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Is Bankruptcy The Way Out Of Payday Loan? |

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Dear Debt Adviser,
I had a medical emergency last year and opened a payday loan for $1,500. I haven’t been able to pay it off, and I’m unable to get a real loan due to a decline in my credit score. Is there any way out for me other than bankruptcy? A loan with a co-signer maybe? I hate being behind on my bills, and I want to resolve this.
— Janet

Dear Janet,
Bankruptcy isn’t the best option here given the relatively small amount you owe. It’s usually a last resort, and it’ll sink your credit score. Also, once you file for bankruptcy, there’s a lengthy waiting period before you can file again (should you need to).

You have other options, but they will require some planning on your part.

First, you should drastically cut back on expenses to pay off the payday loans. Take a look at your monthly spending and determine how much you could save on a bare-bones budget. By bare-bones I mean no entertainment, no cable TV, no new clothing, no lattes and not even any bubble gum — at least for a while.

I also want you to look for a part-time job or some overtime to bring in more money. If that’s not possible, then consider selling something.

And you might try to pay off some of the loans with a credit card. Using credit got you into this mess. Using more of it to get out is less than ideal. And you may not qualify for a card with a low interest rate at this point. Still, a high-interest-rate card that takes you months to pay off would still cost less than the fees you are paying to the payday lenders.

If you’re unable to qualify for a credit card on your own, and you know someone willing to help you out, you could request that he or she co-sign for a credit card account. Before going through with this, make sure that you have a solid plan for paying off the balance on the card. Share your plan with your potential co-signer and promise that you will let the person know in advance if you are ever unable to make the required monthly payment. If someone is willing to put her own credit on the line for you, you need to make good on your promise to pay. At the very least, you should let the co-signer know if you’re going to fall behind on your payments.

Once you have broken the payday loan cycle, begin saving for emergencies so you can avoid being in this situation again in the future. Save as much as you can each pay period and include any unexpected funds such as pay raises, tax refunds, etc. until you reach at least six months’ of living expenses.

Good luck!


Payday loan companies in government crosshairs | FP Street | News …

Once indulged as a necessary evil, payday loan companies are increasingly in the crosshairs of governments obsessed with consumers getting all tangled up again in loans they can’t repay.

Still bruised by the reckless lending practices of banks and irresponsible borrowing by consumers that sparked the 2008 financial crisis, governments in Canada, the United States and United Kingdom are cracking down on short-term loan providers for the way they operate — and for trying to skirt the rules.

Canadian payday loan firm hit with proposed class action

The Cash Store Financial Services Inc., a publicly traded firm in the payday loan business, has been served with a proposed class action in four Canadian provinces.

Read full story here.

Earlier this month, the Ontario government took aim at the operating licence of Cash Store Financial Services Inc., an Edmonton-based company with 512 branches across Canada and 25 in the U.K. Ontario wants to revoke Cash Store’s licence because it alleges that by charging fees, it allows the company to end run the province’s maximum borrowing cap of $21 per $100 lent.

Cash Store disagreed and filed for a judicial review. Meantime, the consumer protection branch of Ontario’s Ministry of Consumer Affairs, issued an “alert” to consumers telling them of the investigation and reminding them of their rights.

It’s the latest imbroglio for Cash Store, which faced similar challenges in Alberta, Manitoba and British Columbia. Two years ago, the B.C. government fined the company $25,000 and demanded it refund “unlawful” fees paid by consumers. That hasn’t happened yet because Cash Store appealed.


Woes pile up for Cash Store as Ontario aims to revoke licenceCash Store Financial seeks appeal of proposal to revoke lending licences

Essentially, payday loan operators provide short-term funds or payday advances in small amounts, ostensibly to cover last-minute or emergency expenses. Typically, this type of loan is $1,500 or less for a maximum term of 62 days and the money is advanced in exchange for a post-dated cheque or some other form of pre-authorized payment.

On average, Canadians borrow $300 for a two-week term. According to Statistics Canada, about 3% of Canadian families have obtained a payday loan.

The bottom line: 1,350 players populate the Canadian industry that’s worth an estimated $2-billion annually. For a financially conservative country like Canada, that’s mighty big business.

Hence the hand wringing. Governments have never been comfortable with the idea that companies could profit by offering what amounted to predatory loans to a segment of society who can’t get a bank account or a credit card. Even so, the provinces decided to ring fence the payday lenders with a regulatory structure.

In the case of Ontario, where 750 of these companies operate, the Payday Loans Act was established in 2008, and amended in 2011 when the government worried lenders were getting around the maximum borrowing costs by charging fees.

Ditto for the other provinces – except for Quebec, where payday loans are prohibited. Borrowing costs vary from province to province, for example, $25 per $100 in Nova Scotia, $23 per $100 in B.C., and $17 per $100 in Manitoba.

