Category Archive: Pay Day Loans

2015
11/25

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Son stole from his dementia suffering mum

“I accept that was something you were reluctant to do. For several years before you had encountered serious financial difficulties. You were unable to work from 2007 by reason of your medical condition.”

“You had an unsuccessful business which failed. I’m told £90,000 debts had been incurred including sums from pay day loans.

“I’m prepared to accept this was something you resorted to in desperation.”

2015
10/24

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Michelle Singletary: A rare time when debt is worth it

Anyone who reads my columns knows that I absolutely despise debt.

Some people argue that there is good debt (a mortgage, student loans) and bad debt (credit-card debt, pay-day loans). I disagree.

2015
10/20

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Color of Money: Value of being debt-free is for the children

Anyone who reads my columns knows that I absolutely despise debt.

Some people argue that there is good debt (a mortgage and student loans) and bad debt (credit-card debt and pay-day loans). I disagree.

Debt is debt. Its sometimes a necessary financial tool, but only when used sparingly and paid off as soon as possible.

But is there ever a time when indebtedness is a fair trade-off for something you value?

Thats the question I was asked during a recent online discussion. My answer might surprise you.

Some background:

My wife and I have always been great savers, a reader wrote. We are debt-free, even after finishing putting our two children through doctorate degrees two years ago. We hate debt, but we love our children. The two girls and their families have moved seven hours away, and we would like to be closer to them.

The couple also is concerned that, as they get older and possibly need some caregiving help, living so far away will be a burden to their children.

So, they wanted to know whether they should move and take on a mortgage or stay where they are and remain debt-free.

To move, the couple said, they estimate purchasing a home for about $300,000. They are in their mid-60s and retired, with a combined monthly retirement income of about $7,000 before taxes. They are able to make a $200,000 down payment.

We always bought the smallest house on the block that met our needs, not our desires, the reader added.

Before going any further, Donna Butts, executive director of Generations United, recommends that the couple talk to their daughters about their expectations.

They dont want to move closer thinking they will see the grandchildren or help with them more frequently if that isnt also what the parents are thinking, she said.

If everyone were thrilled about the possible relocation, the next issue would be: Can they afford the mortgage?

Using a mortgage calculator at realtor.com, I found that the principal and interest payment on a $100,000 loan at 2.99 percent would be about $961 if they opted for a 10-year fixed loan.

Current interest rate trends for various mortgage types are automatically plugged into the calculator, which also lets you input your home location and then estimates your property tax and insurance payments.

Using a Washington, DC ZIP code, the couples total cost would be $1,294, including principal, interest, taxes and insurance.

The couple didnt provide any additional financial information, so I dont know what assets or other major expenses they may have. I dont know if the $200,000 would come from the sale of a current home or if they planned to pull the money out of their retirement savings. However, based on what I do know, it appears they could handle a mortgage.

Then the issue turns on how much they value being debt-free. This is when personal finance becomes very personal.

We are torn between our love for no debt and love for our children, the reader said.

I would move.

As I told them, I would do whatever I could to avoid getting a mortgage, including searching again for a house or condo I could purchase outright.

But if they dont want to rent, cant or dont want to move in with family, or they cant find a cheaper home to meet even their modest needs, take on the mortgage.

As much as I hate debt and dream of one day being mortgage-free, I dont want to hold on to money at the risk of losing the time living closer to my adult children and grandchildren.

Generally its a great arrangement, because all generations can help with caregiving across the lifespan, Butts said. But even more, it means sharing family stories, history and experiences that help children and youth connect with their roots. It supports what has been called the grandparent advantage, because younger generations benefit from the recycled knowledge and experience of elders, and elders are fulfilled helping launch the next generation.

To further make her point, Butts referred to a Maya Angelou quote: Today people are so disconnected that they feel they are blades of grass, but when they know who their grandparents and great-grandparents were, they become trees, they have roots, they can no longer be mowed down.

By moving, the couple can leave a legacy that distance can prevent.

If they stay put, they may have more money to pass on to their children and their childrens children.

But if they move, they also have something else they can pass on: their presence. And as we know, money cant buy time.

Contact Michelle Singletary at michelle.singletary@washpost.com or c/o The Washington Post, 1150 15th St. NW, Washington, DC 20071.

2015
10/14

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Teenager commits suicide after Wonga clears his account

An eighteen-year-old with mental health problems killed himself after pay-day loan firm Wonga cleared out his bank account, a coroner has ruled.

