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Supporters push for cap on payday loan businesses


(Source: WBRC video)BIRMINGHAM, AL (WBRC) –

Pay day loan businesses promise to help in hard times and give you cash when you need it most.

But for a lot of people payday loan and cash advance type establishments are doing more harm than good.

“We had a member in our church who had her car repossessed in the middle of the night. Got up the next morning trying to go to work and her car wasn’t there,” said Rev. R.G. Lyons with Church Without Walls.

A number of Lyons’ congregation members have fallen victim to these businesses. In fact, some checks were even stolen from the church and cashed at a cash advance business. Calls from the business became so constant they had to disconnect the lines.

“It’s really frustrating. They’re basically like school yard bullies. They prey on the weak and they try to intimidate people,” said Lyons.

Dozens of people rallied in front of YWCA in Downtown Birmingham on Monday to gain momentum on a movement to cap the interest rate for loan businesses.

Shay Farley is the Legal Director for a group called Alabama Appleseed. She has been pushing for a cap fair trading for eight years.

“We’ve had legislation for three years and so far we haven’t really gotten a lot of attention,” said Farley. “A lot of people don’t know that these title loans in Alabama are 30-day loans and they’re 300% interest. A 14-day loan where you can postdate a check in 456% and we’re tired of it.”

Farley said this isn’t a bipartisan issue nor is about a person’s ideologies or political beliefs. She said this is a moral issue and wants to see a stop to those who prey on the poor.

Senator Jabo Wagner was in Birmingham Monday. He said payday loan type businesses have and continue to have a very strong lobbying force to protect their interests.

That being said, Wagner said there is more movement this year in the legislature to lower the interest rate.

Copyright 2015 WBRC. All rights reserved.


8 On Your Side: Bill could remove payday loan protections


LAS VEGAS – Taking out a payday loan is rarely a good idea. Many companies charge high interest rates, and customers can easily get in a trap where they spend years paying off the loans.

If you get a payday loan, be warned. These companies may soon have more leverage over customers. Nevada law offers consumers some protections from payday loan companies, but that could change.

If Senate Bill 123 passes, it would allow payday loan companies that offer long-term loans to sue customers who default on their loans.

“Somebody can get sued after paying for twelve to fourteen months on this loan, and then get sued at the end for more interest,” said consumer advocate Venicia Considine.

Considine says this can hurt payday loan customers who are already strapped for cash.

“The average income nationally of people who go to payday loan lenders is about $22,400 a year,” she said.

Considine says she feels the current laws obligate lenders to ensure anyone they give money to can pay it back. Senate Bill 123 would change that, and it could keep people trapped in a cycle of debt for a long time.

“It’s a lose-lose for the consumer,” she said.

You can voice your opposition to the bill by contacting your state lawmaker.

If you are in trouble with payday loans, the Legal Aid Center of Southern Nevada can help. Their services are free.

If you have a problem you want investigated, contact 8 On Your Side at 702-650-1907.


Payday loan caps come into force | Money | The Guardian

Well over a million people will see the cost of their borrowing fall now that new price caps on payday loans have taken effect.

However, early indications are that many of the sector’s bigger players will be charging the maximum amount allowed to under the new regime, rather taking the opportunity to set their fees below the cap.

Interest and fees on all high-cost short-term credit loans are now capped at 0.8% per day of the amount borrowed. If borrowers do not repay their loans on time, default charges must not exceed £15.

In addition, the total cost (fees, interest etc) is capped at 100% of the original sum, which means no borrower will ever pay back more than twice what they borrowed, said the Financial Conduct Authority (FCA), which has introduced the new rules.

Someone taking out a £100 loan for 30 days and paying it back on time will not pay more than £24 in fees and charges.

Payday lending is a multibillion-pound sector: the Competition & Markets Authority said there were 1.8 million payday loan customers in 2012-13, while the FCA estimates that in 2013, 1.6 million customers took out around 10m loans. However, some lenders quit the market before the changes took place. These include Minicredit, which ceased its lending on 10 December.