Interestingly, payday loan companies are under fire from provincial regulators just as giant U.K. short-term lender Wonga readies for its arrival in Canada. The online lender is in the initial phase of its Canadian launch and will primarily focus in Ontario and eventually branch out West.

By offering more flexible loans and terms “uniquely built for Canada,” Wonga Canada CEO Mark Ruddock said in an email, the company is “committed to offering loans to those who have the ability to repay them.”

Over in the U.K., Wonga is among the group of 240 companies under formal investigation by the U.K.’s Office of Fair Trading after almost 700 complaints were filed last year. Last November, the OFT said it is concerned about “aggressive debt collection practices” and whether the companies are actually providing affordable loans. “

In the U.S., 15 states have an outright ban on payday loans while others have been introducing stringent regulation to curb them. Even so, the measures have not stopped the sector from expanding. According to The New York Times, three million Americans obtained short-term loans in 2011, amounting to US$13-billion, more than a 120% increase from US$5.8-billion in 2006.

Clearly, the industry isn’t suffering even though lenders complain the borrowing limits are severely crimping profitability. That’s likely what’s spooking regulators. Still, in the absence of default rates, it’s hard to gauge the extent of the problem, or if there actually is one. For now, the crackdowns appear to be motivated by consumer complaints.

And that may be the problem. Issuing public Buyer Beware alerts to consumers who are unlikely to see them, let alone heed them, won’t really fix much. Besides, at some point people have to be accountable and responsible for their actions — and that includes reading the fine print.

Maybe the end game for governments is merely to send a message to payday lenders and the folks who use them. After all, having legitimized the business, all that’s left is to raise public awareness and hope for the best.


The Cash Store Australia Holdings Inc. reports results for the three and six months ended December 31, 2012

EDMONTON , Feb. 27, 2013 /CNW/ – The Cash Store Australia Holdings Inc. (“Cash Store Australia ” or the “Company”) (AUC.V) today announced results for the three and six months ended December 31, 2012 .

The decline in revenue continued in the second quarter as a result of the Company’s decision to cease brokering loans from March 17, 2012 to April 14, 2012 . Also during this period the sale of a key income producing product was put on hold until a complete review of its key features is undertaken. This review has now been completed. As a result of this action taken by the Company, a significant number of customers went elsewhere for their financial servicing needs and have not yet returned to do business with Cash Store Australia . The Company plans to introduce new loan products on March 1, 2013 and a newly designed insurance product shortly thereafter. These product offerings are expected to help draw former customers back to Cash Store Australia’s branches. The new products extend the loan term, increase the amount loaned and increase the number of payments required to repay the loan amount.

To partially counteract the effect of the ensuing periods of the reduction in revenue, the Company reduced branch operating expenses by $1.1 million in the second quarter and by $1.8 million for the six months ended December 31, 2012 compared to the same periods last year. The Company will continue to monitor the performance of its existing branch base, merge or close those branches that do not meet its performance criteria and closely manage creditor relationships to ensure access to capital is maintained.

The Company made significant improvements in the quarter ended December 31, 2012 over the quarter ended September 30, 2012 . The net loss for the quarter ended December 31, 2012 improved to $2.1 million from $2.9 million for the quarter ended September 30, 2012 . The Company also made significant improvements in the six months ended December 31, 2012 over the six months ended June 30, 2012 . The net loss for the six months ended December 31, 2012 improved to $5.0 million from $8.4 million for the six months ended June 30, 2012 .

Highlights for the second quarter:

Revenue of $2.1 million compared to $5.0 million for the same quarter last year. Net loss of ( $2.1 million ) compared to a net loss of ( $1.5 million ) in the second quarter of fiscal 2012. Branch operating expenses reduced by $1.1 million in this quarter compared to the same quarter last year. Diluted loss per share of ( $0.13 ) compared to a diluted loss per share of ( $0.09 ) in the same quarter last year. Negative Adjusted EBITDA of ( $1.8 million ) compared to negative Adjusted EBITDA of ( $1.1 million ) in the same quarter last year.

Highlights for the six months ended December 31, 2012:

Revenue of $3.9 million compared to $9.7 million for the same period last year. Net loss of ( $5.0 million ) compared to a net loss of ( $3.0 million ) in the six months ended December 31, 2011 . Branch operating expenses reduced by $1.8 million in this period compared to the same period last year. Diluted loss per share of ( $0.31 ) compared to a diluted loss per share of ( $0.18 ) in the same six month period last year. Negative Adjusted EBITDA of ( $4.6 million ) compared to negative Adjusted EBITDA of ( $2.1 million ) in the same six month period last year.