After Kane Sparham-Price reached 18 and left local authority care, he took out several loans from Wonga in an attempt to raise enough money for a deposit on a flat.

But – perfectly legally, under the terms of his loan – Wonga withdrew the entire contents of his bank account through whats known as a continuous payment authority (CPA). This left him penniless, and unable to borrow any more money elsewhere.

South Manchester coroner John Pollard has now written to the Financial Conduct Authority (FCA) saying that this shouldnt be allowed to happen.

Whilst I accept that the various pay-day lenders are legally entitled to clear out someones bank account if money is owing to them, it struck me that there ought to be a statutory minimum amount which MUST be left in an account (SAY pound;10) to avoid absolute destitution; and as I understand you set and regulate the rules, you might look at this with a view to preventing further deaths, he wrote, the Disability News Service reports.

But in the FCAs response, chief executive Martin Wheatley said this plan would be undesirable.

The ability of lenders to access a consumers bank account to ascertain what residual balance may be available would raise significant concerns about privacy, he wrote.

In practical terms it might not be effective as by the time a find transfer is processed (later that day) there is no guarantee that other payments will not have depleted the balance on the account in the meantime.

He added that the FCA has already taken action to curb the use of CPAs, as part of new rules on pay-day loans. Lenders now arent allowed to make more than two attempts to take money from a customers account, nor use one to take a part-payment, meaning that people are now less likely to find their accounts cleared out.

Since the new rules came in in April, Citizens Advice says its been receiving half as many requests for help with pay-day loans as before.

Following concerns raised by Citizens Advice the regulator and government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies, says its chief executive Gillian Guy.

But, she adds: With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye.

Its worth noting that, according to Citizens Advice, as many as a quarter of pay-day loan customers would be able to get a loan from a bank instead – a much cheaper option.

2015
10/12

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Liverpool housing association marks 50th birthday with £50k to help cash …

Cash-strapped residents faced with extortionate pay-day loans are being offered a helping hand by a Liverpool housing association born 50 years ago today.

Liverpool Housing Trust (LHT) is marking the milestone with a pound;50,000 investment in two ‘community banks’.

It has deposited pound;25,000 with both Central Liverpool Credit Union and Halton Credit Union in the hope more residents will use them rather than resorting to payday loans, expensive doorstep lenders, or illegal loan sharks.

The investment comes as LHT – part of Symphony Housing Group – marks 50 years since it was formed by community campaigners determined to tackle appalling housing conditions in Liverpool.

Lynn Bundu, LHT assistant director, said: “By depositing pound;50,000 in our 50th year, we hope more of our tenants can benefit from more affordable borrowing.

“We know many people are struggling to make ends meet and this is just one way in which we are trying to help.

“Credit unions play a vital part in providing affordable credit and a safe place to save. They’re run by the community, for the community and that’s something we want to support.

“Payday loans and borrowing from doorstep lenders means people pay a premium for credit and money is lost from the community.

“The interest payable on a credit union loan of pound;500 over a year is in the region of pound;50, compared with about pound;410 on a typical doorstep loan for the same amount, which means you have to pay back over pound;900.”

Mum-of-five Tracy Jones, aged 47, believes the investment from LHT will make a huge difference to struggling families who feel they have no choice but to borrow from expensive doorstep lenders.

Tracy Jones, a member of Halton Credit Union

Tracy, from Windmill Hill in Runcorn and a member of Halton Credit Union for 10 years, said: “I joined to get me away from a really expensive company that came knocking door to door. I’d been borrowing from them a lot and the interest was ridiculous.

“With the credit union, the payments were much lower and they were always there to help if I was struggling to manage. Now I borrow and save with them.

“This investment from LHT is unreal and will help lots of people to borrow safely.”

LHT was founded in 1965 after a group of volunteers recognised that people in Liverpool were living in some of the worst housing conditions and poverty in the country.

The housing association now provides more than 11,500 homes across Merseyside and Cheshire, and is part of Symphony Housing Group – the largest social housing provider based solely in the North West.

2015
10/11

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Rock Band Offers Miami Students Financial Lesson Based On Personal Experience

But members of the band, originally from Kansas, started a nonprofit because they were concerned many students are not being taught anything about personal finance. Financial companies sponsor their shows, such as Raymond James did for their Miami trip.

