Original source: southernstudies.org
As the misdeeds of major financial institutions continue to make the headlines, it should be no surprise to find out the many ways people have been cheated by financial institutions at the community level. The controversial practice known as "payday lending" is one of the most egregious examples. The process gives cash-strapped consumers an advance -- with exorbitant interest rates -- on their paychecks. For years consumer advocates have pushed for more regulations on the payday loan industry, arguing that these firms are in fact predatory lenders that trap the working poor in a cycle of debt.
Now a new study released today by the North Carolina-based research nonprofit Center for Responsible Lending found that race and ethnicity is the leading factor in determining payday lender locations. In essence that means minority communities are the largest targets of these predatory lending operations.
Payday loan stores are nearly eight times more concentrated in California's African-American and Latino neighborhoods as compared to white neighborhoods, draining these communities of some $250 million in payday loan fees annually, according to the new CRL study. Even after accounting for factors like income, education and poverty rates, CRL still found that these lenders are 2.4 times more concentrated in African-American and Latino neighborhoods.
Putting a cap on the industry
The payday lending firms claim they are providing a needed, short-term service to the working poor. But studies have shown that every year payday lenders strip $4.2 billion in excessive fees from Americans who think they're getting a two-week loan and end up trapped in debt. Borrowers end up paying more in interest - at annual rates of 400 percent (about 20 times the highest credit card rates) - which is much more than the amount of the loan they originally borrowed.
The good news is that state legislatures across the country are taking steps to regulate payday loans; hundreds of bills pertaining to such lenders have been introduced in more than 30 states in the past two years. In all, fifteen states and the District of Columbia have either capped rates leading to payday lenders shutting their doors or banned them outright.
In fact the South has led the charge in cracking down on the $28-billion industry. Georgia and North Carolina have already banned the practice. States like Virginia have passed reforms that help borrowers. This week Kentucky Governor Steve Beshear signed into law a ten-year moratorium on new payday lenders in the state. State legislatures in Texas have filed legislation that would mean greater transparency in the lending industry, cap interest rates at 36 percent, and close loopholes in state law that allow lenders to bypass tighter regulation. An intense battle is currently taking place in the South Carolina over reform legislation.
One long-term solution, consumer advocates like CRL argue, is for stronger federal legislation that would put a 36 percent cap on interest rates, which is the same cap that Congress already has in place for military families. A bill with a 36 percent cap has been introduced in the U.S. Senate (S500) and House (H.R. 1608), and would not prohibit states from instituting their own caps.
Source:http://www.pww.org/article/articleview/15042/
Wednesday, April 1, 2009
Sunday, January 18, 2009
Blank cheque for the banks: Billions more taxpayers' cash at risk in new bail-out as Brown pledges support for toxic loans
British banks will take a further step today towards full-scale nationalisation.
Gordon Brown will put hundreds of billions of pounds more at risk in a last throw of the dice to try to save the economy.
Taxpayers - who have already stumped up £37billion to bail out High Street banks - will now be asked to underwrite the reckless loans they have made.
The latest bank rescue deal could take Mr Brown's total commitment to solving the banking crisis to almost £1trillion (£1,000billion) in taxpayers' money either spent or pledged since the credit crunch began in 2007.
Banks that have not yet taken public cash, including Barclays and HSBC, are expected to give up shares to the state in exchange for taking part in the loan guarantee scheme.
And taxpayers are expected to increase their stake in the troubled Royal Bank of Scotland to more than 70 per cent. A huge range of initiatives to be unveiled today by the Prime Minister and Chancellor Alistair Darling is expected to include:
* A 'pay-as-you-go' insurance scheme, which will see an uncapped amount of 'toxic' bank debt underwritten by the public purse;
* A £100billion plan to kick-start mortgage lending;
* A £250billion credit guarantee scheme underwriting the risk of banks' lending to each other, due to expire in April, extended at least to the end of this year;
* A separate project, allowing banks to swap loans for Government bonds, also extended;
* The rules of last year's bank bailout torn up so they have more freedom to start lending again
The package represents a huge political headache for Mr Brown, with polls yesterday suggesting the 'bounce' he enjoyed in response to his initial handling of the financial crisis has come crashing to an end.
