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No fresh loans to SpiceJet, says State Bank of India


State Bank of India is not looking at extending any loan to the cash-strapped airline SpiceJet, Chairperson Arundhati Bhattacharya said today.Stating that the bank does not have any exposure to the airline, she said: “We just have two current accounts with the airline and the bank is not looking at giving any fresh loan to the carrier.”Earlier this week, the Civil Aviation Ministry had said it may request Indian banks/financial institutions to extend loans of up to Rs 600 crore to the airline.A Ministry release had also that it would request the Finance Ministry to permit external commercial borrowing (ECB) for working capital as special dispensation.On rupee volatility, she said it came only a few days ago and she needs to watch out how long it lasts.On whether the bank is worried over unhedged corporate loan exposure due to the ongoing rupee volatility, she said “at this time no need to press the panic button.” “We always ask our clients to hedge but no one hedges completely. Hopefully all our clients have sensibly hedged what are the immediate requirements,” she told reporters on the sidelines of launching tech-learning centres for customers.She said the move is aimed at empowering the customers through technology and awareness of its tech channels amongst customers. The bank will be launching 385 such centres across the country, she added.The first centre was launched by Reserve Bank Deputy Governor H R Khan here this evening.She said by March 2015, there is a plan to install 4,000 additional cash-recyclers which serve the twin purpose of cash deposit and withdrawal. With these installations, the State Bank Group will have a network of 52,791 ATMs, CDMs, cash recyclers.She said that around Rs 44 crore worth of transactions happen at RBI every month out of which Rs 37 crore are generated manually.
“Out of the Rs 37 crore transactions, 65 per cent take place on alternative channels like ATMs, mobile banking and the Internet. We aim to increase it to 85 per cent in the next one year,” Bhattacharya said.

Investigation leads to $10M settlement with payday lender ACE Cash Express


Investigation leads to $10M settlement with payday lender ACE Cash Express


Published: July 17,2014

Tags: ACE Cash Express, banking, Business, finance, Mississippi, NEWS, payday check

The Consumer Financial Protection Bureau cited this graphic from an ACE Cash Express training manual to show the short-term lender seeks to entice borrowers into a cycle of debt.

Texas-based ACE Cash Express, a large payday lender with a franchise store in Hattiesburg, has been hit with $10 million in penalties from the fledgling Consumer Financial Protection Bureau.

ACE Cash Express, CFPB Director Richard Cordray charges, was “relentlessly overzealous” in pursuit of overdue borrowers. ACE Cash Express unlawfully called employers of tardy borrowers and threatened borrowers with lawsuits and criminal prosecutions

ACE Cash Express is the largest owner and operator of check cashing stores in the United States and the second largest payday lender.

» READ MORE: State regulators probe All American Check Cashing on suspicion of violating loan rollover law

ACE Cash Express and other payday lenders require borrowers to be employed, have a bank account and show proof of receiving regular paychecks. They must leave a post-dated personal bank check for the principal and fees as security.

Director Cordray said the intimidation used by ACE Cash Express was “part of a culture of coercion aimed at pressuring payday borrowers into debt traps.”

That trap, and the linear progression of how that should occur, was detailed in a graphic included in a company training manual. The CFPB cited the graphic as evidence of a coordinated strategy to trap borrowers in the cycle of compounding debt.

After applying sustained pressure, ACE would offer to relieve the pressure by encouraging the delinquent borrower to pay off existing loans by taking out yet another payday loan, Cordray said.

“Each time, ACE would collect another round of expensive fees, and the borrower would sink even deeper into debt,” he added. “This vicious cycle of debt drained hard-earned dollars from cash-strapped consumers who had few, if any, options available to fight back.”

In a company statement last week, ACE Cash Express said a review by hired firm Deloitte Financial Advisory Services “indicated” that more than 96 percent of ACE’s calls during the review period met collections standards. It noted, however, that it has since quit using outside collection agencies and has stepped up monitoring of its own collections calls.

ACE also denied making rollover loans. “A customer with a delinquent account is not allowed to take out another loan with ACE until the previous loan is paid off,” spokesman Eric Norrington insisted.

Addressing the Deloitte review, CFPB spokesman Sam Gilford said his agency found “methodological flaws that rendered findings suspect.”

Regardless, Gilford added, “The Bureau has a much lower threshold than ACE does for what constitutes an acceptable rate of consumer law violations.”

The action against ACE is actually a “settlement” by which the company agrees to pay the financial penalties without admitting wrongdoing, the agency says. “We’ve put them under an order so they don’t engage in these unlawful practices again,” said Lucy Morris, CFPB enforcement director, in a teleconference with reporters.

The order for ACE to repay $5 million to borrowers and $5 million in federal fines comes slightly more than a year after the CFPB levied over $14 million in penalties against large-scale payday lender Cash America.

