nov. 10, 2015)