GOODING hopes students will learn from their money mistakes.

Florida is one of 17 states that require personal finance lessons, but some lawmakers want a more thorough course.

The band advises students to prioritize their spending; limit credit card use; stay away from pay day loans. Save.

At the end of the show, members of GOODING answered student questions and signed posters.

Tenth-grader Matias Aranguiz says he wasnt aware  of what pay day lenders were before the assembly.

I think its really useful for the future life, he said. My dad sometimes tells me a bunch of stuff dont get too many credit cards but there are some things that I didnt know about.

This was the first time  GOODING has played in Miami. They’ll perform for students at Miami Beach High twice and again at the Arsht Center Friday.

2015
10/11

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Pay Day Loans: symptom of a larger problem

Ted, a severely disabled young man trying to eke out a living on disability payments, saw an ad that offered him the chance to buy a computer on monthly payments that would give him access to the internet and other life enhancing opportunities. That was five years ago. He has now paid for the computer five times over. Ted did not read the fine print and didnt realize the extraordinary interest he was paying through a popular rent-to-own company.

When he was hospitalized for nine months he skipped payments. The computer company sold his debt to a collection agency. Now he is owned by the collection agency. Ted will be paying $35 a month minimum interest charges from his disability cheque forever unless he can pay the entire $1,000 owing in one payment.

Why didnt he get a loan from a Bank? Could he not save to purchase? Surely a credit card would still be better that this.

Far too many of the working poor and the vulnerable in Hamilton, and indeed the nation, are shut out from the financial services that the rest of us take for granted. Our current generation of financial services cant seem to figure out how to make these transparent, fairly priced and professional services available to those whose lives could be improved by a fairly priced loan or an easy and safe place to put a few dollars away. A place they can trust to deal with them fairly and with dignity.

What is ironic is that in the developing world these needs seem to be answered for the vast numbers of poor people who earn $2 a day. There are over three decades of experience, trial and error, success and failure that can be tapped to create financially inclusive institutions in Hamilton and the rest of North America.

Micro lending internationally is now part of a broader social economic development strategy of the World Bank and bi-lateral aid agencies. In fact there is a global campaign which promotes microfinance in an annual summit. The object is financial inclusion, a term to describe a process of getting more people involved in formal financial institutions around the world. The objective being to help poor people get access to affordable quality financial services and out to the clutches of usury; predatory lenders, money lenders, and loan sharks like the payday loans industry.

There is an organization which promotes pricing transparency; Microfinance Transparency . Statistics show that in Africa and southeast Asia where there is a lot of experience the microfinance loan default rates are typically no more that 3 per cent and gross operating margins about 16 to 20 per cent. Effective interest rates (APRs) range from 20 per cent to 80 per cent, sometimes higher. APRs in microfinance typically relate to the loan size and loan term in emerging markets. Loans which are small tend to have higher rates than larger term loans because of the associated transaction costs. In Africa small financial institutions do not have the benefit of modern technology, low cost of funds, or other advantages such as credit bureaus that payday lenders in Canada benefit from.

They have to overcome extraordinary obstacles but still manage to provide credit to the poor without collateral for far less than Canadian payday lenders. How can a payday lender here justify a 540 per cent APR when a small microfinance bank in Africa can make the same loan for a 40 per cent APR or less? If a borrower from a Canadian payday lender is in default, with penalties and compound interest borrowers here pay 1,000 per cent or more! To characterize this as a community service is at best dishonest. A typical franchise operator in Canada will invest $500,000 to $1 million in his or her store. This is the local elite preying on the local poor. This is not a community service, this is usury.

In our past Canadians have come together to build co-operative organizations to meet needs those corporate interests could not or would not serve.

In the 1970s Bob was just starting his working life. He worked in a small factory. The employees of the company had formed a credit union. It was run by the people Bob worked with. He got a loan to buy a second or third hand car that got him to work. For Bob it was easier and less intimidating for him than a bank. He always made the payments because he did not want to let the people he worked with down. Bob got used to paying his bills and saving a bit. Over the years his credit union membership has offered him a lot of good advice and avoid deals that seemed too good to be true.

This little credit union merged with others over time to stay competitive with the big banks. Members tended to prosper and their needs reflected their improved financial conditions. Companies closed, members merged and members needs grew more complex, credit unions drifted away from serving the growing number of the poor and the working poor.

