Tag Archive | Financial Services

Payday Lending Limitations may leave Borrowers out in the cold

Canton, Ohio is a city that is very much a typical American town. There are about 73,000 people living in Canton. It is also known for being the home of the Pro Football Hall of Fame and is known for having a thriving art scene in the downtown area. You may not know it, but Canton is also a city that serves as the nerve center of the payday lending industry. These smaller dollar loans allow people to borrow money for emergency expenses and to pay the lending company back a few weeks later. There are a lot of lenders in Canton, and a lot of people who regularly borrow money from these lenders.

Tanya Alazaus is the manager of a payday lending store in Canton. During a typical business day she sees a lot of regular customers and works hard to make sure that people get the financial services and products that they need to get by. Alazaus is a lot like any business manager or owner, and she works hard to make sure her customers get great service. It is her job. One that may be in danger if new payday lending limitations get put into place.unsecured-loans-can-be-easily-obtained-through-payday-lenders-direct-6516

Federal regulators are on a mission to crack down hard on businesses just like the one that Tanya manages. They consider payday lenders to be predatory and are coming up with new regulations that will likely lead to a serious decline in the overall volume of loans given each year. Additionally, the new payday lending regulations will probably force thousands of lending locations to close their doors for good.

The main agency that is working hard to over-regulate the payday lending industry is the Consumer Financial Protection Bureau. This agency has drafted new rules for payday lenders that will lead to greater overhead costs associated with providing loans, and that will put a cap on how many loans people are allowed to take out over the course of the year. These two repercussions alone are likely going to spell disaster for small lending companies, like those that help to prop up the economy in Canton, Ohio.

Many lenders are worried about what will happen to their customers if they are unable to get payday loans in the future. Ms. Alazaus said, “My customers look forward to being able to walk in here for their short-term needs. They would rather use us than things like credit cards, and most don’t even have the ability to use those.”

Ohio is a state that has some of the highest per-capita payday lending usage in the country. It is a state with more payday lending locations than it has McDonald’s franchises. There are already at least 14 states that have banned payday lending altogether. Ohio may soon join theses states in restricting payday loans completely. Factor that in with the federal regulations that the CFPB has been proposing, and it is easy to see the writing on the wall.

No one from the regulatory side of the house, though, seems willing to admit that imposing strict regulations on payday lenders is really going to only punish lower income American consumers at the end of the day. These are the people who depend on payday loans the most, and many of them have no alternative lenders to turn to when they are in need of emergency cash. If states, like Ohio, restrict payday lending, consumers are sure to suffer and people are going to needlessly lose their jobs. Makes you wonder just who the CFPB and other groups against free market concepts are really trying to protect.

 

Payday Lending Restrictions will harm Lower Income American Households

It is no secret that the mainstream media and some government watchdog groups seem to loathe the payday lending industry. If you believed everything that got reported on this industry, you might think that there is no reason for it to be in existence. However, that would fly in the face of the fact that millions (some say 10 to 12 million) of people every year rely on payday loans. The Consumer Financial Protection Bureau recently proposed some rules that they say will help to protect consumers from the potential pitfalls of payday loans. Opponents of payday lending have applauded these new rules, but the elephant in the room is the fact that the new rules may wind up hurting the very consumers that they were supposedly created to protect.Banks Are Offering Payday Loan Type Services

The CFPB has never come out and demanded that the payday lending industry go away completely. But the new rules are based on extensive underwriting for the loans; essentially forcing lenders to do extra leg work to make sure that consumers are able to pay back the loans that they take out. The additional checks and balances that payday lenders will have to go through in order to make loans will likely result in many of them being unable to afford to stay in business.

Some crafty investors are working on their own versions of payday loans to swoop in and snatch up their share of the growing number of people who demand short term, small dollar loans. Uber recently announced that it will allow its drivers to get payday advances of up to $1,000 against their paychecks. The money will be paid back directly from the drivers’ pay checks. And Uber is not the only company that is cooking up new ways to offer services that look a heck of a lot like traditional payday loans.

The CFPB has done what the government is known for doing from time to time. They have stepped in to put new regulations on an industry that is already undergoing massive transformations. And if the CFPB gets its way, the new rules will more than likely limit the options available to poor people. All the while similar financial services and products will become more available to middle class households. It is a reversal of fortunes that should never take place, and one that could have lasting negative impacts on lower income households for decades to come.

