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Fitch Affirms Arkansas Development Finance Authority's SRF Revs at 'AAA'

CHICAGO–(BUSINESS WIRE)–

Fitch Ratings has affirmed the ‘AAA’ ratings for the following Arkansas Development Finance Authority’s (ADFA) bonds:

–$56 million revolving loan fund capital improvement bonds, series 2011C.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by loan repayments and other accounts that are pledged under the series and general bond resolutions.

KEY RATING DRIVERS

STRONG FINANCIAL STRUCTURE: Fitch’s cash flow modeling demonstrates that the state revolving fund (SRF) program can continue to pay bond debt service even if there were loan defaults in excess of Fitch’s ‘AAA’ liability default hurdle.

CONCENTRATED PORTFOLIO: The program is somewhat small and concentrated with the largest two borrowers representing over one-third of the portfolio. However, underlying loan provisions for program borrowers are strong, largely reflecting water and sewer revenue or general obligation pledges.

CROSS-COLLATERALIZATION STRENGTHENS PROGRAM: The program includes a cross-collateralization feature wherein excess funds from the clean water SRF (CWSRF) are available to cover deficiencies in the drinking water SRF (DWSRF) and vice versa. The ability for the two funds to cross-collateralize helps to minimize losses if defaults were to occur.

SOUND PROGRAM MANAGEMENT: Arkansas Natural Resources Commission (ANRC), which manages the program, maintains sound underwriting and loan monitoring procedures. To date, the pledged portfolio has not experienced a permanent loan default.

RATING SENSITIVITIES

REDUCTION IN MODELED STRESS CUSHION: Significant deterioration in aggregate borrower credit quality, increased pool concentration or increased leveraging resulting in the program’s inability to pass Fitch’s liability default ‘AAA’ hurdle would put downward pressure on the rating. The Stable Outlook reflects Fitch’s view that these events are not likely to occur.

CREDIT PROFILE

ADFA issues revolving loan fund revenue bonds to fund ANRC SRF loans to various public entities within the state. Funds are typically disbursed to borrowers to pay eligible CWSRF or DWSRF project costs or to reimburse ADFA for projects previously funded. The combined CWSRF and DWSRF loan pool consists of 65 individual borrowers.

FINANCIAL STRUCTURE EXHIBITS STRONG DEFAULT TOLERANCE

The SRF program’s scheduled pledged loan repayments are projected to provide significant minimum debt service coverage of 3.69x. Overall, Fitch calculates the program’s asset strength ratio (PASR) to be a strong 4.6x, which is notably higher than Fitch’s’ AAA’ median of 1.6x. The PASR includes total scheduled loan repayments divided by total scheduled bond debt service. While the program’s general bond resolution (GBR) requires that coverage be maintained at 1.10x, the moderately low borrower demand for program resources offset’s any concerns about overleveraging.

Fitch’s cash flow modeling demonstrates that the SRF program can continue to pay bond debt service even with hypothetical loan defaults of 100% over the first, middle and last four-year period of the bonds life. This is in excess of Fitch’s ‘AAA’ liability stress hurdle of 47.4% as produced by the PSC. The liability stress hurdle is calculated based on overall pool credit quality as measured by the rating of underlying borrowers, size, and loan term.

CROSS-COLLATERALIZATION ENHANCES BONDHOLDER SECURITY

The GBR provides for cross-collateralization between the CWSRF and DWSRF accounts, meaning that deficiencies in one SRF account may be covered by available moneys from the other SRF. This feature enhances bondholder security by providing additional sources of available revenues from which to draw for debt service. It also increases the overall diversity of the portfolio, allowing analysis of the program as one pool instead of separate SRF portfolios. Any such transfer creates a repayment obligation by the deficient SRF, but the obligation is subordinate to the trust estate’s pledge under the GBR.

NON-PLEDGED MONIES POTENTIALLY AVAILABLE

The GBR-established CW and DW revolving loan fund currently totals approximately $136 million and provides additional cushion by capturing excess loan repayments after debt service is paid. While this fund is not pledged, and therefore not incorporated in Fitch’s analysis, ADFA may use available amounts to cure deficiencies at its sole discretion.