Consumer organisation Which? said the new regime “comes not a moment too soon”. Richard Lloyd, Which? executive director, said: “The regulator has clearly shown it is prepared to take tough action to stamp out unscrupulous practices, and they must keep the new price cap under close review.”

Which? carried out research into the amounts payday lenders were charging just before Christmas, to see if they had cut the cost of borrowing ahead of the price caps taking effect. It found that some of the bigger payday lenders had already brought their charges in line with the price caps. Wonga, QuickQuid, PaydayUK and MyJar were charging the maximum £24 to borrow £100 for 30 days, with default fees charged at £15.

When the Guardian checked some of the lender websites on 31 December, it found some had not yet updated their pricing.’s website was quoting a cost of £135 for a £100 loan over 30 days, while showed a cost of £134.70 and Safeloans quoted £130.

Which? said London Mutual credit union was the only payday loan provider it looked at that charged less than the maximum allowed under the cap, with borrowers having to pay just £3 in interest on a loan of £100 over one month, with no default fees.

Martin Wheatley, chief executive of the FCA, said the new caps would make the cost of a loan cheaper for most consumers. “Anyone who gets into difficulty and is unable to pay back on time, will not see the interest and fees on their loan spiral out of control – no consumer will ever owe more than double the original loan amount,” he added.

However, it appears the new regime will not spell the end of the huge annualised interest rates quoted on payday loan websites. Despite the changes, Wonga is still able to charge a representative APR of 1,509%, while QuickQuid’s site was promoting an APR of 1,212%.

New rules covering payday loan brokers have also taken effect after the regulator was deluged with complaints over practices such as imposing charges that consumers often knew nothing about until they checked their bank account.

These firms cannot now request an individual’s bank details or take a payment from their account without their explicit consent first. Payday loan brokers will also have to include their legal name, not just their trading name, in all advertising and other communications with customers, and state prominently in their ads that they are a broker, not a lender.


Subprime boom ties loans to car titles

The title lenders are seizing upon a broad retrenchment among banks, which have become wary of making loans to borrowers on the fringe of the financial system. Regulations passed after the financial crisis have made it much more expensive for banks to make loans to all but the safest borrowers.

Read MoreRegulators press banks for more on auto loan exposure

The title lenders are also benefiting as state authorities restrict payday loans, effectively pushing payday lenders out of many states. While title loans share many of the same features — in some cases carrying rates that eclipse those on payday loans — they have so far escaped a similar crackdown.

In 21 states, car title lending is expressly permitted, with title lenders charging interest of up to 300 percent a year. In most other states, lenders can make loans with cars as collateral, but at lower interest rates.

Seeing the regulatory landscape shift, some of the country’s largest payday lenders are switching gears. When Arizona effectively outlawed payday loans, ACE Cash Express registered its payday loan storefronts in the state as car title lenders, state records show.

Lenders made similar changes in Virginia, where lawmakers outlawed payday lending in 2010. But title lenders were untouched by that law and have expanded throughout the state, drawing business from Maryland.

The number of stores offering title loans in Virginia increased by 24 percent from 2012 to 2013, according to state records. Last year, the lenders made 177,775 loans, up roughly 612 percent from 2010, when the state banned payday lending.

In Tennessee, the number of title lending stores increased by about 22 percent from 2011 to 2013, reaching 1,017.

That is a small fraction of the industry’s overall size, state regulators say, because only a handful of states keep statistics. Legal aid offices in Arizona, California, Georgia, Missouri, Texas and Virginia report that they have experienced an influx of clients who have run into trouble with the loans.

“The demand is there for people who are desperate for money,” said Jay Speer, the executive director of the Virginia Poverty Law Center.

Loopholes and Adversity

When Tiffany Capone suggested that her fiancé, Michael, take out a $10,000 TitleMax loan with a 119 percent interest rate, she figured it would be a temporary fix to pay the bills. But this summer, after Michael fell behind on the loan payments, the couple’s three-year-old Hyundai was repossessed.