The CFPB has come right out and said that the new rules will raise costs for lenders and that they will ultimately lead to a reduction of total loan volume by more than 50 percent. So, the money that would have been lent to lower income consumers (higher risk borrowers) will more than likely end up in the wallets of people who have higher incomes (lower risk borrowers.) Anytime an aspect of lending is regulated the lenders will react by enacting new prices in their loan contracts. They have to account for the increased risk/cost somewhere, right?

They say that bad things tend to roll downhill. The poor in this country know this fact all too well. Unfortunately, it is usually the government who is causing the lack of fortunate financial circumstances that millions of people must contend with. The new rules being proposed by the CFPB are just another example of how a government agency can act on the “behalf” of a group of people and wind up making things even worse on that group of people in the process.

Can Payday Lenders and the CFPB Come to an Understanding?

There are lots of subjects that divide people on a regular basis. Folks who love one form of music, may despise another musical form. Some people think spending time outdoors is amazing, while others don’t like to venture too far from their favorite living room chair. And forget about trying to get conservatives and liberals to agree on much of anything. Another decisive issue that is getting a lot of attention lately is that of short term lending. Some consumer advocates believe that these loans are the worst thing in the world, while others believe that payday lending companies provide a valuable service to their customers. There’s just no reaching a middle ground on some subjects.direct_payday_loans_pros_cons1

Many who fashion themselves as consumer protectors have a deep seated hatred of short term loans, and view the providers of these loans in a bad light. People who tend to favor consumer choice usually believe that grown people in this country are fully capable and allowed to make choices about the types of financial products and services they choose to pay for; even if a loan has expensive fees to pay, these folks believe that everyone should have the freedom of choice to decide on their own.

As far apart as these two groups seem to be, there may actually be some common ground that both sides are not even aware of: They both want consumers to get reasonable access to lines of credit, and expect that those products are priced fairly for the people that use them. Once you get past that basic fact, though, the contention between both sides begins to heat up to a point where some people get downright nasty about the topic.

For example, there are news stories now about how the Consumer Financial Protection Bureau (CFPB) – the most powerful and vociferous of all the groups against payday lending – has been violating the sovereignty of Native American tribes as a part of their efforts to introduce new regulations on the payday lending industry. This industry happens to be a major source of income and employment for some tribes. This is a precarious battle that will likely wage for some time to come.

The Public Affairs Head for Advance American Jamie Fulmer said, “What strikes us is that when the Bureau was established by Professor and now Senator Warren and Director Cordray, there was a lot of talk about the need not to dictate consumer choice but to provide a level playing field across a broad spectrum of financial services companies.” Fulmer went on to note that the financial landscape right now is not so level right now.

In a recent interview Fulmer explained, “Customers are redefining what mainstream customer services are. We think the type of loan we are type of providing falls strongly in the mainstream, because consumers find that they have an increased, yet regular, need for small dollar short-term credit. We believe that was the correct approach and it was rooted in ensuring simplicity, transparency and full and complete and understandable disclosure.”

As to whether or not the CFPB and the major players in the payday lending industry can ever come to an understanding is something that we will all have to wait and see. However, more people – both private citizens and elected officials – are now starting to come out of the woodwork in support of the freedom of financial choice that payday lenders provide to their customers. Proponents of payday lending seem willing to reach common ground; the ball is now in the court of the CFPB.

Consumer Lending Industry from the Perspective of Former Regulators

The free market is supposed to be based on consumers being able to freely participate in it along with healthy competition. Notice we said “supposed to be.” Yes, our free market system is still chugging away, but it could stand to have a few swift kicks to get moving as it ought to be. According to information released from the FDIC, about 92 million Americans are either underbanked or unbanked entirely. Some of these consumers don’t have access to lines of credit, and may not even have the financial savvy it takes to find viable options to credit. While all of this is going on, it seems that regulators are having a field day; making it even more difficult for financial service providers to offer alternative services to people and for consumers to get access to much-needed loans. Many small lending companies are the only providers that some consumers have access to or are willing to do business with. Regulations that may very well shut down the small consumer lending business may well help to make competition virtually non-existent and may actually work to lower consumer participation rates.Banks Being Scrutinized By Regulators for Payday-Like Loans