PROGRAM CONCENTRATION OFFSET BY LOAN SECURITY AND MANAGEMENT

The pool’s single-borrower concentration remains moderately high as the city of Little Rock represents 18% of total loan par. The second largest borrower, the city of Conway, comprises 16% of the portfolio. Underlying loan provisions are strong with more than 85% of the portfolio’s principal secured by water and sewer utility revenues or GO pledges. The remaining loans in the portfolio are backed by sales and use taxes or special taxes.

ANRC’s program management is strong and includes an initial review of borrowers’ finances and other characteristics to ensure compliance with provisions of loan agreements. Annual financial reviews are also conducted on outstanding borrowers. On a monthly basis, ADFA prepares borrower status reports that monitor loan repayments.

To date, no permanent loan defaults have been reported in the pledged program, although there have been a few delinquencies in the past. Under the GBR, management may substitute or remove troubled loans out of the pledged portfolio. Since the establishment of the GBR in 2009, there have been no loans de-pledged from the portfolio.

Additional information is available at ‘www.fitchratings.com‘.

Applicable Criteria and Related Research:

–‘Revenue-Supported Rating Criteria’ (June 16, 2014);

–‘State Revolving Fund and Leveraged Municipal Loan Pool Criteria’ (April 28, 2014).

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

State Revolving Fund and Leveraged Municipal Loan Pool Criteria — Effective April 28, 2014 to Oct. 22, 2014

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746076

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=920236

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Security Upgrades & DowngradesBondsFitch Ratings Contact:

Fitch Ratings

Primary Analyst

Adrienne M. Booker, +1-312-368-5471

Senior Director

Fitch Ratings, Inc.

70 W. Madison Street

Chicago, IL 60602

or

Secondary Analyst:

Major Parkhurst, +1-512-215-3724

Director

or

Committee Chairperson:

Jessalynn Moro, +1-212-908-0608

Managing Director

or

Elizabeth Fogerty, +1-212-908-0526

Media Relations, New York

elizabeth.fogerty@fitchratings.com […]

Dermott Man Pleads Guilty to Using Imprisoned Son’s ID to Obtain Student Loan

DERMOTT, AR – A Dermott man who fraudulently used his imprisoned son’s identification to obtain an $11,145 student loan to attend the University of Arkansas at Monticello College of Technology at McGehee was sentenced this week to two years in prison with eight additional years suspended.

Jerome Davis Terry, 41, was also ordered to pay $6,359 restitution to the University of Arkansas at Monticello for cash he received from the student loan.

Click here to keep reading this story from SEARK Today, a FOX16 content partner.

[…]

Fitch Affirms the Senior Notes of Arkansas Student Loan Authority Series 2010-1

NEW YORK–(BUSINESS WIRE)–

Fitch Ratings affirms the senior student loan notes at ‘AAAsf’ issued by Arkansas Student Loan Authority Series 2010-1. The Rating Outlook on the notes, which is tied to the sovereign rating of the U.S. government, is Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral comprises Federal Family Education Loan Program (FFELP) loans with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch affirmed at ‘AAA’ and assigned a Stable Outlook to the U.S. sovereign rating on March 24, 2014.

Sufficient Credit Enhancement (CE): CE is provided by overcollateralization (OC; the excess of trust’s asset balance over bond balance) and excess spread. As of February 2014, parity is at 112.43%. Additionally, the trust is in turbo and no cash will be released until all notes have been paid in full.

Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund currently sized at $500,000 (0.25% of the bond balance, with a floor of $500,000).

Acceptable Servicing Capabilities: Day-to-day servicing is provided by Edfinancial (89% of principal balance) and Nelnet (remaining 11%), with PHEAA acting as back up servicer for Edfinancial. Both servicers have demonstrated adequate servicing capabilities, according to Fitch.

RATING SENSITIVITIES

Since FFELP student loan ABS rely on the U.S. government to reimburse defaults, ‘AAAsf’ FFELP ABS ratings will likely move in tandem with the ‘AAA’ U.S. sovereign rating. Aside from the U.S. sovereign rating, defaults and basis risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults and basis shock beyond Fitch’s published stresses could result in future downgrades. Likewise, a buildup of credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Fitch has taken the following rating actions:

Arkansas Student Loan Authority Series 2010-1:

–Class A affirmed at ‘AAAsf’; Outlook Stable.