About Cash Store Australia

Cash Store Australia is the only small sum short term advance broker in Australia publicly traded on the TSX Venture Exchange (AUC.V). Cash Store Australia operates 67 branches in the States of Victoria, Queensland, Tasmania, Northern Territory, and New South Wales Australia under the banner “The Cash Store”.

Summary Financial Information

Three Months Ended Six Months Ended Consolidated results December 31 December 31 December 31 December 31 (presented in Canadian dollars) 2012 2011 2012 2011 No. of branches 67 81 67 81 Revenue Brokerage $ 2,008,298 $ 4,476,714 $ 3,672,715 $ 8,641,387 Other income 103,272 493,275 205,636 1,024,432 Total Revenue 2,111,570 4,969,989 3,878,351 9,665,819 Branch Expenses Salaries and benefits 1,563,155 2,424,900 3,196,370 4,791,895 Retention payments 96,967 1,249,920 564,487 2,296,813 Rent 554,545 652,180 1,118,452 1,297,082 Selling, general, and administrative 345,714 510,474 658,662 1,015,735 Advertising and promotion 173,447 165,252 402,695 272,972 Depreciation of property and equipment 49,007 153,312 99,377 323,408 2,782,835 5,156,038 6,040,043 9,997,905 Branch Operating Income (Loss) (671,265) (186,049) (2,161,692) (332,086) Regional expenses 212,669 398,803 400,083 742,459 Corporate expenses 1,122,265 785,961 2,221,982 1,458,417 Other depreciation and amortization 8,039 12,002 16,508 27,678 Impairment of property and equipment 98,087 148,797 111,985 449,592 Restructuring costs (52,271)(45,428) – Interest expense 90,148 140,048 – Foreign exchange loss (gain) (15,766) (49,104) 32,822 12,039 EBITDA* (1,987,242) (1,317,194) (4,783,759) (2,671,186) Adjusted EBITDA* (1,846,660) (1,103,413) (4,586,255) (2,094,958) Net loss $ (2,134,436) $ (1,482,508) $ (5,039,692) $ (3,022,271) Weighted average number of shares outstanding – basic 16,425,981 16,425,981 16,425,981 16,425,981 Basic and Diluted loss per share Net loss $ (0.13) $ (0.09) $ (0.31) $ (0.18) Consolidated Balance Sheet Information Working capital $ (20,039,973) $ (8,140,567) $ (20,039,973) $ (8,140,567) Total assets 2,231,440 3,517,981 2,231,440 3,517,981 Total long-term liabilities 80,181 177,188 80,181 177,188 Total liabilities 21,667,192 9,743,258 21,667,192 9,743,258 Shareholders’ equity $ (19,435,752) $ (6,225,277) $ (19,435,752) $ (6,225,277) * EBITDA – earnings before interest, income taxes, depreciation of property and equipment and amortization of intangible assets. Adjusted EBITDA – earnings before interest, income taxes, depreciation of property and equipment and amortization of intangible assets, stock-based compensation and impairment of property and equipment.

Forward Looking Information

This News Release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, information with respect to our objectives, strategies, operations and financial results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects”, or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “does not anticipate”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, or “will be taken”, “occur”, or “be achieved. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Cash Store Australia , to be materially different from those expressed or implied by such forward-looking information. All material assumptions used in making forward-looking statements are based on management’s knowledge of current business conditions and expectations of future business conditions and trends. Although we believe the assumptions used to make such statements are reasonable at this time and have attempted to identify in our continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Certain material factors or assumptions are applied by us in making forward-looking statements, include without limitation, factors and assumptions regarding our continued ability to fund our small sum short term loan business, rates of customer defaults, relationships with, and payments to, third party lenders, demand for our products, as well as our operating cost structure and current consumer protection regulations. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. We do not undertake to update any forward-looking information, except in accordance with applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE: The Cash Store Australia Holdings Inc.


For further information on Cash Store Australia, please contact:

Bill Johnson, Chief Financial Officer
(780) 732-5695; e-mail:


Is an Auto Title Loan the New Payday Loan

Image hqdefault.jpg Auto title loans are becoming more popular lately just as payday loans are. One of the big differences between the two is the amount that you can be qualified for. […]

What Your Personality and a Payday Loan Have in Common

Image hqdefault.jpg Think about your personality and how it affects your spending habits. In the blog you will see types of personalities: protectors, planners, pleasers and players […]

Corporations Can Prepay Royalties To Access Foreign Cash


Move up tMove down The Forbes 2013 Tax Guide Janet Novack Forbes Staff A Costly ‘Repatriation Tax’ Defeat Lowell Yoder Contributor Fiscal Cliff Tax Deal Extends Key International Rule Lowell Yoder Contributor Hidden Tax Costs with Credit Support From Foreign Subsidiaries Lowell Yoder Contributor

Seal of the United States Internal Revenue Service. The design is the same as the Treasury seal with an IRS inscription. (Photo credit: Wikipedia)

Foreign subsidiaries of U.S. multinationals generally retain their excess cash because paying a dividend to the U.S. parent would result in significant U.S. tax costs. For example, a $50 million dividend received from an Irish subsidiary would be subject to approximately $13 million of U.S. federal income tax (this assumes a credit and related “gross-up” income inclusion for income taxes paid to Ireland, which has a 12.5% tax rate).

