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Wonga to cut third of staff following new clampdown on payday …

Wonga is slashing about a third of its workforce to cut costs as it responds to a wider clampdown on unfair practices in the payday lending market.

The controversial lender said 325 jobs would go, mainly in the UK and Ireland. Wonga’s Dublin office will close as part of the plans, as will its office in Tel Aviv.

Related: Payday lending will shrink but only a complete ban will do

Andy Haste, the lender’s chairman, said: “Wonga can no longer sustain its high cost base, which must be significantly reduced to reflect our evolving business and market.

“Regrettably, this means we’ve had to take tough but necessary decisions about the size of our workforce. We appreciate how difficult this period will be for all of our colleagues and we’ll support them throughout the consultation process.”

Wonga’s decision to cut jobs came on the same day that the Competition and Markets Authority announced new rules to force payday lenders into being more transparent about their charges. The CMA is hoping that it will create more competition in the market, lowering costs for millions of consumers who rely on the loans.

Wonga employs a total of 950 people worldwide, but all the job losses relate to its UK payday loans business, which employs 650 people – about 280 in the UK, 175 in Ireland, 185 in South Africa and 10 in Israel.

It is understood about 100 jobs will go in the UK alone. All jobs will go in Ireland and Israel.

The group is aiming to achieve overall cost savings of at least £25m over the next two years, following a period of rapid expansion that saw costs treble between 2012 and 2014.

When Haste was appointed chairman last July, he said Wonga would become smaller and less profitable as it scaled back the number of customers it extended loans to, imposing stricter lending criteria.

In October the company was forced by the City watchdog, the Financial Conduct Authority, to write off £220m of loans to 375,000 borrowers, who it admitted should never have been given loans.

Wonga also announced on Tuesday that its former chairman Robin Klein was stepping down from the board after eight years.

The payday loans industry is undergoing a major shakeup as regulators seek to make the market fairer for cash-strapped consumers.

Under the new rules announced on Tuesday, lenders will have to list their deals on price-comparison websites and make it easier for customers to compare the total cost of different loans offered by various lenders.

Payday lenders will also have to provide customers with a summary of the total cost of their loans, as well as how additional fees such as late repayment affect the cost.

The recommendations were made after a 20-month inquiry into the payday loans industry by the CMA.

The watchdog concluded that a lack of price competition between lenders had driven costs higher for borrowers, with most people failing to shop around partly owing to a lack of clear information on charges.

Simon Polito, who ran the inquiry, said: “We expect that millions of customers will continue to rely on payday loans. Most customers take out several loans a year and the total cost of paying too much for payday loans can build up over time.”

The CMA’s decision follows an earlier clampdown by the UK financial regulator, the Financial Conduct Authority (FCA).

The authority introduced a price cap on 2 January to ensure that borrowers are never forced to repay more than double the amount of their original loan.

Interest and fees were capped at 0.8% a day, lowering the cost for most borrowers, while the total cost of a loan was limited to 100% of the original sum. Default fees were to be capped at £15 to protect people struggling to repay their debts.

Polito said: “The FCA’s price cap will reduce the overall level of prices and the scale of the price differentials but we want to ensure more competition so that the cap does not simply become the benchmark price set by lenders for payday loans.

“We think costs can be driven lower and want to ensure that customers are able to take advantage of price competition to further reduce the cost of their loans. Only price competition will incentivise lenders to reduce the cost borrowers pay for their loans.”

Joanna Elson, chief executive of the Money Advice Trust charity, welcomed the action from the CMA and FCA but added a note of caution: “This is good news for the consumer. More competition and transparency in the payday loan market will ensure that the FCA’s cap on the cost of credit remains precisely that– a cap, not the norm.

“This is a good example of regulators working together to bring about meaningful change in this sector. However, these improvements in the way that payday loans are regulated must not dilute the core message that payday lending remains an extremely expensive way to borrow,” she said.

Payday lenders will be forced to publish the details of their products on at least one price comparison website, authorised by the FCA. The CMA said on Tuesday it would work closely with the FCA to implement the new recommendations.

[…]

Exclusive – Greece to run out of cash by end-March without new aid -source

REUTERS – Greece is burning through its cash reserves and will not be able to meet payment obligations beyond the end of March at the latest unless it secures additional funds from its creditors, a person familiar with the figures told Reuters on Wednesday.