Additional information is available at ‘www.fitchratings.com‘.

Applicable Criteria and Related Research:

–‘Global Structured Finance Rating Criteria’ (May 24, 2013);

–‘Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria’ (May 17, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria — Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826871

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Security Upgrades & DowngradesFinanceFitch RatingsFFELP Contact:

Fitch Ratings

Primary Analyst

Victoria Ohorodnyk, +1 212-908-0866

Associate Director

Fitch Ratings, Inc.

One State Street Plaza

New York, NY 10004

or

Committee Chairperson

Kevin Corrigan, +1 212-908-0156

Senior Director

or

Media Relations:

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com […]

Whack-a-Mole: How Payday Lenders Bounce Back When States …

In state after state that has tried to ban payday and similar loans, the industry has found ways to continue to peddle them. (Thomas Hawk via Flickr)

A version of this story was co-published with the St. Louis Post-Dispatch.

In 2008, payday lenders suffered a major defeat when the Ohio legislature banned high-cost loans. That same year, they lost again when they dumped more than $20 million into an effort to roll back the law: The public voted against it by nearly two-to-one.

But five years later, hundreds of payday loan stores still operate in Ohio, charging annual rates that can approach 700 percent.

It’s just one example of the industry’s resilience. In state after state where lenders have confronted unwanted regulation, they have found ways to continue to deliver high-cost loans.

Sometimes, as in Ohio, lenders have exploited loopholes in the law. But more often, they have reacted to laws targeted at one type of high-cost loan by churning out other products that feature triple-digit annual rates.

To be sure, there are states that have successfully banned high-cost lenders. Today Arkansas is an island, surrounded by six other states where ads scream “Cash!” and high-cost lenders dot the strip malls. Arkansas’ constitution caps non-bank rates at 17 percent.

But even there, the industry managed to operate for nearly a decade until the state Supreme Court finally declared those loans usurious in 2008.

The state-by-state skirmishes are crucial, because high-cost lenders operate primarily under state law. On the federal level, the recently formed Consumer Financial Protection Bureau can address “unfair, deceptive or abusive practices,” said a spokeswoman. But the agency is prohibited from capping interest rates.

In Ohio, the lenders continue to offer payday loans via loopholes in laws written to regulate far different companies — mortgage lenders and credit repair organizations. The latter peddle their services to people struggling with debt, but they can charge unrestricted fees for helping consumers obtain new loans into which borrowers can consolidate their debt.

Today, Ohio lenders often charge even higher annual rates (for example, nearly 700 percent for a two-week loan) than they did before the reforms, according to a report by the nonprofit Policy Matters Ohio. In addition, other breeds of high-cost lending, such as auto-title loans, have recently moved into the state for the first time.

Earlier this year, the Ohio Supreme Court agreed to hear a case challenging the use of the mortgage law by a payday lender named Cashland. But even if the court rules the tactic illegal, the companies might simply find a new loophole. In its recent annual report, Cash America, the parent company of Cashland, addressed the consequences of losing the case: “if the Company is unable to continue making short-term loans under this law, it will have to alter its short-term loan product in Ohio.”

Amy Cantu, a spokeswoman for the Community Financial Services Association, the trade group representing the major payday lenders, said members are “regulated and licensed in every state where they conduct business and have worked with state regulators for more than two decades.”

“Second generation” products

When unrestrained by regulation, the typical two-week payday loan can be immensely profitable for lenders. The key to that profitability is for borrowers to take out loans over and over. When the CFPB studied a sample of payday loans earlier this year, it found that three-quarters of loan fees came from borrowers who had more than 10 payday loans in a 12-month period.

But because that type of loan has come under intense scrutiny, many lenders have developed what payday lender EZCorp chief executive Paul Rothamel calls “second generation” products. In early 2011, the traditional two-week payday loan accounted for about 90 percent of the company’s loan balance, he said in a recent call with analysts. By 2013, it had dropped below 50 percent. Eventually, he said, it would likely drop to 25 percent.