“It had my child’s car seat in the back,” said Ms. Capone, of Olney, Md.

With their car gone, the couple had to sell most of their furniture and other belongings to a pawnshop so they could afford to pay for taxis to ferry Michael, a diabetic with a heart condition, to his frequent doctors’ appointments. The hardships caused by title loans are being cited as one of the big challenges facing poor and minority communities.

“It is a form of indenture,” said Robert Swearingen, a lawyer with Legal Services of Eastern Missouri, adding that “because of the threat of repossession, they can string you along for the rest of your life.”

Johanna Pimentel said she and both of her brothers had taken out multiple title loans.

“They are everywhere, like liquor stores,” she said.

Ms. Pimentel, 32, had moved her family out of Ferguson, Mo., to a higher-priced suburb of St. Louis that promised better schools. But after a divorce, her former husband moved out, and she had trouble paying her rent.

Ms. Pimentel took out a $3,461 title loan using her 2002 Suburban as collateral.

After falling behind, she woke up one morning last March to find that the car had been repossessed. Without it, she could not continue to run her day care business.

Pointing to such experiences, lawmakers in some states — regulating the industry largely falls to states — have called for stricter limits on title loans or outright bans.

In Virginia, lawmakers passed a bill in 2010 that institutes some restrictions on the practice, including preventing lenders from trying to collect money from customers once a car has been repossessed. That same year, Montana voters overwhelmingly backed a ballot initiative that capped rates on title loans at 36 percent.

But for every state where there has been a crackdown, there are more where the industry has mobilized to beat back regulations.

In Wisconsin, it took the title loan industry only one year to reverse a ban on the loans that had been put in place in 2010. In New Hampshire in 2008, state legislators enacted a law that put a 36 percent ceiling on the rates that title lenders could charge. Four years later, though, lobbyists for the industry won a repeal of the law.

“This is nothing but government-authorized loan sharking,” said Scott A. Surovell, a Virginia lawmaker who has proposed bills that would further rein in title lenders.

Even when there are restrictions, some lenders find creative ways to continue business as usual. In California, where the interest rates and fees that lenders can charge on loans for $2,500 or less are restricted, some lenders extend loans for just over that amount.

Sometimes the workarounds are more blatant.

The City of Austin allows title lenders to extend loans only for three months. But that did not stop Mr. Chicosky, the veteran who borrowed $4,000 for car repairs, from getting a loan for 24 months.

Last year, after applying for a loan at a Cash America store in Austin, Mr. Chicosky said, a store employee told him that he would have to fill out the paperwork and pick up his check in a nearby town. Mr. Chicosky’s lawyer, Amy Clark Kleinpeter, said the location switch appeared to be a way to get around the rules in Austin.

The lender offered a different explanation to Mr. Chicosky. “They told me that they didn’t have a printer at the Austin location that was big enough to print my check,” he said.


What are some examples of a good time to take out a payday loan?


Over the past 10-15 years, payday loans and payday lenders have become pariahs of the finance and credit worlds. Stories abound about the deleterious consequences of being caught in a payday loan “trap,” and many people will tell you that payday loans just do not pay. However, there are some circumstances when payday loans make sense as long as they are carefully considered and paid back responsibly.

Payday loan decisions are all about necessity and alternatives: do you need the cash, do you need it soon and do you have any superior options available to you? It is a good idea to assume that almost any other legal means of acquiring a loan is going to be relatively cheaper than a payday loan. Check with your bank, look at credit card issuers, and ask a relative or friend, etc.

Payday lenders almost always have effective interest rates that are extremely high. It is not uncommon to find a payday loan and, after annualizing the interest and fees, find out the money is being lent at 300% APR or more. Even though the interest may only accumulate for a short period of time, do some research to find the cheapest rates possible. Many payday loans are available online, so that is a good place to start. Just be careful about entering any personal information through payday loan websites.