Opposition MPs will seize on the new bail-out as evidence that last year's part-nationalisation was a hugely expensive flop. Taxpayers are also likely to resent being asked to shoulder the risk for dodgy lending by banks - much of it made overseas.
The loan scheme is likely to have a dramatic impact on the public finances, sending liabilities spiralling still higher.
But the Government is convinced that another massive taxpayer-backed bail-out is the only way to get credit flowing to families and businesses and unfreeze the lifeblood of the economy.
Officials and ministers worked through the weekend to hammer out details of the package, with the Chancellor seeing bank chiefs for a series of crisis meetings.
Huge stock market falls on Friday, triggered by fears that banks are poised to admit vast losses and write-offs, added to the sense of urgency.
The Prime Minister, in the Middle East for talks on Gaza, said: 'My first priority is hard-working families who are worried about whether they can afford or get a mortgage and businesses who work hard every day to employ people.
'They need credit and lending to be made. They need the banks to do the job that the banks say they are there to do. What we want to see is for businesses to get the money they need to create jobs and secure any for the future.
'What I want to see is people having access to mortgages at prices they can afford. That's what tomorrow's programme is all about.'
Officials insisted it was not possible to put a figure on how much taxpayers' money will be at risk in the loan guarantee scheme, despite suggestions that it could be as much as £200billion. They said the Government was not putting any limit on the amount which could be underwritten. The total will depend on how many banks take part.
The scheme will see the taxpayer agreeing to underwrite loans which banks fear are at risk of default. The insurance will mean the banks' losses on bad loans being limited.
Instead, the taxpayer will shoulder the burden for decades to come and pick up the bill if families or businesses are unable to pay back the money they have borrowed.
Banks will have to pay a fee, which could be in cash or shares in their businesses, for the cover. They will have to gave 'contractual' commitments to lend more in the future in exchange for taking part.
Ministers consider this system better than a state-owned 'bad bank' - which they have all but ruled out - because there would not be the need to find billions of pounds up front.
An announcement is also expected on new guarantees for mortgage-backed securities.
The Government will take steps directly to stimulate fresh lending in the mortgage market where a shortage of affordable loans is contributing to a crash in house prices.
Northern Rock, the fully nationalised bank, will be made to shake up its business model. Rather than shrinking mortgage lending, ministers want it to increase it again, subject to approval from the EU.
Liberal Democrat Treasury spokesman Vince Cable urged the Government to 'bite the bullet' and take full control of the banks.
'At the moment, large numbers of excellent British companies are unable to raise credit,' he said.
'The Government must bite the bullet on the public ownership and control of the banks to ensure that lending is maintained to sound companies who can keep the economy ticking over in these turbulent times.
'They should not be made to suffer because the banks have had a collective stroke. Getting the banks lending effectively, efficiently and quickly again is the key to avoiding a serious recession the like of which we haven't seen for a generation.'
John McFall, Labour chairman of the Commons Treasury Committee, said the Government had little alternative to the new rescue plan.
'We have got to go back again with a bigger sum because the banks in my opinion haven't been honest enough about the toxic assets on their books.'
Justin Urquhart Stewart, of Seven Investment Management, said: 'I think we are now inexorably heading towards taking over the balance sheets of the big beasts.'
source : http://www.dailymail.co.uk/news/
Gordon Brown will put hundreds of billions of pounds more at risk in a last throw of the dice to try to save the economy.
Taxpayers - who have already stumped up £37billion to bail out High Street banks - will now be asked to underwrite the reckless loans they have made.
The latest bank rescue deal could take Mr Brown's total commitment to solving the banking crisis to almost £1trillion (£1,000billion) in taxpayers' money either spent or pledged since the credit crunch began in 2007.
Banks that have not yet taken public cash, including Barclays and HSBC, are expected to give up shares to the state in exchange for taking part in the loan guarantee scheme.
And taxpayers are expected to increase their stake in the troubled Royal Bank of Scotland to more than 70 per cent. A huge range of initiatives to be unveiled today by the Prime Minister and Chancellor Alistair Darling is expected to include:
* A 'pay-as-you-go' insurance scheme, which will see an uncapped amount of 'toxic' bank debt underwritten by the public purse;
* A £100billion plan to kick-start mortgage lending;
* A £250billion credit guarantee scheme underwriting the risk of banks' lending to each other, due to expire in April, extended at least to the end of this year;
* A separate project, allowing banks to swap loans for Government bonds, also extended;
* The rules of last year's bank bailout torn up so they have more freedom to start lending again
The package represents a huge political headache for Mr Brown, with polls yesterday suggesting the 'bounce' he enjoyed in response to his initial handling of the financial crisis has come crashing to an end.