But like payday loans, which have annual rates typically ranging from 300 to 700 percent, the new products come at an extremely high cost. Cash America, for example, offers a “line of credit” in at least four states that works like a credit card — but with a 299 percent annual percentage rate. A number of payday lenders have embraced auto-title loans, which are secured by the borrower’s car and typically carry annual rates around 300 percent.

The most popular alternative to payday loans, however, are “longer term, but still very high-cost, installment loans,” said Tom Feltner, director of financial services at the Consumer Federation of America.

Last year, Delaware passed a major payday lending reform bill. For consumer advocates, it was the culmination of over a decade of effort and a badly needed measure to protect vulnerable borrowers. The bill limited the number of payday loans borrowers can take out each year to five.

“It was probably the best we could get here,” said Rashmi Rangan, executive director of the nonprofit Delaware Community Reinvestment Action Council.

But Cash America declared in its annual statement this year that the bill “only affects the Company’s short-term loan product in Delaware (and does not affect its installment loan product in that state).” The company currently offers a seven-month installment loan there at an annual rate of 398 percent.

Lenders can adapt their products with surprising alacrity. In Texas, where regulation is lax, lenders make more than eight times as many payday loans as installment loans, according to the most recent state data. Contrast that with Illinois, where the legislature passed a bill in 2005 that imposed a number of restraints on payday loans. By 2012, triple-digit-rate installment loans in the state outnumbered payday loans almost three to one.

In New Mexico, a 2007 law triggered the same rapid shift. QC Holdings’ payday loan stores dot that state, but just a year after the law, the president of the company told analysts that installment loans had “taken the place of payday loans” in that state.

New Mexico’s attorney general cracked down, filing suits against two lenders, charging in court documents that their long-term products were “unconscionable.” One loan from Cash Loans Now in early 2008 carried an annual percentage rate of 1,147 percent; after borrowing $50, the customer owed nearly $600 in total payments to be paid over the course of a year. FastBucks charged a 650 percent annual rate over two years for a $500 loan.

The products reflect a basic fact: Many low-income borrowers are desperate enough to accept any terms. In a recent Pew Charitable Trusts survey, 37 percent of payday loan borrowers responded that they’d pay any price for a loan.

The loans were unconscionable for a reason beyond the extremely high rates, the suits alleged. Employees did everything they could to keep borrowers on the hook. As one FastBucks employee testified, “We just basically don’t let anybody pay off.”

“Inherent in the model is repeated lending to folks who do not have the financial means to repay the loan,” said Karen Meyers, director of the New Mexico attorney general’s consumer protection division. “Borrowers often end up paying off one loan by taking out another loan. The goal is keeping people in debt indefinitely.”

In both cases, the judges agreed that the lenders had illegally preyed on unsophisticated borrowers. Cash Loans Now’s parent company has appealed the decision. FastBucks filed for bankruptcy protection after the judge ruled that it owed restitution to its customers for illegally circumventing the state’s payday loan law. The attorney general’s office estimates that the company owes over $20 million. Both companies declined to comment.

Despite the attorney general’s victories, similar types of loans are still widely available in New Mexico. The Cash Store, which has over 280 locations in seven states, offers an installment loan there with annual rates ranging from 520 percent to 780 percent. A 2012 QC loan in New Mexico reviewed by ProPublica carried a 425 percent annual rate.

“Playing Cat and Mouse”

When states — such as Washington, New York and New Hampshire — have laws prohibiting high-cost installment loans, the industry has tried to change them.

A bill introduced in Washington’s state senate early this year proposed allowing “small consumer installment loans” that could carry an annual rate of more than 200 percent. Though touted as a lower-cost alternative to payday loans, the bill’s primary backer was Moneytree, a Seattle-based payday lender. The bill passed the state senate, but stalled in the house.