The CFPB found that Cash America violated the Military Lending Act by illegally overcharging service members and their families. The penalties included an order for Cash America to pay up to $14 million in refunds to consumers. These violations and the destruction of records in advance of the Bureau’s examination brought a $5 million fine.

The CFPB, created under the Dodd Frank Wall Street Reform and Consumer Protection Act, has authority to oversee the payday loan market and is a clearinghouse for complaints on collections practices y the short-term lenders.

The agency has issued white papers the last two springs that detail disturbing trends in payday lending practices across America. The newest report, issued in late March, found that four out of five payday loan are rolled over or renewed within 14 days.

The study also found that three of out of five payday loans are made to borrowers whose fee expenses exceed the amount borrowed. This occurs through loan renewals, or rollovers, a designation the CFPB gives any low-dollar loans from the same lender to the same borrower within 14 days of each other.

Further, the study found, four out of five payday borrowers who renew end up borrowing the same amount or more. They do this at least once a year, according to the CFPB.

The conclusions CFPB reached in its investigation of ACE Cash Express are hardly a news bulletin for those who follow the payday lending sector, said Diane Standaert , legislative counsel for the Center for Responsible Lending, a North Carolina-based non-profit organization created to combat predatory lending.

“I think it means what we’ve known for a long time in that the core of the business model is keeping borrowers trapped in a cycle of debt,” Standaert said.

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KESC mortgages 12 grid stations to get Rs2 billion loan


KESC mortgages 12 grid stations to get Rs2 billion loan

Wednesday, 27 June 2012 12:11


KARACHI: Cash strapped Karachi Electric Supply Company (KESC) has mortgaged at least its 12 grid stations in order to get Rs 2 billion loan from private firms/banks for five years.

With the new loan received through its recently announced Term Finance Certificate (TFC) programme, KESC’s payables have ballooned to around Rs 255 billion. The company, which was privatised with zero loan or debt, has also allocated at least 250 consumers which according to the set procedure would be paying monthly dues to the private firms, including Pak Brunei Investment Company and Standard Chartered Bank, in order to pay the interest on loan, Business Recorder learnt on Tuesday.

The fresh loan has been obtained at the interest rate of 15.50 percent per annum for the five-year. KESC will pay at least Rs 3.55 billion against Rs 2 billion loan in five years. The interests of the amount has been planned to be paid as Rs 310 million and Rs 25 million per year and per month, respectively to the loan giving organisations.

According to sources, the two private firms, which agreed to provide the required funds to KESC, have, however, asked the power company to guarantee paybacks and interests before going to any formal deal. To satisfy the loan giving companies KESC has mortgaged the grid stations in various parts of the city, besides the arrangement of hundreds of selected consumers who would pay the monthly charges to Chartered Bank directly. The millions of rupees worth monthly bills would be paid by the consumers as interests of the amount received by KESC from two firms.

The mortgaged grid stations are included, Civil Aviation Grid Airport, Baloch Colony Grid, F.B Area B (A) Grid, F.B Area B (B) Grid, Gizri Grid, Airport Grid, Hub Choaki Grid, Queen Road Grid, Korangi East Grid, Lyari East Grid, North Karachi Grid and North Nazimabad Grid.

Interestingly, some of the consumers, mostly industrial, who have been issued notices by KESC to submit the monthly bills in a separate account at Standard Chartered Bank created for payment of the interest, were also not ready to follow the fresh instructions as it could add their sufferings.

The total payables of the company have swelled to at least Rs 255 billion, as according to the company’s financial report July to December, 2011. The total liabilities were Rs 253 billion, which included trade payables, loan, outstanding dues the purchases made by the company like power, fuel, gas and furnace oil etc. The receivables of the company, according to the report, were Rs 28.4 billion against the huge liabilities.

According to official source, KESC has already obtained billions of rupees worth loans from, International Finance Corporation, Asian Development Bank and local banking consortium while mortgaging the company’s properties.

They have further their apprehension that the government might be paying the huge liabilities if the management of KESC leaves the company as according to the amended agreement’s Article 8.6 “Government of Pakistan ‘in case of take over of the company’ would pay all liabilities (past and future) of KESC.

It is worth mentioning here that KESC had finally launched TFC worth Rs 2 billion to the general public, making it the second company to enter the bond market after Engro Corporation.

Earlier, the company had claimed that TFC was corporate bonds issued by companies to generate short and medium-term funds. Investments received will be utilised for financing KESC’s permanent working capital requirements. KESC executives had earlier expected to announce the offering in November 2010. The certificate called AZM was available in three maturities. Profit rate for the 13-month issue was fixed 13 percent per annum, 14.75 percent per annum for the three-year issue and 15.50 percent per annum for the five-year issue. Principal repayment of the investment would be available at maturity.

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