Opposition MPs will seize on the new bail-out as evidence that last year's part-nationalisation was a hugely expensive flop. Taxpayers are also likely to resent being asked to shoulder the risk for dodgy lending by banks - much of it made overseas.
The loan scheme is likely to have a dramatic impact on the public finances, sending liabilities spiralling still higher.
But the Government is convinced that another massive taxpayer-backed bail-out is the only way to get credit flowing to families and businesses and unfreeze the lifeblood of the economy.
Officials and ministers worked through the weekend to hammer out details of the package, with the Chancellor seeing bank chiefs for a series of crisis meetings.
Huge stock market falls on Friday, triggered by fears that banks are poised to admit vast losses and write-offs, added to the sense of urgency.
The Prime Minister, in the Middle East for talks on Gaza, said: 'My first priority is hard-working families who are worried about whether they can afford or get a mortgage and businesses who work hard every day to employ people.
'They need credit and lending to be made. They need the banks to do the job that the banks say they are there to do. What we want to see is for businesses to get the money they need to create jobs and secure any for the future.
'What I want to see is people having access to mortgages at prices they can afford. That's what tomorrow's programme is all about.'
Officials insisted it was not possible to put a figure on how much taxpayers' money will be at risk in the loan guarantee scheme, despite suggestions that it could be as much as £200billion. They said the Government was not putting any limit on the amount which could be underwritten. The total will depend on how many banks take part.
The scheme will see the taxpayer agreeing to underwrite loans which banks fear are at risk of default. The insurance will mean the banks' losses on bad loans being limited.
Instead, the taxpayer will shoulder the burden for decades to come and pick up the bill if families or businesses are unable to pay back the money they have borrowed.
Banks will have to pay a fee, which could be in cash or shares in their businesses, for the cover. They will have to gave 'contractual' commitments to lend more in the future in exchange for taking part.
Ministers consider this system better than a state-owned 'bad bank' - which they have all but ruled out - because there would not be the need to find billions of pounds up front.
An announcement is also expected on new guarantees for mortgage-backed securities.
The Government will take steps directly to stimulate fresh lending in the mortgage market where a shortage of affordable loans is contributing to a crash in house prices.
Northern Rock, the fully nationalised bank, will be made to shake up its business model. Rather than shrinking mortgage lending, ministers want it to increase it again, subject to approval from the EU.
Liberal Democrat Treasury spokesman Vince Cable urged the Government to 'bite the bullet' and take full control of the banks.
'At the moment, large numbers of excellent British companies are unable to raise credit,' he said.
'The Government must bite the bullet on the public ownership and control of the banks to ensure that lending is maintained to sound companies who can keep the economy ticking over in these turbulent times.
'They should not be made to suffer because the banks have had a collective stroke. Getting the banks lending effectively, efficiently and quickly again is the key to avoiding a serious recession the like of which we haven't seen for a generation.'
John McFall, Labour chairman of the Commons Treasury Committee, said the Government had little alternative to the new rescue plan.
'We have got to go back again with a bigger sum because the banks in my opinion haven't been honest enough about the toxic assets on their books.'
Justin Urquhart Stewart, of Seven Investment Management, said: 'I think we are now inexorably heading towards taking over the balance sheets of the big beasts.'
source : http://www.dailymail.co.uk/news/
Saturday, December 20, 2008
Fed provides details of upcoming auctions
The Federal Reserve on Friday released a schedule of upcoming auctions that allow squeezed banks to obtain short-term cash loans to help them cope with the global credit crisis.
The Fed will conduct six auctions in the first three months of next year. Auctions conducted on Jan. 12, Feb. 9, and March 9 give banks the opportunity to obtain 28-day loans. Auctions conducted on Jan. 26, Feb. 23, and March 23 allow banks to get 84-day loans.