Even former regulators understand that sweeping changes to the small dollar lending industry is going to cause problems for many consumers. The people that utilize these types of financial products don’t need lines of credit for tens of thousands of dollars. No, these are the consumers who need a hundred dollars or maybe a few hundred in order to repair their car or to take care of emergency medical costs. The traditional banks are simply not willing to offer the types of smaller dollar, shorter term loans that people need for these kinds of expenses, which leaves millions of Americans scrambling for help when emergency expenses arise.

Back in 2008, only around 30 banks offered consumer loans for less than $2,500. Since then, larger banks, like U.S. Bank and Wells Fargo have stopped their lines of small dollar loans because of all the new regulatory pressures that lenders must deal with. Since that happened, the situation for unbanked/underbanked consumers has gone downhill fast. Consider the fact that 54 percent of African Americans are currently underbanked/unbanked. Some of these folks run into brick walls when they need to get access to fast money for emergency expenses, but don’t have the options that many other Americans enjoy. Because many unbanked people have poor credit histories, they have no choice but to seek out alternative financial service providers. It is either that, or they have to take their luck with selling belongings, or worse yet, dealing with loan sharks.

Every consumer, including the unbanked and underbanked, need to have access to small dollar loans. And the lenders that provide these types of financial services need to do business in a way that allows them the ability to be profitable and successful. Upcoming small dollar consumer loan regulations may take away the ability for some of the most underserved financial participants in this country to gain access to emergency funds. And the regulations may drive legitimate lending operations completely out of business.

More than a few former financial regulators and watchdog group members have chimed in on this subject, with many of them saying that the proposed regulations coming down the pipeline are sure to spell financial disaster for many underbanked/unbanked households in this country. These warnings seem to be going completely unnoticed, as the Obama administration continues to utilize resources, like the CFPB, to put undue pressure and scrutiny on both small dollar lending companies and the people who depend on these types of loans to survive.

What are the Legal Rights Associated with Alternative Credit Scores?

In recent years there has been an ever-growing portion of the population from all over the United States who are starting to recognize how valuable alternative credit scores can be. This is especially true for those who have had past financial difficulties and have had no luck in maintaining good traditional credit scores. What people may not be aware of just yet, though, is what their rights really are with regards to using alternative credit scores. As luck would have it, however, just knowing a bit about how these credit scores work goes a long way toward helping people to get access to these credit scores and to ultimately improve their overall financial situations.credit_score

One of the most popular alternative credit scores is PRBC. It is important for consumers to know that over 9,000 companies around the United States accept these scores. The companies that accept PRBC range from mom-and-pop stores to big chains that have stores all over the country. It is a good thing, then, that this number includes companies that are, as of today, ready to accept these alternative credit scores. However, consumers who are looking to make credit-related choices in the near future, and who present those businesses with their PBRC scores, need to know that the score must be accepted according to the Equal Credit Opportunity Act.

What is involved in Alternative Credit Scores?

What are the legal rights associated with alternative credit scores really all about? Well, when it comes to PRBC scores, even though thousands of businesses do use them, the consumer will usually have to do the hard work of seeking these businesses out on their own. This means that if you plan on renting an apartment or turning on utilities in the near future, you will have to ask landlords, property management companies and utility providers (along with cell phone providers, cable companies, etc…) to report their standings when bills are paid. After the PRBC gets this data, it very well could help to improve the financial standing of the person making payments, because it could help to improve their alternative credit rating. As a matter of fact, the more of these types of accounts and payments a consumer can get attached to their PRBC account, the faster their credit scores will grow. And to get these benefits a consumer usually just has to contact any businesses they make payments to and ask that they get added to the list.

As of now, companies that are making credit decisions won’t just have access to potentially damaged/low traditional credit scores, but also a whole host of other information that shows how well people do when it comes to meeting their monthly payment obligations. This is all thanks to the implementation of alternative credit scores. People must keep in mind, however, that how different companies interpret this data is likely to vary. Again, though, under the federal law, companies cannot refuse to at least consider the information. People who have a good track record of making payments on time will be more likely to not only get new lines of credit, but to do so in a way that is as affordable as possible too.