Athens is locked in a battle with euro zone partners over the future of its bailout programme, which is due to expire in 10 days. Failure to clinch a deal would leave it at risk of bankruptcy, though until now it had not been clear how much time Athens had until state coffers run dry.

Greece will be able to repay a 1.5 billion euro loan from the International Monetary Fund that falls due in mid-March, but the state will struggle to make payments after that despite continuing efforts to minimize cash needs, the person said.

“Greece can cover its needs until mid-March or the latest by the end of March unless it secures additional funding from official lenders,” the person told Reuters.

Athens has repeatedly asked its euro zone partners to be allowed to issue more Treasury bills beyond an existing 15 billion euro ceiling that it has already hit but its request has been denied.

Adding to the pressure, budget data for January showed the state’s finances worsening sharply as Greeks held off on paying taxes ahead of the Jan. 25 general election. That resulted in a 1 billion euro shortfall in tax revenues, 23 percent below the targeted level, putting the country’s bailout target of a 3 percent budget surplus this year in doubt.

Prime Minister Alexis Tsipras leftist-led government has sought to play down cashflow concerns, with ministers saying the state has enough money on hand and refusing to speculate on when it might run out.

Asked at a news conference on Wednesday about the state’s cash reserves, Deputy Finance Minister Dimitris Mardas said: “We are trying to pay our obligations all the time, I don’t have anything else to tell you.”

Earlier on Wednesday, the conservative daily Kathimerini said cashflow projections showed government coffers would start to run dry as early as Feb. 24.

After the March IMF repayment, Athens faces 800 million euros in interest payments in April followed by a major financing hump in the summer, when it has to repay about 8 billion euros to official lenders including 6.5 billion euros to the ECB for maturing bonds.

In addition, Athens also faces a monthly bill of 1.5 billion euros for public sector salaries and pensions, and an additional 1 billion euros a month for social security and healthcare costs.

Shut out of capital markets in 2010, Greece has survived over the past four and a half years on a continued stream of over 240 billion euros in aid from the European Union and IMF.

It broke its four-year exile from bond markets in April last year amid signs that the worst of its debt crisis was over, but the return was short-lived as bond yields rose to unsustainable levels in the autumn when political tensions rose.

(Editing by Paul Taylor and John Stonestreet)

Politics & GovernmentBudget, Tax & EconomyInternational Monetary FundAthens […]

7 Ways to Build Your Credit Score Without a Credit Card

Unless you have a ton of cash at your disposal, you’ll probably need credit at some point in your life. Whether you’re buying a home, car or big-ticket luxury item, the first thing that most lenders typically look at is your credit score.

If you have limited or no credit history, you’ll need to begin building your credit and boost your score before you apply for a major loan. Unfortunately, many believe that opening and using a credit card is the only way to go.

Here are a few alternatives to help raise your credit scores without the magic plastic:

1. Ask companies to report on your behalf

Do you have any recurring bills that you pay on a monthly basis, such as rent, utilities, cable or a cellphone? Try giving the providers a call and request that they report your account activity to the three major credit bureaus, TransUnion, Experian and Equifax.

Do this only if you have responsible payment habits, as payment history accounts for 35 percent of your credit scores and can have a significant impact if there is not a lot of other data in your credit reports.

Also, bear in mind that these companies are not obligated to report to the bureaus, and your request is simply a favor that they have the right to deny.

2. Become an authorized user on another credit card

Of course, there are pros and cons to becoming an authorized user. If the cardholder has a strong credit background, two thumbs up for you because signing on as an authorized user will enable their stellar behavior to improve your credit profile somewhat (perhaps not as much as you think). But, if things are the other way around, your credit scores could take a hit.

Either way, if you opt in and have a change of heart, the information will quickly vanish from your credit file when you request to be removed from the account.

3. Open an account with a credit union and take out a small personal loan

Some credit unions have restricted membership and limited accessibility, but credit unions generally offer financing options at lower interest rates than traditional banks. To give your credit score a boost, apply for a small personal loan.