Do not take out a payday loan if you cannot afford to pay it back quickly, such as in one month or less. Avoid loans that automatically roll over. If you get caught with the wrong loan, you may end up paying more in fees than you borrowed in the first place. The most obvious time a payday loan makes sense is when you are caught with a bill or financial need in between paychecks. Suppose you have a medical bill you would have been able to afford without a payday loan by the time your next paycheck rolls around, but you do not get paid again for two weeks. Taking out a $100 to $1,000 payday loan and immediately paying it off with your next paycheck may be the answer. As always, look to other options first.

If a payday loan is the only financing option that lets you fix your car so you can go to work or take your children to school, it might be worth considering. Chances are, you will not receive a credit card or a bank loan as quickly as a payday loan. Be sure you can pay off the loan quickly and check for competitive rates.

Unfortunately, most payday loans are not taken out with these guidelines in mind, and that is where you can get into trouble. According to a 2012 Pew survey, only 16% of payday loans were taken out for unexpected emergencies. More than 80% of borrowers said they could have cut back on expenses instead of taking the loan. Avoid these mistakes because the costs of continued payday loan use are almost never worth it.


Avoid dangerous or ‘predatory’ loans with these tips

Cash-Advance Loan

A cash advance loan is a small, short-term, high-interest loan that is offered in anticipation of the receipt of a future lump sum of cash or payment. Although a cash advance may be made in anticipation of future legal winnings, pensions, inheritances, insurance awards, alimony or real estate proceeds, the most common cash advance loans are payday loans and tax refund anticipation loans.

Payday loan

A payday loan is a relatively small, high-cost loan, typically due in two weeks and made with a borrower’s post-dated check or access to the borrower’s bank account as collateral.

Payday lending is illegal in several states for a number of reasons:

Payday loans are designed to trap borrowers in debt. Due to the short term, most borrowers cannot afford to repay the loan and pay their other important expenses. If the loan cannot be paid back in full at the end of the term, it has to be renewed, extended, or another loan taken out to cover the first loan. Fees are charged for each transaction. The annual percentage rates on payday loans are extremely high, typically around 400 percent or higher. Lenders ask that borrowers agree to pre-authorized electronic withdrawals from a bank account, then make withdrawals that do not cover the full payment or that cover interest only, while leaving principal untouched. If the lender deposits a repayment check and there are insufficient funds in the borrower’s account, the borrower is hit with even more fees for insufficient funds.

If you are struggling to pay your bills:

Ask your creditors for more time. Find out what they charge for late payments, finance charges or interest rates since it may be lower than what you might end up paying for a payday loan. Work with a community development credit union or a non-profit financial cooperative, which may provide affordable, small-amount loans to eligible members. Ask for a salary advance from your employer, or borrow from Family or friends. Consult social service agencies that may have programs to help with food, housing and home heating costs.

Tax refund anticipation loan

Some tax return preparers offer what they may call “instant,” “express” or “fast money” refunds. These refunds are actually loans borrowed against the amount of your anticipated refund and often include extremely high interest rates and fees. They must be repaid even if you don’t get your refund or it is smaller than anticipated. To avoid the temptation of getting a refund anticipation loan:

File your tax return electronically and have your refund deposited directly into your bank account. This will speed up your refund. Some refunds will be deposited in as few as 10 days. Go to a Volunteer Income Tax Assistance site at your local .Legal Assistance Office. Call the Fort Belvoir Legal Assistance Office at (703) 805-2856 for more information. AARP Tax-Aide helps people of low-to-middle income, with special attention to people who are 60 and older, with taxes and refunds. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit

Advance fee loan scam

These scams involve a company claiming they can guarantee you a loan if you pay them a processing fee, an application fee or pay for ‘insurance’ on the loan in advance. The company will advertise on the Internet, in the classified section of a newspaper or magazine, or in a locally posted flyer. They will sometimes use a legitimate company’s name or use a variant of a trusted name. They will sometimes ask you to call them at a “900” number, which will result in charges to your phone bill. They will usually ask to be paid via overnight or courier service or by wire, so they can’t be traced. To avoid being taken in by this scam, you should be aware that:

It is against the law for anyone to ask you to pay in advance to get a loan or credit card. A legitimate lender will never guarantee you a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy petition on your credit report.