To ease the severe credit crunch, the Fed last December launched the program to give banks a new way to get short-term loans and help them over the credit hump. A lockup in lending between banks, and to businesses and consumers, has aggravated the economy's problems, throwing the country into a recession.
The Fed has been working closely with other central banks to coordinate the relief efforts. The Bank of England, Bank of Japan, European Central bank and Swiss National Bank also announced schedules for similar auctions.
But citing weakening demand, the ECB also said it would discontinue euro-dollar foreign exchange swaps at the end of January. The ECB added that if conditions warranted, the swaps could be resumed.
source : http://www.google.com/hostednews/ap/article/ALeqM5hHY9_2T5594LdVhBsC-c1nfqlkJgD955QCGG0
The Fed will conduct six auctions in the first three months of next year. Auctions conducted on Jan. 12, Feb. 9, and March 9 give banks the opportunity to obtain 28-day loans. Auctions conducted on Jan. 26, Feb. 23, and March 23 allow banks to get 84-day loans.
To ease the severe credit crunch, the Fed last December launched the program to give banks a new way to get short-term loans and help them over the credit hump. A lockup in lending between banks, and to businesses and consumers, has aggravated the economy's problems, throwing the country into a recession.
The Fed has been working closely with other central banks to coordinate the relief efforts. The Bank of England, Bank of Japan, European Central bank and Swiss National Bank also announced schedules for similar auctions.
But citing weakening demand, the ECB also said it would discontinue euro-dollar foreign exchange swaps at the end of January. The ECB added that if conditions warranted, the swaps could be resumed.
source : http://www.google.com/hostednews/ap/article/ALeqM5hHY9_2T5594LdVhBsC-c1nfqlkJgD955QCGG0
Friday, November 21, 2008
Check Into Cash to Close 32 Ohio Stores
Payday lender Check Into Cash announced today that it is closing 32 of its 92 stores in Ohio. The closings follow recently passed legislation that caps interest rates at 28 percent, making it impossible for the company to continue current operations.
The 60 stores that remain open are offering micro loans under the Ohio Small Loan Act. "We're making an effort to continue serving our customers," said Check Into Cash President Steve Scoggins. "While the federal government understands the importance of providing access to credit as it's doing with the bailout," notes Scoggins, "Ohio legislators insisted on eliminating credit access for its citizens.
In addition, this is putting thousands out of work during a serious economic crisis."
Ohioans are likely to experience what Federal Reserve researchers Donald Morgan and Michael Strain learned about Georgia and North Carolina after payday lending was eliminated. Their study showed that customers bounced more checks, filed for Chapter 7 (no assets) bankruptcy more often and registered more complaints with the FTC. Consumers were also forced to use more expensive credit options when payday loans weren't available.
Approximately 45 employees will lose their jobs early next month when the store closings go into effect. Some 47,500 square feet of retail space will now go dark as the 32 locations in cities and towns across the state are vacated.
Scoggins declined to say whether additional Ohio locations may be shuttered in the future. "We're doing the best we can to meet the needs of our customers and at the same time trying to keep the lights on," he explained.
Check Into Cash, headquartered in Cleveland, TN, is a founding member of the Community Financial Services Association, an industry trade group of responsible lenders dedicated to promoting balanced legislation and consumer protection while preserving credit options. Founded in 1993, Check Into Cash has 1254 centers in 32 states, and is the nation's largest privately held payday advance company.
Source from:
http://www.marketwatch.com/news/story/Check-Into-Cash-Close-32/story.aspx?guid={9A12C127-EBC3-437D-94D9-0688D01E2FAF}
The 60 stores that remain open are offering micro loans under the Ohio Small Loan Act. "We're making an effort to continue serving our customers," said Check Into Cash President Steve Scoggins. "While the federal government understands the importance of providing access to credit as it's doing with the bailout," notes Scoggins, "Ohio legislators insisted on eliminating credit access for its citizens.
In addition, this is putting thousands out of work during a serious economic crisis."
Ohioans are likely to experience what Federal Reserve researchers Donald Morgan and Michael Strain learned about Georgia and North Carolina after payday lending was eliminated. Their study showed that customers bounced more checks, filed for Chapter 7 (no assets) bankruptcy more often and registered more complaints with the FTC. Consumers were also forced to use more expensive credit options when payday loans weren't available.