If you have had previous credit problems, consider looking further into alternative credit scores. You may find that this method of credit scoring may help you to improve your financial situation faster than simply waiting on your traditional credit score to improve over time.

A New Perspective on the Debate about the Payday Lending Industry

Other than the estimated 12 million people who take out payday loans each year, just about everyone else despises these types of loans. Those who have taken up arms against payday lenders include consumer advocate groups, clergy members, writers, professors and even the President of the United States. Is it really right for all of these people to hate the payday lending industry, though? Many of the aspects of payday loans that people seem to vilify the most – ongoing debt cycles, allegedly targeting low income people and minorities – don’t really prove to be true when one takes an honest look at the short term lending industry. This is not to say that the industry is perfect, by any stretch of the imagination. However, it is in everyone’s best interest to learn the truth and then to make a judgement call from there.

Let’s take a look at a few aspects of short term loans and see if it is really justifiable for anyone to outright hate the payday lending industry in this country.

Payday Loan Fees

payday-onlineWhen people write scathing articles about payday loans, they often focus on the fees that the lending companies charge. At many payday lending locations, the lenders charge about $15 dollars for every $100 that is borrowed. Those types of fees would be alarming if they were attached to a mortgage or a high dollar loan. But considering that the majority of borrowers understand these rates for what they are – flat rate fees, and not yearly percentage rate fees – one should come to the conclusion that these rates are not all that high or difficult to repay.

And there are plenty of payday lending companies for people to choose from. It is not like there is a monopoly on this industry, and that borrowers are forced to pay these types of fees by a single lending company that is controlling all of the short term lending going on in the United States. There are thousands of local lending locations and hundreds of online lenders that people can choose to get loans from. Of course, some people are disturbed by the fact that there are so many payday lending locations. You don’t hear those same pundits getting upset about the number of McDonald’s locations, do you? Of course not. In a free market economy, businesses are free to develop and thrive IF the market for the businesses’ services or fees actually exist.

This leads to a very interesting point that many who oppose payday lending never seem to get: There is a great demand for short term loans all across the land. People who either don’t or won’t deal with mainstream banks and lenders, still need to borrow money. If these people – hard working adults who understand exactly how much they need to pay back within a short loan term – choose to do business with payday lender, who is anyone else to try to eliminate this industry; and industry that provides vital financial services to a large section of the population?

The fact of the matter is that there is no way to make everyone see eye-to-eye about the topic of the payday lending industry in the United States. However, the time has come for people to get a better understanding of this industry, and some of the reasons that people seem to loathe payday lending companies as a whole. It is only when we can get past the rhetoric and accusations that we ever get a better handle on any topic that might be considered controversial to others.

Are Payday Loans a Better Deal than Traditional Bank Loans?

If you have been keeping track of the latest news over the past few years then you probably already know that the mainstream media outlets have a serious ax to grind with the payday lending industry. And with the government doing its best to crack down on payday lenders, there is even more bad news about this particular financial industry. But, as is usually the case, we are only hearing part of the story when we get our news from the typical news outlets and websites. The fact of the matter is that there is more to payday loans than meets the eye – especially when that eye belongs to the typical news resource or website.flexibility

Case in point – a new study released by the New York Federal Reserve Bank seems to disprove some of the most widely circulated half-truths and lies that are reported with regards to the payday lending industry. The report actually points to some areas where payday loans can actually be more affordable than having a traditional checking account at the local bank branch. This may sound crazy to some, but the numbers simply do not lie.

The report mentioned the median overdraft fee of just $27 for a bounced check, not even including any of the flat rate fees that banks might charge. By way of comparison, payday loans that use deferred deposit (typically a post-dated check that is used as the form of payment) usually charges right around $15 for every $100 that is borrowed.

When those costs are compared, the cost of bouncing a few checks or actually biting the bullet and getting a payday loan to avoid those bank fees, it makes a bit more sense. The bottom line is that for some people it just flat out makes more sense to pay less by getting a payday loan instead of paying the higher costs of overdraft fees enforced by most traditional banks. And when you consider the wide availability of payday loans, it is easy to understand why more Americans are taking out these types of loans than ever before.