We need to remember that credit unions started out to meet the needs of some of those the banks turned away.

I believe our credit unions will learn a lot from the international microfinance community, where the goal is lower transaction costs to provide provident and productive credit for the poor. Their financial inclusion will help the poor build a path out of poverty. The poor and their credit unions can end entrenched debt misery and the stress that is the consequence of the debt trap promoted by the Canadian payday lenders.

This is how our credit unions came into being.

Its time to go back to the future.

2015
10/07

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Jamaican Style Money Guide: Short Cut Draw Blood

Many of our Jamaican proverbs are light and witty; while they give us pause to think, they usually also give us a hearty laugh. However, there are other old-time sayings that contain dire warnings which explain the problems that we will bring upon ourselves if their messages are ignored.

One ominous Jamaican adage that is often used for cautionary advice is, Short cut draw blood. This succinct saying has a clever twist on the meaning of the word cut; while a short cut can be a quicker way to reach your destination, the word cut can also connote a type of physical injury.

Its natural for people to seek the easiest route to achieve their objectives, and historically this has helped mankind to develop many important inventions. However, there are times when trying to find the easy way out of a situation can actually cause more harm than good.

Stoplights to money success

Many people may find it difficult to make ends meet with what they earn, especially in challenging economic times. We have a Jamaican saying, Rain a fall but dutty tough, and right now, it seems that our expenses keep escalating but our income never seems to catch up with them!

Even if you are desperate to pay your bills, its important for you to think clearly about your options, so that you dont make your financial situation worse. As I explained in previous columns, if you have an income shortfall, your only solutions are to cut back on spending or earn more money.

In reality, it can be very difficult to reduce costs, especially if you are just barely covering the basic necessities of life. The other option of generating extra income demands much focus and determination, and you may think it will take too much time to bring in the money you need.

Debt detour is a wrong turn

One apparent answer to this perennial income deficit, is to borrow —

a solution by many lending agencies. They suggest that a payday loan can help you to bridge the gap between your salary and your bills, and claim that it is a quick and easy solution to your money challenges.

Increasingly, many persons are flocking to these loan institutions to obtain money to meet their bills, and for some it provides an instant relief from financial stress. However, as our proverb of the day confirms, this short cut method will only bring a deeper pain which will be harder to resolve.

The problem with borrowing to pay your bills is that it does not address the root cause of the income shortfall itself. While you receive a temporary cash inflow to take care of your obligations, your issues with inadequate earnings or habitual overspending will return in the ensuing months.

Heading down a precipice

In addition, many payday or unsecured loan facilities charge very exorbitant interest rates which can significantly increase your monthly costs. So you may quickly find that you are caught in a web of debt as you have to be constantly taking out new loans to pay off existing obligations.

There are many Jamaicans who are literally enslaved to multiple lending institutions as most of their income has to be utilised to pay debt. Their regular bills remain unpaid and they have to be perpetually searching for new injections of borrowed funds to try to deal with their commitments.

Getting into debt to pay bills is a money challenge that is particularly difficult to solve. This is because the underlying issue of insufficient income is continually worsened by the act of borrowing. Its like being trapped in a hole and trying to dig yourself out; you will only sink deeper into the problem.

The long route will prevail

If youre faced with mounting bills which your income cannot cover and youre wondering if you should opt for a loan, heed the wisdom of our proverb and avoid the short cut. Use the advice from previous columns to create a budget that will allow you to see how you can possibly reduce costs.

While it may be initially discouraging to have your cable service disconnected or to find a cheaper dwelling place, in the long run these actions will help you to stay away from the quicksand of debt. Living within your limited means might be harsh, but debt slavery is exceedingly worse.

Your budget will also indicate how much more you need to earn each month in order to meet all the expenses that you will incur over a twelve-month period. In upcoming articles I will discuss methods of increasing your earnings so that you can proceed more easily in your money journey.

If you had already taken short cuts that led you into a maze of debt, be consoled that there are solutions to your money woes. Next week, we will examine how another wise Jamaican saying can provide a ray of hope for those who are deep in debt distress.

Cherryl is a money coach, business mentor, and founder of Financially SMART. Services. Her upcoming book, The 3 Ms of Money will reveal all the secrets she learned about financial success. Get more advice on money and business matters at www.financiallysmartadvice.com and www.entrepreneursinjamaica.com. Email comments to cherryl@financiallysmartonline.com.