Approximately 45 employees will lose their jobs early next month when the store closings go into effect. Some 47,500 square feet of retail space will now go dark as the 32 locations in cities and towns across the state are vacated.
Scoggins declined to say whether additional Ohio locations may be shuttered in the future. "We're doing the best we can to meet the needs of our customers and at the same time trying to keep the lights on," he explained.
Check Into Cash, headquartered in Cleveland, TN, is a founding member of the Community Financial Services Association, an industry trade group of responsible lenders dedicated to promoting balanced legislation and consumer protection while preserving credit options. Founded in 1993, Check Into Cash has 1254 centers in 32 states, and is the nation's largest privately held payday advance company.
Source from:
http://www.marketwatch.com/news/story/Check-Into-Cash-Close-32/story.aspx?guid={9A12C127-EBC3-437D-94D9-0688D01E2FAF}
Friday, November 14, 2008
Hampden Bank recovers cash on impaired loan
Hampden Bancorp Inc. said it recovered $621,000 in cash on a loan it had classified as impaired, cutting its portfolio of nonperforming loans, according to a recent regulatory filing.
Hampden said it recently received the cash payment, a move that cut its impaired loans by $364,000 and resulted in a $257,000 loan-loss recovery.
In the third quarter, the bank’s net income was $47,000, compared with $521,000 for the same period in 2007. This decrease in net income was primarily the result of setting aside more money for anticipated loan losses, the bank said.
Source from:
http://www.bizjournals.com/boston/stories/2008/11/10/daily37.html
Hampden said it recently received the cash payment, a move that cut its impaired loans by $364,000 and resulted in a $257,000 loan-loss recovery.
In the third quarter, the bank’s net income was $47,000, compared with $521,000 for the same period in 2007. This decrease in net income was primarily the result of setting aside more money for anticipated loan losses, the bank said.
Source from:
http://www.bizjournals.com/boston/stories/2008/11/10/daily37.html
Tuesday, September 30, 2008
Fed makes billions available to battle crisis
The Federal Reserve and foreign central banks moved Monday to pump billions of dollars to cash-strapped banks at home and abroad in a dramatic bid to break through a credit clog and spur lending.
The Fed said the action is intended to "expand significantly" the cash available to financial institutions, its latest effort to relieve the worst credit crisis since the Great Depression.
The goal is to boost the amount of quick cash available to banks and other financial institutions so that they'll feel more confident and inclined to lend not only to each other but also to people and businesses.
Credit is the economy's lifeblood. The global credit clog — which started a year ago and grew much more severe in the past few weeks — has made it increasingly difficult for people and businesses to borrow money. The crisis — if it persists — could plunge the economy into a recession, President Bush and Fed Chairman Ben Bernanke have warned.
The Fed action came hours before the House defeated a $700 billion financial bailout plan, ignoring urgent pleas by Bush and Bernanke to move swiftly.
The plan was designed to break through a dangerous credit clog that has threatened to freeze up the entire financial system and throw the economy into a recession. At the heart of the plan, the government would buy bad mortgages and other dodgy debts held by banks and other financial institutions. By getting those rotten assets off their books, financial institutions should be in a better position to raise capital and boost lending, supporters contend.
The Fed's action on Monday expands programs already in place. It is unclear whether it will break through the credit bottlenecks. Its previous actions — including steps along these lines — have provided relief, but haven't halted the crisis.
Against this backdrop, central banks will continue to work closely and are prepared to take "appropriate steps as needed" to ease the crisis and get banks lending again, the Fed said.
On Wall Street, stocks dropped sharply even after the Fed's announcement. The Dow Jones industrials plunged 777 points — their largest point drop ever — or almost 7 percent. The Standard & Poor's 500 index declined 8.51 percent and the technology-heavy Nasdaq composite index fell 9.14 percent.
Under one new step, the Fed will boost the amount of 84-day cash loans available to U.S. banks. The Fed is increasing the amount to $75 billion, up from the current $25 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction.
That move will triple the supply of 84-day loans to $225 billion, from $75 billion, the Fed said.
Meanwhile, the Fed will continue to make $75 billion worth of shorter, 28-day loans available to banks.
