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The year in business: Payday loan debate heats up in Baton Rouge …

Lobbyists for the payday loan industry stormed Baton Rouge over the summer as state lawmakers deliberated tighter controls on short-term, high-interest loans.

Proponents for stricter rules argued payday loans prey on the working class and trap them in a cycle of debt that can ruin their credit.

But payday lenders said restrictions would put them out of business and stymie a much-needed source of lending for the poor.

By the end of the 2014 legislative session, the payday loan industry had beaten back several proposals to limits its activity. But the fight isn’t over.

What happened: The Legislature considered several proposals putting limits on payday loans during the 2014 session.

Initial bills, sponsored by Rep. Ted James, D – Baton Rouge and Sen. Ben Nevers, D – Bogalusa, proposed capping payday loan interest rates at 36 percent annually.

A later draft abandoned the 36 percent cap and instead proposed limiting borrowers to 10 payday loans per year. It also required payday lenders to enter transaction into a database reviewed by the Office of Financial Institutions.

The bill failed on the Senate floor in late April, despite the support of consumer advocates, including AARP Louisiana and Louisiana Together, a statewide network of religious and civic organizations.

Senators who voted against the bill were wary of placing limits on lending, which they said could damage the industry and hurt consumers.

What’s next: AARP Louisiana, Louisiana Together and other groups that led the initial charge for limits have vowed to continue their push in the 2015 session.

Payday lenders are likely to face heightened scrutiny in coming years, even if Louisiana rules do not change.

Federal regulators have already cracked down on banks that offer short-term products.

In July, the Consumer Financial Protection Bureau reached a $10 million settlement with payday lender ACE Cash Express over illegal debt collection tactics. The agency, which became the first to oversee payday loans in 2012, is in the process of drafting rules for the entire industry.

In the meantime, traditional lenders, including Liberty Bank & Trust in New Orleans, are experimenting with ways to offer small loans and other products tailored for low-income borrowers.


U.K. Confirms Payday Loans Caps Coming In January | TechCrunch

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Strict new price caps will come into force in the U.K.’s payday loans market in January, sector regulator the Financial Conduct Authority (FCA) has confirmed, affecting any U.K. businesses that offer this type of short-term consumer credit.

The FCA said today that from January 2, 2015 it will be imposing an initial cost cap of 0.8 per cent per day for all high-cost short-term credit loans, which means interest and fees must not exceed 0.8 per cent per day of the amount borrowed.

It will also be applying a total cost cap of 100 per cent on a loan, meaning a borrower must never pay back more than 100 per cent of the amount they borrowed in order to protect them from escalating debts. Fixed default fees are also capped at £15 for borrowers who do not make loan repayments on time. And interest on unpaid balances and default charges must not exceed the initial rate.

The result of the regulatory caps will be a far smaller payday loans market, and one which can’t generate huge profits at the expense of the most vulnerable borrowers. Last year one payday loans company, Wonga, listed its representative annual interest rate at 5,853 per cent.

In the first five months since the FCA has been regulating the sector it said the number of loans and the amount borrowed has dropped by 35 per cent. Going forward, it is estimating the new price caps will mean seven per cent of current borrowers may no longer have access to payday loans — some 70,000 people.

“These are people who are likely to have been in a worse situation if they had been granted a loan. So the price cap protects them,” it notes.

Caps on the payday loans market have been expected since 2013, when the duty to cap the cost of credit was formally established through the Financial Services (Banking Reform) Act 2013. The FCA spent this summer consulting on its proposed caps and has today confirmed the levels it was consulting on.

“I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we risk not having a viable market, any higher and there would not be adequate protection for borrowers,” said Martin Wheatley, the FCA’s chief executive officer, in a statement.

“For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts. For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections.”

The FCA notes that from January 2, no borrower will ever pay back more than twice what they borrowed, while someone taking out a loan for 30 days and repaying on time will not pay more than £24 in fees and charges per £100 borrowed.