If your request is denied, inquire about a secured loan in which your money, say, a certificate of deposit or savings account, will be used as collateral. The request will more than likely be approved because the risk to the institution is minimal. And you may have to pay a tad bit of interest, but the rate usually beats what’s available in the credit card world.

4. Apply for an installment loan

Installment loans paid in a timely manner over an extended period of time build your credit scores because they show creditors that you are a responsible borrower. The types of credit in your file make up only 10 percent of your score, but the impact has the potential to be greater if the information in your credit reports is limited.

Retailers sometimes offer promotional installment loans to customers with little to no introductory interest for a limited period of time. If you have the cash on hand, it may not be a bad idea to take this route. But be sure that you have the total sum of cash available upfront to make timely payments and eliminate the balance before the interest kicks in.

5. If you’re a student, take out a federal student loan

A credit check is not required to obtain a federal student loan. All you need to do is fill out the Free Application for Federal Student Aid (FAFSA), and you’re all set. Since it is an installment loan, it can help boost your credit score.

But don’t get the loan and blow through the money. Instead, aim for one that is subsidized and deposit the money into a safe interest-bearing account so the funds will be available when repayment starts.

6. Research peer-to-peer loans

Companies such as Prosper and Lending Club offer peer-to-peer loans in an environment where borrowers are connected with individual investors. The interest rates are usually lower than those of traditional financial institutions. And the lenders are eager to loan unsecured funds because the return they derive is competitive with other investments. (See “4 Things to Know About Peer Lending.”)

Most of the peer-to-peer lenders report to the major credit bureaus.

7. Try an alternative credit score

By reporting your payment history to an alternative to the big three credit bureaus, you can create a nontraditional credit score. Check out a service like Payment Reporting Builds Credit, known as PRBC, to learn more about how an alternative credit score service works.

Do you know of any other ways to improve your credit score without using a credit card? Feel free to share it in the comments below or on our Facebook page.

For more tips on raising your score, watch this video by finance expert Stacy Johnson:

Watch the video of ‘7 Ways to Build Your Credit Score Without a Credit Card’ on MoneyTalksNews.com.

This article was originally published on MoneyTalksNews.com as ‘7 Ways to Build Your Credit Score Without a Credit Card’.

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Payday Loans Are Bleeding American Workers Dry. Finally, the …

We’ve all seen the ads. “Need cash fast?” a speaker asks. “Have bad credit? You can get up to $1,000 within 24 hours.” The ad then directs you to a sketchy-sounding website, like 44cash.com, or a slightly-less-sketchy-sounding business, like PLS Loan Store. Most of us roll our eyes or go grab another beer when these commercials air. But 12 million people a year turn to payday lenders, who disguise the real cost of these loans. Borrowers often become saddled with unaffordable loans that have sky-high interest rates.

For years, states have tried to crack down on these deceptive business practices. Now, the Consumer Financial Protection Bureau (CFPB) is giving it a shot. On Monday, the New York Times reported that the CFPB will soon issue the first draft of new regulations on the $46 billion payday-lending industry. The rules are being designed to ensure borrowers have a better understanding of the real cost of payday loans and to promote a transparent and fair short-term lending market.

On the surface, payday loans sound like a good idea to many cash-strapped Americans. They offer a short-term loan—generally two weeks in length—for a fixed fee, with payment generally due on the borrower’s next payday. The average borrower takes out a $375 two-week loan with a fee of $55, according to the Pew Charitable Trust’s Safe Small-Dollar Loans Research Project which has put out multiple reports on payday lenders over the past few years. But payday lenders confuse borrowers in a couple of ways.

First, borrowers are rarely able to pay back their loans in two weeks. So they “roll over” the payday loan by paying just the $55 fee. Now, they don’t owe the $375 principal for another two weeks, but they’re hit with another $55 fee. That two-week, $375 loan with a $55 fee just effectively became a four-week, $375 loan with a $110 fee. If, after another two weeks, they still can’t repay the principal, then they will roll it over again for yet another $55 fee. You can see how quickly this can spiral out of control. What started as a two-week loan can last for months at a time—and the fees borrowers incur along the way end up dwarfing the principle. Pew found that the average borrower paid $520 in fees for the $375 loan, which was rolled over an average of eight times. In fact, using data from Oklahoma, Pew found that “more borrowers use at least 17 loans in a year than just one.”