All told, the total amount of cash loans — 84-day and 28-day — available to banks will double to $300 billion from $150 billion, the Fed said.
source : http://economictimes.indiatimes.com/
The Fed said the action is intended to "expand significantly" the cash available to financial institutions, its latest effort to relieve the worst credit crisis since the Great Depression.
The goal is to boost the amount of quick cash available to banks and other financial institutions so that they'll feel more confident and inclined to lend not only to each other but also to people and businesses.
Credit is the economy's lifeblood. The global credit clog — which started a year ago and grew much more severe in the past few weeks — has made it increasingly difficult for people and businesses to borrow money. The crisis — if it persists — could plunge the economy into a recession, President Bush and Fed Chairman Ben Bernanke have warned.
The Fed action came hours before the House defeated a $700 billion financial bailout plan, ignoring urgent pleas by Bush and Bernanke to move swiftly.
The plan was designed to break through a dangerous credit clog that has threatened to freeze up the entire financial system and throw the economy into a recession. At the heart of the plan, the government would buy bad mortgages and other dodgy debts held by banks and other financial institutions. By getting those rotten assets off their books, financial institutions should be in a better position to raise capital and boost lending, supporters contend.
The Fed's action on Monday expands programs already in place. It is unclear whether it will break through the credit bottlenecks. Its previous actions — including steps along these lines — have provided relief, but haven't halted the crisis.
Against this backdrop, central banks will continue to work closely and are prepared to take "appropriate steps as needed" to ease the crisis and get banks lending again, the Fed said.
On Wall Street, stocks dropped sharply even after the Fed's announcement. The Dow Jones industrials plunged 777 points — their largest point drop ever — or almost 7 percent. The Standard & Poor's 500 index declined 8.51 percent and the technology-heavy Nasdaq composite index fell 9.14 percent.
Under one new step, the Fed will boost the amount of 84-day cash loans available to U.S. banks. The Fed is increasing the amount to $75 billion, up from the current $25 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction.
That move will triple the supply of 84-day loans to $225 billion, from $75 billion, the Fed said.
Meanwhile, the Fed will continue to make $75 billion worth of shorter, 28-day loans available to banks.
All told, the total amount of cash loans — 84-day and 28-day — available to banks will double to $300 billion from $150 billion, the Fed said.
source : http://economictimes.indiatimes.com/
Wednesday, July 16, 2008
AR Cash Flow’s views on factoring and bank loans
AR Cash Flow has outlined its views on factoring and bank loans.
Usually, the first thought for a business owner is to seek funds from a bank. Historically, invoice factoring is rarely the first thought of when attempting to overcome a working capital shortage. When first introduced to the idea of factoring, it is common for a business owner to compare all terms, costs and conditions with a traditional bank loan.
Very often, the business seeking working capital will look for a specific amount of money commonly referred to as its credit line or credit limit. Traditionally, the banks dictate a limit on funds available based on the assets (real estate, business equipment, etc.) being pledged as collateral.
Unlimited availability of funds is uncommon in the finance industry and sometimes cannot be grasped by a potential client. In factoring, a client's credit facility is based on his ability to deliver product (or services) and generate an invoice reflecting completion of delivery or service. Elasticity of funds is an unlimited line of funds that grows with the business and provides true cash flow as opposed to cash infusion.
A business must weigh the costs of factoring against not having the immediate cash flow. Most often the choice is between factoring and putting up with severe cash flow problems and missed sales opportunities.
Usually, the first thought for a business owner is to seek funds from a bank. Historically, invoice factoring is rarely the first thought of when attempting to overcome a working capital shortage. When first introduced to the idea of factoring, it is common for a business owner to compare all terms, costs and conditions with a traditional bank loan.
Very often, the business seeking working capital will look for a specific amount of money commonly referred to as its credit line or credit limit. Traditionally, the banks dictate a limit on funds available based on the assets (real estate, business equipment, etc.) being pledged as collateral.
Unlimited availability of funds is uncommon in the finance industry and sometimes cannot be grasped by a potential client. In factoring, a client's credit facility is based on his ability to deliver product (or services) and generate an invoice reflecting completion of delivery or service. Elasticity of funds is an unlimited line of funds that grows with the business and provides true cash flow as opposed to cash infusion.
A business must weigh the costs of factoring against not having the immediate cash flow. Most often the choice is between factoring and putting up with severe cash flow problems and missed sales opportunities.
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