These scams should not be confused with:

pre-qualified offers, which mean you are selected to apply and must go through the normal application process, or pre-approved offers, which require only verbal or written acceptance. Don’t ever give out personal information or agree to a loan over the phone or via the Internet.

Government grant and loan scam

This scam, like the advance fee loan scam, uses the Internet, phone and newspaper to advertise. A company claims that they can guarantee a grant or loan from the government in exchange for a fee. Victims are instructed to send money to pay for ‘insurance’ on the promised grant or loan. They will usually ask that the money be sent via overnight or courier services or by wire, so they don’t leave any trace of their identity or location. They then provide the victim with information that is available in any library or can be ordered directly from the government.

Bounce protection programs

Traditional overdraft protection services allow you to avoid bouncing checks by linking your checking account to your savings account or to a line of credit or credit card that you have with the bank.

With overdraft payment programs, also called “courtesy” overdraft protection or bounce coverage, the bank pays any checks that you write, debit purchases or ATM withdrawals that are for more money than you have in your account. The decision to make this payment is at the sole discretion of the bank. The bank will charge a fee for each transaction and some banks will also charge a daily fee until the account has a positive balance. Some banks will charge loan fees, sometimes twice in a billing period. In order to avoid the imposition of additional charges, the customer must repay the bank the amount that it covered plus any accumulated fees.

High-cost home equity loans

Home equity is the value of your home minus the money you still owe on the home. You can sometimes borrow money from a lender by using the equity in your home as security on a loan. Home equity lending fraud occurs when someone talks a homeowner into taking out a loan they don’t need or that is bigger than they need, or has higher interest rates and higher fees and larger monthly payments than they can afford. If the homeowner falls behind on payments, the lender can take the home.

To avoid Home Equity Lending Fraud:

Don’t give out personal information or agree to a loan over the phone or via the Internet. Don’t let anyone who may be working on your home, like a contractor, steer you to a particular lender. Don’t borrow more than you can afford. Educate yourself. Know what the prevailing interest rates are. Remember that a low monthly payment isn’t always a deal. Look at the TOTAL cost of the loan. Learn the real value of your home by getting an independent appraisal. Don’t trust ads promising “No Credit? No Problem!” If it sounds too good to be true, it probably is. Get your credit report and your credit score. See if you qualify for better rates than are being offered. Never lie about your income, expenses or available cash to get a loan and avoid any broker or lender that encourages you to do so. Avoid early repayment penalties and fees of more than 3 percent of the loan amount (4 percent for FHA or VA loans). Be aware that credit insurance premiums (insurance that a borrower pays a lender) should never be financed into the loan up-front in a lump-sum payment. Don’t ever sign a document that has blank spaces or pages in it that the lender promises to fill out later. Ignore high-pressure sales tactics. Take your time and read everything thoroughly. Be wary of a lender who promises to refinance the loan to a better rate in the future. A predatory lender will let you keep refinancing a bad loan and will charge fees every time. Know that even if you have already signed the agreement, you have three days to cancel it. Take your documents to a housing counselor near you and have them review the documents or refer you to someone who will. To find a counselor near you, visit the Department of Housing & Urban Development online at or call (800) 569-4287.

Auto title loans

These are small, high-interest loans given using a car as collateral. If you default on the loan, you lose your car.


When you rent furniture or appliances you will often end up paying much more than it would have cost you to buy that furniture all at once. If you miss a payment the company may repossess the items and you will forfeit any payments you may have already made.


Chattanooga payday lender Carey Brown faces criminal charges …

Image carey_v._brown_t755_h1ea09e03c74dd3e0b4dc5b8a04277f0e5b6f4d90.JPG

Carey BrownPhoto by Contributed Photo/Times Free Press.