Second, borrowers are often confused about the cost of the loan. The $55 fee—payday lenders often advertise a fee of $15 per $100 borrowed—sounds like a reasonable price for a quick infusion of cash, especially compared to a credit card with a 24-percent annual percentage rate (APR). But that’s actually an extremely high price. Consider the standard two-week, $375 loan with a $55 fee. If you were to roll that loan over for an entire year, you would pay $1,430 in fees ($55 times 26). That’s 3.81 times the original $375 loan—an APR of 381 percent.

Many borrowers, who badly need money to hold them over until their next paycheck, don’t think about when they’ll actually be able to pull it back or how many fees they’ll accumulate. “A lot of people who are taking out the loan focus on the idea that the payday loan is short-term or that it has a fixed $55 fee on average,” said Nick Bourke, the director of the Pew research project. “And they make their choice based on that.”

Lenders advertise the loans as a short-term fix—but their business model actually depends on borrowers accruing fees. That was the conclusion of a 2009 study by the Federal Reserve of Kansas City. Other research has backed up the study’s findings. “They don’t achieve profitability unless their average customer is in debt for months, not weeks,” said Bourke. That’s because payday lending is an inefficient business. Most lenders serve only 500 unique customers a year, Pew found. But they have high overhead costs like renting store space, maintaining working computers, and payroll. That means lenders have to make a significant profit on each borrower.

It’s also why banks and other large companies can offer short-term loans at better prices. Some banks are offering a product called a “deposit advance loan” which is nearly identical to a payday loan. But the fees on those loans are far smaller than traditional payday loans—around $7.50-$10 per $100 loan per two-week borrowing period compared with $15 per $100 loan per two-week period. Yet short-term borrowers are often unaware of these alternatives. In the end, they often opt for payday loans, which are much better advertised.

The CFPB can learn a lot about how to (and how not to) formulate its upcoming regulations from state efforts to crack down on payday lenders. Fourteen states and the District of Columbia have implemented restrictive rules, like setting an interest-rate cap at 36 percent APR, that have shutdown the payday-loan business almost entirely. Another eight states have created hybrid systems that impose some regulations on payday lenders, like requiring longer repayment periods or lower fees, but have not put them out of business. The remaining 28 states have few, if any, restrictions on payday lending:

The CFPB doesn’t have the power to set an interest rate cap nationally, so it won’t be able to stop payday lending altogether. But that probably shouldn’t be the Bureau’s goal anyways. For one, eliminating payday lending could have unintended consequences, such as by driving the lending into other unregulated markets. In some states, that seems to have already happened, with payday lenders registering as car title lenders, offering the same loans under a different name. Whether it would happen on a large scale is less clear. In states that have effectively outlawed payday lending, 95 percent of borrowers said they do not use payday loans elsewhere, whether from online payday lenders or other borrowers. “Part of the reason for that is people who get payday loans [are] pretty much mainstream consumers,” Bourke said. “They have a checking account. They have income, which is usually from employment. They’re attracted to the idea of doing business with a licensed lender in their community. And if the stores in the community go away, they’re not very disposed towards doing business with unlicensed lenders or some kind of loan shark.”

In addition, borrowers value payday lending. In Pew’s survey, 56 percent of borrowers said that the loan relieved stress compared to just 31 percent who said it was a source of stress. Forty-eight percent said payday loans helped borrowers, with 41 percent saying they hurt them. In other words, the short-term, high-cost lending market has value. But borrowers also feel that lenders take advantage of them and the vast majority want more regulation.

So what should that regulation look like? Bourke points to Colorado as an example. Lawmakers there capped the annual interest payment at 45 percent while allowing strict origination and maintenance fees. Even more importantly, Colorado requires lenders to allow borrowers to repay the loans over at least six months, with payments over time slowly reducing the principal. These reforms have been a major success. Average APR rates in Colorado fell from 319 percent to 129 percent and borrowers spent $41.9 million less in 2012 than in 2009, before the changes. That’s a 44 percent drop in payments. At the same time, the number of loans per borrower dropped by 71 percent, from 7.8 to 2.3.