To be fair, we must mention that the study in question was underwritten by an industry trade group that works with payday lenders – the Community Financial Services Association of America.

Johnny Gordon, an industry spokesperson, said, “When used correctly and for relatively small amounts, cash advance or payday loans can be both economical and convenient.”

The study also showed that payday loans are far more accessible to more people than traditional checking accounts are. There are millions of American consumers who are either underbanked or unbanked right now. The unbanked people of this country many times do not have the ability or access to open traditional bank accounts, so payday loans and other alternative financial services are their only options to stay on top of their finances.

Gordon summed this fact up by saying, “Overdraft and other similar programs require extensive credit checks and comprehensive income documentation.”

The media outlets in this country like to cherry pick the topics that they report on. We will all surely see lots of negative reports about payday lenders from most of the news websites and programs that are so popular these days. This report only focused on a particular aspect of payday lending and is not the end of the story where payday loans are concerned. However, it is nice to see official reports that show the other side of the coin where payday loans and other alternative financial services are concerned. People need access to the whole truth in order to make informed financial choices for themselves.

Little Known Facts about Payday Lending Companies

Instant-Cash-Advance-OnlineMost people have a bit of difficulty in understanding financial issues. We can all agree that the intricacies of finances and staying on top of the very latest financial news are not exactly the kinds of topics that the average American can spend much time understanding. The majority of people in this country simply want to get by from one payday until the next check arrives. When we take into account these two basic facts – the vast lack of understanding about finances and the need that most families have just to get by and pay for what they need each week – it is quite easy to understand why so many people are confused about getting a loan; specifically payday loans, as this sector of the financial services industry has been somewhat vilified by the mainstream media.
It is high time that things get cleared up a bit and that we all take a few minutes to learn more about the payday lending industry. Any time you are serious about getting to the heart of the matter, it is essential to dispel the myths and get to the real truth that you may not ever hear from the mainstream news media or other so-called financial experts. Let’s take a look at some information about payday lending that you may not be aware of…
Are Payday Lenders Making HUGE Profits?
When you compare the profits that payday lenders make to the big profits that mainstream banks rake in, you’ll soon realize that most payday lenders are not raking in money hand over fist. Here’s an example for you to consider: Advance America is one of the most successful payday lending companies in the country. In 2011 they recorded pre-tax profits of just over $105 million. Yes, that is quite a lot of money, but when you compare that to the billions of dollars in pre-tax profits that big banks make every year, the profits that one of the biggest payday lending companies makes pretty much seems like pocket change.
Statistics about Payday Loans
Now that you understand that payday lending companies are not multi-billion dollar companies, let’s take a few minutes to understand some basic statistics about payday loans. Advance America reported that the average loan amount they provide for their customers is about $375. The average fees that are associated with these loans are usually about $55. The average term for one of these payday loans is typically just a bit over two weeks, at 18 days. If you take all that information, and do some basic calculations, you might come to the conclusion that the APR for one of these types of loans comes out to about 294 percent. That is a bit on the high side, but it is important to remember that these loan fees are really flat dollar fees – not true APR fees. Most payday loan borrowers are well aware of exactly how much they have to pay back when their loan term is up, and they prefer to see those fees as flat rate fees, and not as over-inflated APRs, like so many financial watchdogs try to make the fees out to be.
The Bottom Line
This article was not put together to help readers become experts about the most complex of financial topics, but to help every reader understand that there is more to payday loans than you might get from reading the typical online report from self-proclaimed financial experts and consumer advocates. Traditional banks often make it impossible for subprime borrowers to get short term loans. Thankfully, though, payday lenders are continuing to offer much-needed short term loans to the unbanked and underbanked citizens of this country. Unless there is some sort of drastic change in the very near future, it is a sure bet that millions of people will continue to rely on these loans when they need fast money, and that payday lenders will continue to stay in business; even though government bureaus and negative coverage from the media continue to join forces to cast the industry in an unfavorable light.

Some Money Mistakes That Women Make

Let’s face it ladies, we all make mistakes at some point or another. Sometimes these mistakes are money mistakes. Here are some of the more common money mistakes women make and why they are mistakes. Hopefully if you see one that you do make you will learn how to change it.