Wonga still looks to be charging higher rates of interest and fees than the impending price caps will allow. A loan fee calculator on its website states that a £100 loan taken out for 30 days will incur interest and fees of £37.15. But from January 2 the same loan will have its interest and fees capped at £24.

Last month Wonga was forced by the FCA to write off the debts of some 330,000 customers, and waive the fees and charges of a further 45,000 — taking a write down of around £220 million — after admitting its affordability checks had been inadequate.

It has put in place interim measures to test affordability, and is in the process of rolling out a new permanent lending decision platform that reflects the new affordability criteria. But the company — which for years touted the speed and efficiency of its technology platform in making lending decisions – will clearly see its business shrink further when the new price caps come into place.

Featured Image: Howard Lake/Flickr UNDER A CC BY-SA 2.0 LICENSE […]

The Wall Street Journal: Sears borrows $400 million from CEO’s hedge fund



Sears Holdings Corp. is borrowing $400 million from Chief Executive Edward Lampert’s hedge fund, giving the retailer an infusion for the holidays after it burned through cash over the summer.

The loan is being made by entities affiliated with Lampert’s ESL Investments Inc. and secured by 25 of the company’s properties, Sears SHLD, -2.19% said in a securities filing on Monday.

The loan will mature on Dec. 31, though that could be extended until Feb. 28, assuming Sears doesn’t violate the terms of the loan.

The arrangement underscores the deep and unusual relationship between the hedge fund and the brand. Sears has shed sales, staff and market value amid what critics say has been a lack of investment by Lampert.

Sears recorded a loss of nearly $1 billion in the six months through Aug. 2, extending a string of losses, as revenue fell more than 8%.

Sears had said it planned to raise $1 billion this year, a goal that it has now met with the $400 million ESL loan plus $665 million that the retailer had raised by spinning off its Lands’ End division to shareholders and selling some real estate.

An expanded version of this report appears on


Amid Market Shift, Summer Lull, Leveraged Loan Issuance Grinds To Halt


The U.S. leveraged loan market saw no new deals this week as investors and issuers either engaged in price discovery for credits already brought to a changing market or began closing up shop for the summer. With this week’s goose egg, year-to-date volume holds at $391 billion, compared to $411 billion at this point in 2013.

While there were no new issues brought to the syndications market during the week, that’s not to say there was no activity. Amid continued withdrawals from U.S. loan funds and uncertainty in the neighboring high yield bond market, loan issuers and investors wrestled over credits brought to market earlier in the month.

Indeed, there were no fewer than 19 investor-friendly price flexes during the week, according to LCD’s Chris Donnelly. A leveraged loan price flex is when a deal’s interest rate or upfront fee is changed during the syndications process, depending on demand. For much of the recent past issuer-friendly price flexes – where interest rates are trimmed – have dominated, due to the huge overhang of investor cash in loan funds.

That has changed, however. U.S. loan funds have seen five straight weeks of cash outflows, totaling roughly $3.3 billion, and 13 weeks of withdrawals over the past 14 weeks, according to Lipper. Year to date, loan funds have seen $2.2 billion of net outflows.

The change in market sentiment is evident in yields, which on lower-rated, single-B loans increased to 5.27% this week from 5.1% a week ago, according to S&P Capital IQ/LCD.


FCA vows in-depth review of payday lenders | Money | The Guardian

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The FCA says it will examine the culture of each payday lender to see whether the focus is truly on the customer. Photograph: Christopher Thomond for the Guardian

Payday lenders’ treatment of struggling borrowers is to come under the spotlight in April, when the Financial Conduct Authority takes over regulation of the sector on 1 April.

The FCA said it planned to kick off an in-depth review of the way high-cost short-term lenders collect debts and deal with people who have fallen into arrears on their loans in one of its first actions in its new role. More than a third of payday loans are repaid late or not at all, the equivalent of around 3.5m a year. Six in 10 complaints made about payday lenders are about how debts are collected. The watchdog said while new rules it had already announced should reduce problems, for those who were struggling “there will now be a discussion about the different options available rather than piling on more pressure or simply calling in the debt collectors”.