An idea for accessing excess cash of foreign subsidiaries without increasing total tax costs is to prepay royalties. This option is available if intellectual property (IP) is owned in the U.S. and licensed to foreign subsidiaries for use in their business operations.

To illustrate, assume a foreign subsidiary pays $15 million of royalties to its U.S. parent each year. The foreign subsidiary could prepay three years of royalties, providing the U.S. parent with $45 million. The advance payment would be applied as an offset against future royalties due under the license agreement.

The amount of the advance royalty payment generally is subject to U.S. tax in the year received (but there would be no further taxable royalty income in years 2 and 3). Thus, while U.S. tax on the three years of royalty income is accelerated, the total amount of taxes is not increased. For financial reporting purposes the royalty income and taxes generally are reported over the three-year period as if the royalties had been received each year.

It is critical that the amount received by the U.S. parent be nonrefundable—otherwise the advance payment would be treated as creating a debt. A prepayment that is considered as indebtedness of the U.S. parent would be taxable as a dividend (see my blog “A Costly ‘Repatriation Tax’ Defeat” discussing the tax treatment of a loan from a foreign subsidiary to its U.S. parent as a deemed dividend), while the royalties would still remain taxable as such.

Companies seeking to tap excess foreign cash for U.S. needs without incurring additional tax costs should consider having foreign subsidiaries prepay taxable royalties.

Also on Forbes:

Companies That Pay CEOs More Than Uncle Sam


Why Borrowers Use Payday Loans –

People use payday loans to avoid borrowing from family and friends, and to avoid cutting back further on expenses. But they often end up doing those things anyway to pay back the loan, a new report finds.

The average payday loan — a short-term, high-interest-rate loan typically secured by a borrower’s future paycheck — requires a repayment of more than $400 in two weeks, according to a new report from an arm of the Pew Charitable Trusts. But the average borrower can only afford a $50 payment, which means that borrowers end up rolling over the loan and adding to their debt. The Pew report found that borrowers typically experience prolonged periods of debt, paying more than $500 in fees over five months.

About 41 percent of borrowers say they need a cash infusion to close out their payday loan debt. Typically, they get the money from the sources they tried to avoid in the first place, like family and friends, selling or pawning personal items, taking out another type of loan, or using a tax refund.

“Payday loans are marketed as an appealing short-term option, but that does not reflect reality. Paying them off in just two weeks is unaffordable for most borrowers, who become indebted long-term,” Nick Bourke, Pew’s expert on small-dollar loans, said in a prepared statement.

The Community Financial Services Association of America, a group representing payday lenders, countered that the Pew report lacked context. “Short-term credit products are an important financial tool for individuals who need funds to pay for an unexpected expense or manage a shortfall between paychecks,” the association said in a statement. “In our current economy and constricted credit market,” the statement continued, “it is critical that consumers have the credit options they need to deal with their financial challenges.” The typical fee charged by association members, the statement said, is $10 to $15 per $100 borrowed.

Payday loans and similar “bank deposit advance” loans, which are secured by a direct deposit into a bank account, are coming under increasing scrutiny from federal regulators.

Once confined to storefront operations, payday lenders are increasingly operating online. This last week, The New York Times reported that major banks, like JP Morgan Chase, Bank of America and Wells Fargo, had become behind-the-scene allies for the online lenders. The big banks don’t make the loans, but they enable the lenders to collect payments through electronic transactions.

(On Tuesday, though, Jamie Dimon, the chief executive of JPMorgan Chase, vowed to change how the bank deals with Internet-based payday lenders that automatically withdraw payments from borrowers’ checking accounts.)

The loans are typically viewed as helpful for unexpected bills or emergencies. But the Pew report found most payday borrowers are dealing with persistent cash shortfalls, rather than temporary expenses. Just 14 percent of borrowers say they can afford to repay an average payday loan out of their monthly budgets.

The findings are based on a telephone survey as well as focus groups, Information about borrowers’ experiences with payday loans is based on interviews with 703 borrowers. The margin of sampling error is plus or minus 4 percentage points.

Even though borrowers complained that they had difficulty repaying the loans, most agreed that the terms of the loans were clear. So why do they use such loans? Desperation, according to the report: “More than one-third of borrowers say they have been in such a difficult situation that they would take a payday loan on any terms offered.”

Have you ever used a payday loan? How did you pay it back?