In New Hampshire, which banned high-cost payday loans in 2008, the governor vetoed a bill last year that would have allowed installment loans with annual rates above 400 percent. But that wasn’t the only bill that high-cost lenders had pushed: One to allow auto-title loans, also vetoed by the governor, passed with a supermajority in the legislature. As a result, in 2012, New Hampshire joined states like Georgia and Arizona that have banned triple-digit-rate payday loans but allow similarly structured triple-digit-rate auto-title loans.

Texas has a law strictly limiting payday loans. But since it limits lenders to a fraction of what they prefer to charge, for more than a decade they have ignored it. To shirk the law, first they partnered with banks, since banks, which are regulated by the federal government, can legally offer loans exceeding state interest caps. But when federal regulators cracked down on the practice in 2005, the lenders had to find a new loophole.

Just as in Ohio, Texas lenders started defining themselves as credit repair organizations, which, under Texas law, can charge steep fees. Texas now has nearly 3,500 of such businesses, almost all of which are, effectively, high-cost lenders. And the industry has successfully fought off all efforts to cap their rates.

Seeing the lenders’ statehouse clout, a number of cities, including Dallas, San Antonio and Austin, have passed local ordinances that aim to break the cycle of payday debt by limiting the number of times a borrower can take out a loan. Speaking to analysts early this year, EZCorp’sRothamel said the ordinances had cut his company’s profit in Austin and Dallas by 90 percent.

But the company had a three-pronged counterattack plan, he said. The company had tweaked the product it offered in its brick-and-mortar outlets, and it had also begun to aggressively market online loans to customers in those cities. And the industry was pushing a statewide law to pre-empt the local rules, he said, so payday companies could stop “playing cat and mouse with the cities.”

Jerry Allen, the Dallas councilman who sponsored the city’s payday lending ordinance in 2011, said he wasn’t surprised by the industry’s response. “I’m just a lil’ ol’ local guy in Dallas, Texas,” he said. “I can only punch them the way I can punch them.”

But Allen, a political independent, said he hoped to persuade still more cities to join the effort. Eventually, he hopes the cities will force the state legislature’s hand, but he expects a fight: “Texas is a prime state for these folks. It’s a battleground. There’s a lot of money on the table.”

[…]

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INSTITUTE INDEX: Turning back the clock to predatory payday loans

Image Payday_loan_shop_window.jpg

Coming soon to North Carolina? (Photo: Gregory F. Maxwell/Wikipedia)

Appreciate this post? Please donate & share below.

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Date on which North Carolina Sen. Jerry Tillman (R) introduced a bill to re-open the state to “payday” lenders, companies that offer unsecured cash advances with effective interest rates that critics call “predatory”: 2/13/2013

Interest that some consumers can pay on such loans when it’s computed as an annual percentage rate (APR): 400

Maximum APR North Carolina law allows consumer finance lenders to charge: 36

Year in which the North Carolina legislature let payday lending expire after a four-year experiment allowing it: 2001

Number of companies that then ignored or tried to skirt the ban, continuing to make illegal loans: 10

Year in which the North Carolina Justice Department negotiated a settlement with the state’s remaining payday lenders under which they agreed to stop making loans: 2006

As part of the agreement, amount the three companies then still operating — Check Into Cash, Check ‘n’ Go, and First American Cash Advance — paid to nonprofits to help consumers impacted by their loans: $700,000

Number of states that currently allow payday loans with APRs of 391 percent or higher: 28

Of the 15 states that currently do not allow payday loan storefronts, number in the South: 4*

Number of Americans who take out cash advance or “payday” loans every year: 12 million

Average loan amount taken out by a payday borrower: $375

Average number of months for which borrowers remain indebted: 5

Average amount they end up paying in finance charges: $520

According to a study released this week by the Pew Charitable Trusts, percentage of payday loan borrowers who have trouble meeting monthly expenses at least half the time, indicating they’re dealing with persistent cash shortfalls rather than temporary emergencies: 58

Percentage of borrowers who say they are facing such difficulties that they would take a payday loan on any terms offered: 37

Portion of payday loan borrowers who have had a checking account overdraft in the past year: more than 1/2

Percentage who report that the overdrafts occurred as a result of a payday lender making a withdrawal from their account: 27

Percentage of payday loan borrowers who have had to borrow money to pay off a payday loan: 41

Portion of borrowers who favor more regulation of payday loans: 2/3

Percentage rate of payday loan usage in the states that regulate the industry most stringently: 2.9

In the states with the least regulation: 6.6

Date on which the Navy-Marine Corps Relief Society wrote a letter to all members of the N.C. General Assembly asking them to reject the payday loan legislation, citing negative impacts on military members including loss of security clearance: 2/20/2013

* Arkansas, Georgia, North Carolina, West Virginia

(Click on figure to go to source.)