Too many women leave the finances to their boyfriend or husband. This is such a bad idea. You have to know how to handle the finances in your family even if you are not the one who regularly deals with it. Why is this so important? No one wants to think about a relationship that they are in ending, but it happens. If you let your husband or boyfriend take care of all of the finances and suddenly the relationship is over, what are you going to do? You may not know how to take over the role as the person who handles the finances. So make sure that if you are not the one handling the finances in your home that you learn how to do it just in case. It is a skill that you will never know when you will need it.

This may sound harsh but another mistake many women make is to save for their child’s college fund before saving for retirement. Why is this bad? You may end up being able to pay for your child’s college but then you do not have enough money left for retirement. If you save for retirement first, to make sure that you will have enough money, you may not have enough to pay for all of your child’s college. That is okay though; there are scholarships and grants available to students. Many students even work full or part time to help pay for their education. Nothing else your child can get student loans.

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Ladies most of us make our children our beneficiaries for our life insurance. How much do you know about your life insurance policy though? Leaving your child as a beneficiary as a minor is a big mistake. Most of the life insurance companies out there will not pay out to minors. Instead you should have someone of age be your beneficiary with the understanding that they use that money to care for your children. Then when your children become of age, you can change the beneficiaries to be them, but not until they are eighteen years old.

Most women feel that having a will is enough. These women are wrong though, this is another money mistake that women make. If you were to get into a car accident and are incapacitated who will pay your bills? If you have a spouse you may just assume that they will. What if they are in the accident with you? What if you live longer than your spouse or your relationship ends? This is why in addition to having a will you also need a trust with an incapacitated clause so someone has access to your bank account to pay your bills.

Yet another money mistake that women make is that they have the wrong life insurance. Talk with your insurance provider. Make an appointment to talk to someone to find out what is the right policy for you. Everyone is different, and everyone’s situation is different, which means that you need to take the time to make sure that you are getting the right insurance for you.

The inability to say no is another money mistake that women make. You have to be able to say no if something is not worth the money that it costs or if you truly cannot afford it. Many times children want very expensive clothing; do they need something that costs so much? The answer should be no. Learn to say no in different situations and you will be able to save a lot of money.

There are many money mistakes that women make. There are ways to change that though. The changes do not need to be difficult though. If you need help, get it, there is nothing wrong with needing some help now and then. Take charge of your financial future and you will be glad that you did ladies.

Financial Planning Tips for Women

Financial planning is an important part of life. Women need to make sure that they are not just planning for their financial future, but also completely understand what it is that they are doing. Here are some tips that will help you ladies out there to plan for your financial future.

The first thing that you need to do is to figure out how much you are going to need for retirement. Experts say that once retired most women need at least eighty five percent of their pre-retirement income. So you will need to determine what kind of bills you will have and how much they will be. You will also need to determine how much you will need for other things such as trips or bigger purchases such as a new car.

retirement

Ladies, you have to be able to determine when you need help. Financial planning can be extremely overwhelming if you do not know what it is exactly that you are doing. This is when you have to make sure that you are able to say it is time to get help. Do not just pick the first financial advisor you find though. Do your research. Do you want to use a financial advisor who charges a fee or a commission? These are things that you need to look into before you decide on any financial advisor.

Another important part of financial planning is making sure that you not only have the right insurance for you but enough of it as well. Ladies studies show that women live longer than men, so you will want to have some long term care insurance. You want to have good insurance, and enough of it. This is because if you were to get a major illness while in retirement, paying for it could wipe out your funds, leaving you with not enough money for the rest of your retirement.

All of you ladies out there need to make sure that you have an emergency fund as well. Many people do not think about having an emergency fund after they retire, but this is something you do not want to forget. If you do get into a financial emergency such as a major illness, the money in your emergency fund will help you to pay for those medical bills. If you plan on using your retirement income to pay large medical bills you could end up with the problem of running out of money. This is why it is so important to have an emergency fund even into retirement.

Ladies you are in charge of your financial future. Do not try to put it on someone else. You must take charge of your financial planning. After all no one knows you and your needs better than you do. Do not wait until the last minute ladies, get started on your financial planning today.