The Colorado law did reduce the number of licensed locations by 53 percent, from 505 to 238. Yet, the number of individual consumers fell just 15 percent. Overall, that leads to an 81 percent increase in borrowers per store, making the industry far more efficient and allowing payday lenders to earn a profit even with lower interest rates and a longer repayment period.

Bourke proposes that the CFPB emulate Colorado’s law by requiring the lenders to allow borrowers to repay the loans over a longer period. But he also thinks the Bureau could improve upon the law by capping payments at 5 percent of borrower’s pretax income, known as an ability-to-repay standard. For example, a monthly payment should not exceed 5 percent of monthly, pretax income. Lenders should also be required to clearly disclose the terms of the loan, including the periodic payment due, the total cost of the loan (all fee and interest payments plus principal), and the effective APR.

The CFPB hasn’t announced the rules yet. But the Times report indicated that the Bureau is considering an ability-to-repay standard. The CFPB may also include car title lenders in the regulation with the hope of reducing payday lenders’ ability to circumvent the rules. However, instead of requiring longer payment periods, the agency may instead limit the number of times a lender could roll over a borrower’s loan. In other words, borrowers may only be able to roll over the loan three or four times a year, preventing them from repeatedly paying the fee.

If the Bureau opts for that rule, it could limit the effectiveness of the law. “That kind of tries to tackle a problem of repeat borrowing and long-term borrowing but that’s a symptom,” Bourke said. “That’s not really the core disease. The core disease is unaffordable payments.” In addition, it could prevent a transparent market from emerging, as payday lenders continue to take advantage of borrowers’ ignorance over these loans. “The market will remain in this mire,” Burke added, “where it’s dominated by a deceptive balloon payment product that makes it difficult for consumers to make good choices but also makes it difficult for better types of lenders to compete with the more fair and transparent product.” Ultimately, that’s in the CFPB’s hands.

[…]

Should You Get a Loan Instead of a Credit Card?

Whether it’s an emergency or a planned expense, you’re likely going to want to finance a large purchase at some point. Among the handful of options consumers have in these situations, a credit card is the most common way people spread out a large expense over several months, but not everyone has that option, and it may not be the best one for those who do. Instead of using or opening a credit card to finance something, you may want to consider taking out a personal loan.

No Room for Excuses

When you charge something to your credit card, you might end up paying for it for a long time. One of the nice things about credit cards is their flexibility — if you don’t have the cash you need to pay your entire bill this month, you can pay any amount above your minimum payment and face relatively minimal consequences for doing so. The balance will accrue interest, but as long as you make your payment on time and keep your balance low, relative to your credit limit, it won’t have do major credit score damage.

People often abuse that flexibility, and the lack of urgency in paying down credit card debt can allow the balance to snowball into an intimidating sum. With a personal loan, you have to repay it within a specified time frame, forcing you to prioritize the payments.

“It’s sort of forced discipline,” said Gerri Detweiler, Credit.com’s director of consumer education. Some people need that extra push to stick to their get-out-of-debt plans, Detweiler noted, which is why the personal loan route may appeal to some people over credit cards. Additionally, because it’s an installment loan, you’re not going to add to your burden, like you might with a credit card. That’s another issue a lot of people encounter with credit cards: It’s hard to stop spending.

Prevent Credit Damage

Before you can decide what’s better for you, you’ll need to have an idea of where your credit stands. If you have poor credit, you may not be able to qualify for a new card or loan. On top of that, you won’t be able to estimate how your choice will affect your credit. You can get a free credit report summary on Credit.com every 30 days to help you with these and other financial decisions.

If you see your credit utilization is high — meaning you use more than 30% of your available credit — adding a large purchase to your credit card is probably going to damage your credit score. There are a few things you can do to avoid that: Ask for a credit limit increase, open a new credit card for the purchase (increasing your overall credit limit and keeping utilization down on other cards) or seek an alternative financing method.

Going for a personal loan could help you build credit, too, because your mix of accounts has an impact on your credit score. It’s not as influential as your payment history or debt use, but if you only have credit cards, adding an installment loan to your credit portfolio can boost your score, Detweiler said. It’s important to note that applying for new credit will cost you a few score points in the short term, but as long as you do it infrequently, applying for a new card or loan won’t hurt you in the long run.