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[…]

5 Reasons To Avoid Payday Loans

The United States’ middle-class citizens are certainly no strangers to being strapped for cash. After years of economic turmoil, shaky job markets and financial uncertainty, many families are still trying to find a way to make ends meet. With debt piling up and credit cards maxing out, some consumers are left with few options when it comes to borrowing money. With mortgages under water and auto loans barking for help, many consumers don’t want another loan from their bank. So where does this leave them?

At first glance, payday loans may seem like an attractive option. You are approved for a small loan within minutes and the money is transferred via direct deposit to your checking account within 24 hours. It seems there truly is no easier way to get money, though this is where the fairy tale ends. Consumers best beware because there are some serious financial drawbacks to taking out a payday loan.

High Interest Rates
If you think your credit cards have high interest rates, you haven’t seen anything yet. Payday loans can have interest rates as high as 911% for a one-week loan, and 212% for a one-month loan. That blows the average credit card interest rate of 14.59% clear out of the water. While your loan is meant to be a short-term fix, you will wind up paying an exorbitant amount of money on interest alone. Keep in mind that when you sign up for a payday loan, the lenders will request that your transactions be performed through direct deposit or electronic transfer, which means they will have access to your bank account when they assess their interest rates.

Hidden Fees
Just like there are several hidden bank fees, there are also hidden fees with payday loans. For every $100 borrowed, the lender will assess a $17.50 charge up to a cap of $300. These fees are on top of the loan capital and interest rates, making payday loans a very expensive method of borrowing money. Prior to borrowing money, make sure that you read the fine print and understand your financial obligation.

Banned or Tightly Regulated for Good Reason
Payday loans are now illegal or tightly monitored in 18 states across the U.S., and it is for good reason. The states that are taking payday loans very seriously include Arizona, Arkansas, Colorado, Connecticut, Georgia, Maine, Maryland, Massachusetts, Montana, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Vermont, Washington, D.C. and West Virginia.

Legislature is being enforced in these states to either ban outright or limit the interest rates, fees and billing practices of payday loan lenders. Because payday loans are often sought out by individuals who cannot obtain a loan elsewhere, lenders take advantage of borrowers and try to scare them into paying more than they have to. Additionally, because some states have banned payday loans outright, many unethical lenders hide on the Internet, seeking consumers regardless of where they live.

Aggressive Lending and Collection Practices
A big reason why payday loans have come under scrutiny is because of the aggressive lending and collection practices associated with them. Some payday loan companies threaten consumers with prosecution or garnishment of wages, in turn scaring the borrower into paying off his or her balance. This is typically an illegal collection practice and if you have encountered this type of treatment then you should contact the Federal Trade Commission (FTC) to discuss your situation.

Not Financially Wise in the Long Run
While payday loans may help in a pinch, they are certainly not a smart financial decision in the long run. With interest rates that are simply astronomical, hidden fees, aggressive collection practices and legislation that has either banned or limited payday loans in 18 states, it is clear that payday loans are not your best option when you need money. If a person in a tight financial situation takes out a payday loan they might actually be making their financial situation worse.

The Bottom Line
There is no such thing as easy money. While payday loans are easy to obtain, they will definitely cost you big in the long run. The next time that you are tempted to take out a payday loan, stop and consider the financial implications over the long run.

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Online Payday Loans – Rapid Solutions for Emergency Financial Needs

LITTLE ROCK, Arkansas, January 30, 2013 /PRNewswire/ —

PersonalLoansForBadCredit.org announces the launch of a new emergency payday loan online introduction service. Formed in order to help bring together and unite individuals that need instant cash boosts with the lenders that are able to offer these, the matching platform is an independent matching specialist. It is not itself a lender, although it has built strong professional relationships with several reputable online lending companies.