From April, the FCA will regulate more than 50,000 consumer credit firms, of which around 200 are payday lenders. These lenders, which offer loans arranged over days or weeks at interest rates often in excess of 1,000%, are currently under the scrutiny of the Competition Commission after the Office of Fair Trading raised serious concerns about the industry. The FCA has already told lenders that from the summer they will not be allowed to extend loans more than twice or repeatedly attempt to take payments from people’s bank accounts. Previously, borrowers have reported multiple attempts to retrieve debts, which in some cases has left people in with no access to cash.

The FCA’s chief executive, Martin Wheatley, said: “These are often the people that struggle to make ends meet day to day, so we would expect them to be treated with sensitivity, yet some of the practices we have seen don’t do this.

“There will be no place in an FCA-regulated consumer credit market for payday lenders that only care about making a fast buck.”

The review will look at all aspects of how high-cost short lenders treat their customers when they are in difficulty. This will include how they communicate, how they propose to help people regain control of their debt, and how sympathetic they are to each borrower’s situation. The FCA said it would also examine the culture of each firm to see whether the focus is truly on the customer – as it should be – or simply oriented towards profit.

In 2012, the best-known payday lender Wonga was told to improve its debt collection practices by the current regulator, the OFT.


Goldman Cautious on Leveraged Loan Flows


For a while now, it has seemed as though exchange traded funds holding senior bank loans have among the toasts of the town in the bond ETF universe.

Not only do ETFs such as the PowerShares Senior Loan Portfolio (BKLN) offer high yields, but these funds also feature diminished interest rate risk because bank loans act like floating rate notes to an extent because the rates on the loans are reset every month or two months. [Bank Loan ETFs Continue to Thrive]

Despite the advantages of bank loan ETFs, not all market observers are convinced go-go days for these funds will last forever.

“I would just caution those that are involved in the loan space to be mindful of the fact that they’ve been beneficiaries of inflows for 88 straight weeks and the tide can turn,” said Justin Gmelich, the head of credit trading at Goldman Sachs Group, in a video on Goldman’s web site.

Bank loans have “seen unprecedented demand with the funds that purchase the debt receiving deposits every single week since the summer of 2012. That enabled speculative-grade companies to raise $676 billion last year of bank debt, with more than 80 percent of that used to escape maturing debt deadlines,” writes Sridhar Natarajan for Bloomberg.

Indeed, investors have warmed to bank loan ETFs in noticeable fashion. PowerShares tracks flows data for its ETF over 12 months, year-to-date, the past 90 days, 30 days and week. Over each of those time frames, BKLN ranks as the second-best PowerShares ETF in terms of inflows. The fund now has $7 billion in assets under management, $4.6 billion of which has come into the ETF in the past year.

A pair of actively managed rivals to BKLN debuted last year, each quickly gaining assets. The SPDR Blackstone/GSO Senior Loan ETF (SRLN) is just 11 months old and already has $616.5 million in assets. First Trust Senior Loan Fund (FTSL) debuted in early May 2013 and has nearly $164 million in assets. [New ETFs Off to Fast Starts]

Some investors have questioned the liquidity of the bank loan market. Others have warned that the trading rate risk for higher credit risk is not worth it because bank loans would be vulnerable in the event of a U.S. recession.

That has not stopped cash from pouring into these funds. Retail inflow to loan mutual funds for 2014 was $4.6 billion as of Feb. 20, Bloomberg reported, citing Bank of America.

PowerShares Senior Loan Portfolio


ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

ETFsLoansbank loansGoldman Sachs Group […]

Service Members Left Vulnerable to Payday Loans

The Military Lending Act was enacted nearly seven years ago, but some say it has gaps that leave hundreds of thousands of U.S. service members open to potentially predatory loans. Congress passed the law to shield service members from loans with double-digit interest rates that can get borrowers deep into debt. Critics, however, say the law has not kept up with high-interest lenders that operate either online or near bases.

Navy Petty Officer First Class Vernaye Kelly, for example, took out her first payday loan more than 10 years ago to bankroll moving expenses; but this summer, she had to take out a couple more to cover existing payments.