Document: Payday Indictment

Payday IndictmentPayday lender Carey Brown, along with associates Joanna Temple and Ron Beaver, will face criminal usury charges in New York nearly three years after an investigation by the Chattanooga Times Free Press concluded that the trio had created a syndicate of shell companies designed to market, make and collect payday loans considered illegal in many states.The New York Times reported that Brown, Temple and Beaver “carefully crafted their corporate entities to obscure ownership and secure increasing profits.”Brown, a former Rossville, Ga. used car salesman who built an empire worth hundreds of millions of dollars, is charged along with a dozen companies and his associates with flouting New York rules that limit interest rates on such loans, while attempting to obscure the fact that those loans originated in Chattanooga.The erstwhile payday lender, with the help of legal advisor Temple and chief operating officer Beaver, used a number of tricks to mask the true identify of his companies, from setting up shell companies in Bermuda and on Indian reservations to suing former employees who spoke to reporters, an investigation determined.”The exploitative practices – including exorbitant interest rates and automatic payments from borrowers’ bank accounts, as charged in the indictment – are sadly typical of this industry as a whole,” said Cyrus R. Vance Jr., the Manhattan district attorney, according to the New York Times.Brown incorporated the online payday lending arm,, in the West Indies, a tactic that prosecutors say was intended to try to put the company beyond the reach of American authorities.The indictment against Brown, Beaver and Temple said the trio orchestrated a “systemic and pervasive usury scheme.”But Brown’s lawyer, Paul Shechtman with Zuckerman Spaeder, told the New York Times that Brown “acted in good faith and looks forward to showing his innocence.”On Monday, Beaver, who was arraigned in state court, entered a plea of not guilty. Denis Patrick Kelleher of the law firm Clayman & Rosenberg said his client “voluntarily appeared in court this morning to defend himself against these charges.”The Times said such charges are rare.”The case is a harbinger of others that may be brought to rein in payday lenders that offer quick cash, backed by borrowers’ paychecks, to people desperate for money,” New York Times reporter Jessica Silver-Greenberg wrote in a web update.Reporters who attempted to connect the dots between Brown’s business interests were themselves threatened with lawsuits, and Temple has claimed on multiple occasions that her firm, the Scenic City Legal Group, was not directly connected to Brown’s payday empire, despite the fact that the founder of the firm has identified himself as a representative of one of Brown’s companies on multiple occasions.Brown pledged to donate $1 billion in profits from his payday empire to charity, forming the Covenant Values Foundation to support Christian causes around the world. He gained partners in this effort such as Hugh O. Maclellan, who descends from the family that founded what is now disability insurer Unum Group.Brown also diversified his empire, supporting language translation software for missionaries that later became what is now a company called Sovee, and investing in real estate throughout the Chattanooga area.Payday lending isn’t the only field in which Brown has come under fire. He gained notoriety for a $1 million donation by another one of his associates, Sherry Huff, that a nonprofit group said Brown himself funneled toward an anti-Obama campaign attacking the president for his support of same-sex marriage.Through it all, Brown maintained that his actions were legal, and subject to federal, not state jurisdiction. He dodged cease and desist orders by attorneys general in multiple states, while dismissing an investigation by federal agencies as a routine matter.Eventually, he was forced to lay off hundreds of employees in 2013 after New York bankers refused to let him continue using their network to deposit his loans in customers’ accounts and withdraw fees.Many of those employees, who formerly worked at Brown companies with names like Area 203, Cloudswell and ACH Federal, remained in the Chattanooga area at marketing, information technology and payday lending businesses.Read more in tomorrow’s Times Free Press.Contact Dave Flessner at or 757-6340.Contact staff writer Ellis Smith at 423-757-6315 or with tips and documents. […]

Hooked loan sharks eyed 500pc interest


Police have smashed a loan shark syndicate that operated under the guise of loan referral companies and charged interest of up to 500 percent per year.

Officers arrested 27 suspects, eight of them women.