These partnerships enable PersonalLoansForBadCredit.org to host the lenders in its database so that online applications completed via the site are immediately reviewed by the lenders for consideration. The timesaving benefits of using the comparison service rather than approaching numerous lenders individually lie not just in the fast screening of applications. All of the lenders within the site’s database are unified in their quest to provide successful applicants with some of the fastest payouts available, with many lenders transferring payday loan online funds within 24 hours.

PersonalLoansForBadCredit.org made the announcement in the following statement.

“With the start of the new year 2013 leaving many Americans in a tricky place financially with more outgoings than incomings, many urgently need to look towards creative ways to increase their cash flow without hurting their credit score or undertaking more finance than they can handle. It is with this in mind that we announce our new emergency online payday loan service. It confidential and ideal for consumers that need to borrow up to $1,000 until their next salary is paid. Consumers can complete our 2 minute application form to see which lenders can provide quick cash for any purpose.”

Cash advance can be an appealing way to borrow money for immediate, pressing needs such as bill payments, unforeseen medical expenses, car repairs or any other emergency need. Online cash advance aggregation such as that offered through PersonalLoansForBadCredit.org are a convenient way for consumers to compare their options from the privacy of their own home or workplace, without needing to discuss their financial backgrounds or circumstances in any great detail.

A high proportion of the lenders featured in the database are able to offer bad credit loans for those individuals with challenging fiscal histories.

To learn more or apply for free, visit: http://personalloansforbadcredit.org/
personalloansforbadcredit.org
Ben Milo
momoinvestments@gmail.com
+1-213-438-9613

[…]

Home BancShares, Inc. Announces a 30% Increase in First Quarter Cash Dividend

CONWAY, Ark., Jan. 23, 2013 (GLOBE NEWSWIRE) — Home BancShares, Inc.’s (HOMB), parent company of Centennial Bank, Board of Directors declared a regular $0.13 per share quarterly cash dividend payable March 6, 2013, to shareholders of record February 13, 2013. This cash dividend represents a $0.03 per share, or 30%, increase over the $0.10 cash dividend paid during the first quarter of 2012 and is equal to both the regular and the special cash dividend paid during the fourth quarter of 2012.

During the fourth quarter of 2012, the Board of Directors paid a second dividend for the quarter on December 31, 2012. This dividend has been declared by the Board of Directors as a special one-time cash dividend versus a cash dividend in lieu of the regular quarterly cash dividend for the first quarter of 2013. This special fourth quarter dividend was paid out of current earnings and profits in accordance with IRC Section 316 and therefore, will be entirely classified as a qualifying dividend for income tax purposes pursuant to Section 1(h).

Home BancShares, Inc. is a bank holding company, headquartered in Conway, Arkansas. Our wholly-owned subsidiary, Centennial Bank, provides a broad range of commercial and retail banking plus related financial services to businesses, real estate developers, investors, individuals and municipalities. Centennial Bank has locations in central Arkansas, north central Arkansas, southern Arkansas, the Florida Keys, southwestern Florida, central Florida, the Florida Panhandle and south Alabama. The Company’s common stock is traded through the NASDAQ Global Select Market under the symbol “HOMB.”

This release contains forward-looking statements regarding the Company’s plans, expectations, goals and outlook for the future. Statements in this press release that are not historical facts should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements of this type speak only as of the date of this news release. By nature, forward-looking statements involve inherent risk and uncertainties. Various factors, including, but not limited to, economic conditions, credit quality, interest rates, loan demand, the ability to successfully integrate new acquisitions and changes in the assumptions used in making the forward-looking statements, could cause actual results to differ materially from those contemplated by the forward-looking statements. Additional information on factors that might affect Home BancShares, Inc.’s financial results are included in its Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission.