Save Money

Before using a credit card to finance a large purchase, check your card’s APR. If you have a high or variable interest rate on that debt, you should look into personal loans. With good credit, you’re likely to qualify for a personal loan with a low interest rate, making the purchase more affordable over time. There’s another option for borrowers with good credit: 0% financing promotions. If you can qualify for a credit card with a 0% promotional finance period and you can pay off the purchase within the promotional period, you won’t have to pay interest on the purchase at all (although you may have to pay a balance transfer fee). If you don’t stick to that plan, though, you may see your APR skyrocket, negating the purpose of getting that card in the first place.

Explore your options. Depending on your credit score and your current access to financing tools, one route may have many more advantages than the other, but if you don’t consider all your choices, you can’t be sure you’re making the best one. It doesn’t matter if you’re using the card or loan to pay for an emergency car repair or a much-wanted home improvement — just make sure you have a plan to pay for it.

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Nama generates €8.6bn in cash in 2014

The National Asset Management Agency (Nama) generated cash of some €8.6 billion in 2014, thanks to a healthy returnfrom the sale of loans and property during the year.

According to an end of year statement from the State’s “bad bank”, some € 8.6 billion in cash was generated in 2014, including € 7.8 billion from the proceeds of asset disposals, bringing total cash generated to date up to €23.7 billion.

Nama chairman Frank Daly and Nama CEO Brendan McDonagh said that 2014 was a “tremendous year in terms of cashflow generation and accelerated debt paydown and in terms of Nama making a significant contribution to the delivery of social housing, private housing and the Dublin Docklands SDZ and to employment preservation in trading businesses.”

Slide in corporate insolvencies sign of recovering economy Weak global manufacturing figures suggest more central bank action Property prices to continue to rise in 2015 – Sherry Fitzgerald

At end-2014, Nama held cash and cash equivalent balances of € 1.8 billion, after making Nama senior bond redemptions and other debt repayments totalling € 16.6 billion since inception.

To date, Nama has realised proceeds of € 18.7 billion from the sale of loans and property and other assets held as security; € 7.8 billion (42%) of this was realised in 2014, including the sale of Project Eagle ((loans secured by assets controlled by Northern Ireland debtors), and Project Tower (loans secured by investment and developments assets, mainly in Ireland, Britain and Germany).

In its statement, Nama said that a “strong flow” of asset and loan portfolios will be offered to the market during the course of 2015, assuming that current investor interest is sustained.

On the funding front, Nama has approved a total of € 3.2 billion in advances to debtors and receivers, and it said that it is prepared to advance additional funding for commercially viable Irish projects, including the Dublin Docklands development programme.

With respect to residential housing, Nama is on target to meet its goal of completing 4,500 additional units by the end of 2016, with more than 1,000 units already delivered.

By the end of 2014 Nama had delivered over 1,000 social housing units, and predicts that a further 1,000 houses and apartments will be taken up by local authorities and housing bodies in 2015.

Nama also said that it has played a “major part” in facilitating the examinership of trading businesses during 2014, which resulted in safeguarding close to 1,000 jobs,

[…]

Payday loan brokers subject to emergency action as regulator steps …

The Financial Conduct Authority has taken emergency action to tackle payday loan brokers after a deluge of complaints over “blatantly unfair” practices.

The brokers have made as many as one million attempts a month to raid the bank accounts of some of the poorest members of society. While promising to find a loan, the they charge a fee of £50 to £75, and then share the person’s bank details with as many as 200 other companies, which also attempt to charge the individual.

The financial regulator said it had blocked seven payday loan brokers from taking on new business, with three in line for further “enforcement action”.

In October, NatWest said it was being contacted every day by hundreds of its most vulnerable customers, who were bewildered by the charges added to their accounts.

The FCA said the new rules would come into force on 2 January 2015, and would end the lack of clear information on the websites currently luring people into paying fees without “informed consent”.

In an unusual step, the FCA said the rules had been made without prior consultation because it considered that the delay arising from the time it would take to consult “would be prejudicial to the interests of consumers”.

It added: “The FCA also believes that enforcement action alone is not sufficient to protect consumers from the poor practices identified in the market.”

The rules will ban credit brokers from charging fees to customers, and from requesting customers’ bank details unless they comply with new requirements making it clear who they are dealing with, what fee will be payable, and when and how the fee will be payable.