Victims who failed to pay up would be harassed, confined, threatened and escorted to ATMs to get the cash, Kwai Tsing assistant district commissioner Eric Wong Kai-chung said.

Wong said those held face charges of blackmail, criminal intimation, theft, unlawful detention, lending at excessive interest rates and money laundering.

He said victims may number in the several hundreds.

Syndicate members made cold calls to potential clients, offering loans at low interest rates.

Victims would then be lured into signing referral contracts that stated there would be no charge if a loan application was rejected.

But the contract also stipulated, in very small print, that a very high “consultation” fee ranging from 25 percent to 40 percent of the successful loan would be charged.

The police probe came after the force received 13 reports in the first seven months of the year alleging that two finance consultation firms charged high fees, involving more than HK$1 million.

Officers searched two finance companies in Kwai Chung and several flats around Hong Kong on Wednesday, arresting the 27 suspects aged 20 to 54.

The raids, codenamed Operation Firecobbler, saw police seize HK$920,000 in cash, eight computers, about 2,000 suspected loan records and other documents.

Wong said one person tried to apply for a loan of HK$300,000 after a bank rejected his application. The company offered to lend him the money, at an interest rate of 200 percent.

When he rejected the loan, he was asked to pay a consultation fee of HK$100,000.

But the victim refused to pay and staff at the company confined and threatened him, and did not let him leave with his deed until he withdrew HK$100,000 from a cash machine.

Another victim borrowed just HK$2,500 but paid HK$8,000 in interest at 550 percent or eight times the legal limit.

Police are investigating if there are other victims.


Smart boys behind payday loans | The Jewish Chronicle

July 3, 2014

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The great financial crisis (2007-09) sparked all manner of new lenders as the high street banks cut back their lending. We have seen the birth and expansion of peer-to-peer organisations which match depositors and lenders on the web; crowd-funding where like-minded investors club together to fund small breweries or films, and most contentiously the payday lender.

In the Great Recession, payday lenders, who help the less well-off make ends meet before the arrival of the next pay cheque, sprang up on the nation’s high street. They sat alongside discount retailers like Poundland and B&M – a new take on the austerity economy. Arguably the payday lending shop, despite the punishing interest rates charged, removed the moneylenders from the back streets, where they were backed up by brutes wielding baseball bats.

Much disparaged payday lender Wonga, founder by two South Africans, Errol Damelin and Jonty Hurwitz, took matters a step further. Damelin, a single-minded former Israeli paratrooper, brought groundbreaking digital skills to an ancient business activity. Payday lending was combined with cutting-edge Israeli know-how and technology to provide a different kind of instant moneylending.

One would be hard put to understand this from some of the recent media coverage that has painted Wonga as the devil incarnate following a finding by the regulator, the Financial Conduct Authority, that between 2008 and 2010 it sent out 45,000 letters in the names of non-existent lawyers demanding payment of arrears.

Wonga is not drawing on the most vulnerable

Clearly, the use of fake legal credentials was stupid and unacceptable. The legal profession is in high dudgeon and the City of London police have been persuaded to re-open an investigation that previously had closed.

Once a witchhunt is underway, it is hard to stop, even though most of us are subjected to such faux legal pressure on a regular basis in our everyday lives, whether we are paying parking fines or utility bills.

Damelin, who stepped down from Wonga before the storm over “legal letters” broke late last month, is a highly focused figure. When I joined him for lunch as Wonga was moving into take-off mode, he persuaded a reluctant chef at one of London’s most fashionable eateries to whip him up a large bowl of Israeli salad, without the dressing, because he didn’t fancy anything else on the menu.

What he explained was that Wonga’s model was different in several vital respects to other payday lenders. Firstly, it would only lend to people who already had current accounts at banks and had signed up for electronic banking. This cuts out the least well-to-do who do not have conventional bank accounts.

Secondly, his customers needed to be cyber-savvy and own mobile devices such as smart phones and tablets so that they could access Wonga’s website and apps electronically.