2015
10/05

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Student legal aid clinics get funding boost

Windsors Marion Overholt says her clinic will use the funds to expand coverage in the areas of small claims, consumer issues, and wrongful dismissal claims.Legal Aid Ontario’s funding increase for each of the seven legal aid clinics run by law schools will allow them to provide additional services to low-income Ontarians and benefit law students with added files.

One of them is the Queen’s Legal Aid Clinic in Kingston, Ont. It facilitates learning for 90 law students with 50 more working for the specialized clinics under its umbrella.

“We are very pleased for Queen’s Legal Aid to have these funds. Law students take pride in providing high-quality legal services and it’s going to our community, which could not otherwise access the rates,” says Jana Mills, acting senior review counsel at Queen’s Legal Aid.

“We are going to expand our current areas of service to include applications to the Human Rights Tribunal of Ontario and expand representation in employment law cases.”

They also expect to expand all services. Public legal education outreach and initiative will help residents of Kingston “avoid unnecessary and expensive legal interventions,” says Mills. Additionally, new case workers will also be trained and a third review counsel will be hired.

The money will help provide technology and enhance the legal learning process for law students and clients, says Mills. Interviewing via Skype and a new database should streamline legal work she explains.

“It gives the students an opportunity to help… a vulnerable population [while] at the same time receiving hands-on experience,” she says.

Community legal services at the University of Windsor plans to expand the number of review counsel “who will be able to work exclusively in the area of small claims, looking at consumer data issues and wrongful dismissal claims,” says Marion Overholt, executive director of Legal Assistance of Windsor, Community Legal Aid.

Windsor and Essex County have one of the highest unemployment rates, she explains.

“As a result we have seen a rise in situations of precarious employment, so being able to offer workers who lose their job an opportunity to consult with us and determine if they have a claim in terms of wrongful dismissal, that will be beneficial to the community,” says Overholt.

Furthermore, the money will benefit the more vulnerable population, which often becomes tied in contracts detrimental to their interest. Due to the area’s high unemployment rates, pay-day loans and similar schemes are especially rampant in the community, explains Overholt

“This additional money is allowing the review counsel to look at consumer debt situations. [We] will be doing a number of public education workshops advising consumers, particularly seniors [and] newcomers, what their rights are under consumer-protection legislation,” she says “We are really excited that we will be able to broaden our services to the low income community.”

About 90 volunteer law students stand to reap the benefits of working on the extra caseload.

Margaret Capes, counsel at Community Legal Services with Western University in London, Ont., says legal aid revolves around three core areas of law at her clinic, including civil, housing, and criminal.

“We are using this money to increase our overall number of clients we can take in all of those areas, in particular criminal law,” says Capes.

Additionally the clinic is able to hire an articling student this year to help with the additional workload in the criminal law area, as well as a part-time lawyer to assist the full-time criminal lawyer she notes.

“The law students will be able to have a variety of different files to work on while they are with us,” says Capes “the more files we are able to open, the more broad range of types of cases that they can be potentially exposed to.”

The funds may also be used to provide additional administrative assistance to the family law lawyer she adds.

The Community Legal Clinic at the University of Ottawa plans to enhance services in the landlord and tenants agreements.

“It’s the area of law where we have the most demand for services, so often we were not able to provide full representation, we were only in a position to offer summary advice,” says Louise Toone, executive director of the clinic.

While the self-help type of service was useful to some, full representation is certainly an improvement.

“A lot of our clients are either recent immigrants, they don’t speak French or English very well or they have mental health problems, so the kinds of clients who really need representation,” Toone.

Besides legal advice and potential for legal representations the clinic also focuses on educating the vulnerable community members.

“We do a lot of community education,” says Toone. Approximately 100 presentations per year are hosted by the clinic in collaboration with various partners. “We do sessions on legal rights on different topics like discrimination at work or housing.”

Approximately 60 law students enrolled at Ottawa’s Faculty of Law will have a chance to help with the cases during the school year.

2015
10/02

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Money can’t buy time

ANYONE WHO READS my columns knows that I absolutely despise debt.

Some people argue that there is good debt (a mortgage, student loans) and bad debt (credit-card debt, pay-day loans). I disagree.

Debt is debt. Its sometimes a necessary financial tool, but only when used sparingly and paid off as soon as possible.

But is there ever a time when indebtedness is a fair trade-off for something you value?