The FCA clampdown on brokers is the latest in a series of regulatory actions against the payday loan industry. From 2 January 2015, the interest that payday loan brokers can charge will be capped at 0.8% a day in a move, which, along with other measures, is expected to drive as many as four out of five lenders out of business.

The FCA said that over 40% of consumer credit complaints received were about credit brokers.

“The FCA has also received relevant intelligence from consumer groups and others who are seeing increasing complaints from people who have had money taken from their accounts unexpectedly and often by more than one broker.”

RBS NatWest was the first major bank to blow the whistle on payday loan brokers. It said it had terminated payment arrangements with 20 of the brokers already, but had had to battle against sites that then reappeared under various .net or .uk domains.

Terry Lawson, the head of fraud and chargeback operations for RBS and NatWest, told the Guardian in October: “We’ve seen large numbers of customers incurring charges they don’t expect when using a payday loan broker since July this year. Customers’ account or debit card details are gathered and sent on to up to 200 other brokers and lenders who charge them fees for a loan application. At its height we were seeing up to 640 calls a day on unexpected fees.”

Wendy Scurr from Middlesborough, who lives on disability benefits, looked for a loan online to buy a new settee. “I put in my bank details as they said I had got the loan. But as soon as I submitted the final bit of information, it popped up that I had been declined. I felt that I had been conned out of my bank details, but I thought not much more about it.

“But on the Friday when I went to take some money out I found there had been two payments made of £67.88 to My Loan Now and £59.99 to another lender.

“I went into the bank and they told me that six minutes after My Loan Now had taken the £67.88, it attempted to take the money again but as I had nothing left it was rejected.” She has since had to change her bank account to stop repeated attempts to take money.

My Loan Now’s website displays a warning that it will charge a “one-off loan matching fee” of £67.88.

[…]

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 […]

Mafia threatens retribution over payday loan crackdown – NewsThump

Image mafia-payday-loans-small.jpg

Tuesday 11 November 2014 by Neil Tollfree

Mafia threatens retribution over payday loan crackdown

New regulations introduced to prevent payday loan companies from charging extortionate fees have prompted anger amongst Mafia interests in the sector.

“As you know, we are an affiliation of legitimate businessmen,” said Vinny ‘the reaper’ Marlione, head of the New Jersey Marlione family.

“But, if these goddamn limey Government pussies think they can screw around with our most profitable concern, then they will have a goddamn war on their hands.”

“The five families are united on this,” he added.

The government, however, have adopted a conciliatory tone.

“I don’t think threats of violence are acceptable,” said Home Secretary Theresa May.

“As ever with our financial sector, we are prepared to sit down with any criminal organisation to find a way for them and their shareholders to work in the industry.”

Payday loans

The Mafia are thought to be the last of the major organised crime groups to still be involved in the payday loan business.

The triads pulled out when it was made illegal for the payday loan companies to take the first-born sons of those late with their repayments.

The Russian Mafia withdrew when the Government prevented the loan companies accepting human organs for repayments.

It has been suggested that maybe the payday loan industry could extricate itself from the clutches of organised crime.

“Are you kidding me?” Said a spokesperson for Wonga.

“You think we could get people with a conscience to work in this business? No chance.”

“You want to work in payday loans, you’ve got to already be on your way to Hell.”

[…]

Payday loan brokers regularly raid bank accounts of poor customers …

A new breed of payday loan brokers are making as many as 1m attempts per month to raid the bank accounts of some of the poorest members of society.

The behaviour is provoking alarm at one of Britain’s biggest high street banks, Natwest, which says it is being inundated with complaints from its most vulnerable customers.

NatWest said it is seeing as many as 640 complaints a day from customers who say that sums, usually in the range of £50 to £75, have been taken from their accounts by companies they do not recognise but are in fact payday loan brokers.

The brokers are websites that promise to find loans, but are not lenders themselves. Often buried in the small print is a clause allowing the payday broker to charge £50 to £75 to find the person a loan – on top of an annual interest charge as high as 3,000%. In the worst cases, the site shares the person’s bank details with as many as 200 other companies, which then also attempt to levy charges against the individual.