These two requirements meant that Wonga, unlike the other payday firms and back street money lenders, were not preying on the poorest of the poor. The point being that unlike other payday lenders Wonga is not drawing upon the most vulnerable groups in society. It is providing an instant cash service to people who need money quickly.

The reality is that if Wonga customers repay their loans rapidly the cost is cheaper than that of an unsecured overdraft at the bank where the charges rise exponentially. It is only when loans are not repaid on time and the interest charges start to ratchet up that they rise to the ghastly 2,689 per cent APR seen in some headlines.

That is terrible but not worse than well-established players like Provident Financial (a publicly quoted company).

Much of this will make the Jewish community uncomfortable even though most publications identify Wonga’s founders as South African rather than anything else. The Bible is extraordinarily tough on usury, and advocates debt forgiveness. And Jews in Britain have suffered, down the ages, from the stereotypes offered by Shakespeare and Dickens, two of the nation’s most lionised literary figures.

It is highly unfortunate that Wonga is now being tainted as an alleged criminal organisation because of the legal letters. Better perhaps if Damelin and friends had chosen to use their brilliance with computer code in a less controversial area. We must be alert to demonisation, drifting into antisemitism.

Alex Brummer is City Editor of the Daily Mail. His book ‘Bad Banks’ will be published by Random House on July 17.

Last updated: 5:45pm, July 3 2014


Fitch Publishes Updated Criteria for Rating U.S. Timeshare Loan ABS


Link to Fitch Ratings’ Report: Criteria for Rating U.S. Timeshare Loan ABS

Fitch Ratings today published an updated Asset-Backed sector specific criteria report titled ‘Criteria for Rating U.S. Timeshare Loan ABS.’

There have been no material changes from the previous version; therefore, Fitch expects no impact on outstanding ratings.

This report updates and replaces the prior criteria report with the title ‘Criteria for Rating U.S. Timeshare Loan ABS dated June 2013.

The report presents Fitch’s analytical approach to rating U.S. timeshare loan ABS and outlines the unique features of these transactions. Additionally, the report details key rating drivers associated with U.S. timeshare loan ABS as detailed below.


Credit Analysis (Borrower Risk): Delinquencies, defaults, recoveries and net losses (if applicable), prepayments, and the associated timing of each are key rating drivers in timeshare loan ABS. As such, Fitch analyzes historical, managed static pool and prior securitization data when deriving a base case proxy and performance assumptions. Fitch expects historical data to be split into predictive subsets where appropriate (e.g. Fair Isaac Corp. [FICO] bands).

Specifically, Fitch analyzes the collateral characteristics of the pool of loans underlying a prospective timeshare loan securitization to determine the overall credit risk present in that particular pool. A forecast base case cumulative gross default (CGD) proxy is derived for each applicable characteristic and then weighted according to the proposed pool composition to determine the weighted average (WA) CGD for the transaction.

Structural Analysis: Structural features have a significant impact on timeshare ABS performance. As such, Fitch uses an internal, proprietary cash flow model to evaluate transaction structures by stressing the various performance assumptions mentioned above and assessing their impact on payments to noteholders.

Counterparty Analysis: The performance of timeshare ABS can rely heavily on the originator/seller/servicer and other counterparties. Thus, Fitch conducts a review, and certain findings of the originator, seller, and servicer may result in qualitative adjustments to assumptions used to generate base case CGDs.

Legal Risks: The performance of timeshare ABS is largely dependent on a sound legal framework. As such, Fitch reviews the legal structure and the opinions furnished to confirm that cash flow derived from the assets will not be impaired or diminished. This could potentially occur due to the bankruptcy or insolvency of the originator or any other transaction party, the trustee’s lack of a perfected security interest in the assets, or taxation, if legal mitigants are absent.

Macroeconomic Risks: The economic environment can have a material impact on the performance of U.S. timeshare loan ABS. As such, Fitch takes into consideration the strength of the U.S. economy as well as future expectations. Adjustments may be made to the base case default proxy or other assumptions if appropriate, based on Fitch’s expectation.

Additional information is available at ‘


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