Contact:

Brian Davis
Chief Accounting Officer &
Investor Relations Officer
Home BancShares, Inc.
(501) 328-4770

[…]

Payday Lending: Why Conservatives are compelled to Oppose …

Image payday-loans.jpg

In 2012, lobbyists for the payday lending industry strived to become the largest campaign donors in Austin. The reason: many state legislators and local municipalities are evaluating limitations to payday lenders by capping interest rates. In Texas, a number of cities have placed restrictions and the Texas Legislature made some restrictions in the last session. The industry argues such a move will significantly curtail their business. At any given time, 12 million Americans have payday loan debt. My initial reaction was to side with the payday lenders, supporting their right to loan money at the interest rate of their choice.

I have since changed my mind.

After thinking about the issue, I have decided that Texans should reject usury. Specifically, conservatives should be at the forefront of this sentiment, as our values reject usurious lending.

About Payday Lending

Payday lending allows consumers to borrow relatively small amounts of money – usually under $1000 – with a repayment date of their next payday. In exchange for this short-term loan, consumers pay high interest rates, typically between 500% to 700% annual interest. This works out to about $17 – $18 in interest per every $100 borrowed every two weeks.

Many jurisdictions have intervened, capping interest rates. There are 12 states which have fully outlawed payday lending. The list includes both the red states, such as Arkansas and Georgia and blue states such as New York and Maryland.

Three states and the District of Columbia have placed interest rate caps on payday loans. Arizona, hardly a left-wing state, has placed a 36% interest rate cap.

Pro-Lending

A number of groups and individuals have made persuasive arguments: First, lenders argue that payday loan customers have no other place to turn for emergency credit due to bad or no credit history. Next, lenders argue that the high interest rates are necessary. Default rates on payday loans are high, often 10 to 20 percent. Lenders contend they must charge high interest rates to compensate for the bad debt on their books. This may be true, but high interest rates contribute heavily to that default rate. For those without a banking relationship, this serves as a less expensive option than multiple overdrafts.

Usury

While the arguments for payday lending are compelling, my faith and commitment to values have caused me to side with tighter regulation. Anyone with a Judeo-Christian belief system should reject usurious interest rates.

The book of Leviticus specifically forbids usury and describes it as a grave sin. In a sense, the Old Testament directly addresses the debt structure of payday lending. In Mark, the scripture describes a loan payable over 30 days. Linked to the Babylonian Talmud, the “fair” rate of interest is 20 percent. This sets a precedent: high interest rates are immoral.

Faith instructs us that charging people exorbitant interest rates in times of desperation is wrong. Instead, we are taught that loaning money should be of mutual benefit. For example, when you take a mortgage or a business loan, both the lender and the business person hope to generate a profit from the transaction. However, in payday lending, creditors know the advantage is one sided.

I don’t mean to overwhelm with biblical text. That’s not the full point. The lesson is, no matter your view on religion, these stories serve as a guide for moral action: high rates of interest are not right and this notion is supported by the belief system this country was founded upon.

Deception is not a Free Market Principle

Free market principles rely on transparent business practices. If business were built on deception, it would be impossible for free market to operate and for actors to make the best choices. The free market depends on individuals being able to conduct self-interested activity. If facts are obstructed intentionally, this evaluation becomes impossible.

The industry suggests that payday lending is a short-term debt financing option. This is not true. Industry reports show the average payday loan customer takes nearly a year to pay off their debt. This adds up to usurious rates of interest. Most payday stores incentive their employees through bonuses to keep customers indebted by rolling over outstanding balances for longer and more expensive terms. However, lenders are reported to make repayment terms and loan amounts in ways that do not make this clear at the point of purchase. This deception often takes advantage of the most financially illiterate. As such, good decision making is dissuaded and often make opaque.

Real Solutions

The best way to solve this problem, other than Arizona-style interest rate caps, is through financial literacy. Instead of pushing indigent people in their time of desperation to usurious lenders, we do far better in the long run to encourage banks and credit unions to create checking and savings alternatives for nontraditional customers. This includes secured credit cards, “second chance” checking and small consumer loans offered banks – at much lower interest rates. Much like Washington, the debt culture of consumers has detrimental impacts. It’s important that consumers understand the risks and terms of the decisions. Deception and usury violates the values social conservatives embrace. It is for that reason that I have changed my mind. I am glad to see the majority of the Republican-controlled Texas Senate agrees as well.

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