The City regulator has received a dossier of information about the escalating problem, and the Financial Ombudsman Service also confirmed that it is facing a wave of complaints about the issue.

NatWest, which is owned by the Royal Bank of Scotland, gave as an example a 41-year-old shop assistant who took a payday loan of £100 at 2,216% interest. A month later she complained to NatWest after seeing a separate fee of £67.88 paid to My Loan Now and £67.95 to Loans Direct on her account, companies she said she had never dealt with.

The broker sites tell customers they need their bank account details to search for a loan, but then pass them on to as many as 200 other brokers and lenders, which then seek to extract fees, even if they have not supplied a loan. The small print allowing the site to pass on the details and demand payments can be hidden in the site’s ‘privacy policy’ or in small print at the bottom of the page.

The sites use sophisticated methods to take money from personal bank accounts. They typically push their charges through bank payment processing systems between midnight and 3am, knowing that state benefit payments are added to accounts just after midnight. When the person living on unemployment or disability benefit wakes in the morning, they find their money has already vanished.

RBS Natwest, whose parent is majority-owned by the taxpayer, said it has terminated payment arrangements with 20 payday loan brokers already, but is battling against sites which reappear under various .net or .uk domains.

Terry Lawson, head of fraud and chargeback operations for RBS and NatWest, said: “We’ve seen large numbers of customers incurring charges they don’t expect when using a payday loan broker since July this year. Customers’ account or debit card details are gathered and sent on to up to 200 other brokers and lenders who charge them fees for a loan application.

“At its height we were seeing up to 640 calls a day on unexpected fees, but we’re pleased to say we’re seeing this decrease on account of the actions we’re taking to help stop these sharp practices.”

Wendy Scurr from Middlesborough, who lives on disability benefits, looked for a loan online to buy a new settee. “I put in my bank details as they said I had got the loan. But as soon as I submitted the final bit of information, it popped up that I had been declined. I felt that I had been conned out of my bank details, but I thought not much more about it.

“But on the Friday when I went to take some money out I found there had been two payments made of £67.88 to My Loan Now and £59.99 [to another lender].

“I went into the bank and they told me that six minutes after My Loan Now had taken the £67.88, it attempted to take the money again but as I had nothing left it was rejected.” She has since had to change her bank account to stop repeated attempts to take money, while on her phone she receives as many as 20 or 30 calls and texts a day from payday loan brokers.

My Loan Now’s website displays a warning that it will charge a “one-off loan matching fee” of £67.88.

NatWest said that during August it saw 1m attempts by payday loan brokers to take money from its customer accounts, although the majority were rejected as the customers were already seriously overdrawn. It added that it is working with the “merchant acquirers” – such as WorldPay and Barclaycard – to blacklist the brokers where possible, and from next month will entirely block payments to two of the major players.

“We are reaching out to customers to warn them of these fees and taking steps to block the transactions altogether.

We are also actively working with the industry to raise awareness of these practices and in many cases halt some of the brokers’ operations, but, these are sophisticated organisations, they are resourceful and more needs to be done at an industry and regulator level to protect customers who may already be in vulnerable situations. If one of our customers finds they have paid these charges, they should get in touch , so that we can stop payment of further charges and help them recoup any funds already paid, if possible”.

What shocks many of the victims of payday loan brokers is that the companies are usually authorised by the Financial Conduct Authority. The FCA said it has only recently taken on the job of authorising credit brokers, which was previously handled by the Office of Fair Trading. What is called “interim authorisation” was granted to 5,247 brokers, and only since 1 October has the authority begun assessing applications in detail.

My Loan Now is the trading name of Katsea Financial Solutions, which gives its address in Ipswich and runs ten other loan brands.Peter Tuvey, a director of Katsea, told the Guardian he did not charge fees and that My Loan Now was an Isle of Man-registered company that had no connection to him. But a check on the Isle of Man registry showed Tuvey was also registered there as a director of My Loan Now.

Tuvey said: “I resigned as a director of Katsea (Isle Of Man) in June 2014. My resignation was due to the company changing its principal business practices from a free comparison site to other practices.” He did not respond to further requests for information.

Loans Direct is run by Syed Rizvi from an address in Manchester. Neither Loans Direct nor Rizvi could be reached for comment.

[…]