The Military Lending Act has an interest rate cap of 36 percent for military members; but the restriction does not cover short-term loans for more than $2,000, loans that last for more than 91 days, or auto title loans with terms longer than 181 days. Such loans can force service members into foreclosure and put their jobs at risk, since the military considers high personal indebtedness a threat to national security. “The law did wonders for the products that it covered, but there are simply many products that it doesn’t cover,” according to Holly K. Petraeus, assistant director for service member affairs at the Consumer Financial Protection Bureau. Many are encouraging Washington to act. The Senate Commerce Committee recently held a hearing on abusive military lending, and the Defense Department is soliciting public feedback on whether the protections of the act should embrace other types of loans.


Led By Dell (Finally), Leveraged Loan Volume Rockets To $20B


Leveraged loan volume in the U.S. this week totaled a whopping $20.4 billion, the most since mid-May and up dramatically from the $8 billion recorded last week, according to S&P Capital IQ/LCD. Loan activity is rising as much of the forward calendar of M&A deals that built up over the summer takes advantage of a cash-rich investor market.

The highest-profile deal to enter market undoubtedly was Dell Dell, which had been anticipated for months. Shareholders yesterday finally approved the $25 billion buyout of the company by founder Michael Dell and private equity concern Silver Lake Partners. Dell will bring $7.5 billion in new money – $5.5 billion for institutional investors – to a leveraged loan market that has been clamoring for higher-yielding LBO and M&A paper, as opposed to the thinly priced refinancings that have bolstered leveraged loan volume for the recent past.

Dell was by no means the only LBO loan this week. Private equity shop Ares management on Monday launched syndication of a $625 million loan backing its acquisition of CPG International, which makes synthetic building products. And Riverstone Holdings unveiled a $2.625 billion loan package supporting its buy of Fieldwood Energy, which has interests in the shallow waters of the Gulf of Mexico.

This M&A activity comes at a good time for issuers, who are finding a “risk-on” loan market, according to LCD’s Chris Donnelly. Indeed, institutional investors have considerable cash at the ready. Inflows to U.S. loan mutual funds ballooned to $1.6 billion this week, more than double the amount last week, says LCD’s Matt Fuller, citing Lipper. So far in 2013 loan mutual funds have seen a net inflow of $41.2 billion, according to Lipper.

Year to date U.S. leveraged loan volume stands at $445 billion, easily topping the $270 billion seen at this point last year. The full-year 2012 total was $465 billion. The full-year record is $535 billion in 2007.


Aiming To Disrupt Payday Lending, a16z-Backed LendUp Now …

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Y Combinator-incubated LendUp launched in October with backing from Kleiner Perkins, Andreessen Horowitz, Google Ventures, Kapor Capital and others, to bring a fresh solution to an old problem: You have to pay your bills now, but you don’t have the money to pay them. Rather than turn to predatory lenders and banks, with their high interest rates, borrow money from friends or cover your eyes and hope they go away, what do you do?

It may seem like a situation that only befalls the chronically irresponsible, but in fact, 15 million Americans turned to payday lenders to borrow money last year. Instead of ending up saddled with long-term debt from hidden fees or wrestling with Draconian terms and costly rollovers, LendUp wants to give those looking for a speedy fix to a short-term financial conundrum a way to borrow money without hidden fees, costly rollovers and high-interest rates.

The lending space at large has begun to brim with startups — like BillFloat, Zest, Think, Kabbage, On Deck and Lending Club — each of which is trying to make it easier for consumers and small businesses to get access to capital without having to jump through a million hoops. LendUp, in contrast, is positioning itself as a direct lender, using technology and Big Data to allow consumers with poor or no credit to get access to small-dollar, short-term loans (of up to $250 for 30 days) and build their credit while doing so.

Unfortunately, most credit agencies turn their backs on payday loans, so even if people are able to pay them on time, it doesn’t help their credit scores and the cycle of bad credit keeps on spinning. Most banks won’t touch these kind of loans because they’re high-risk, but like On Deck Capital (which is attempting to streamline the lending process for small businesses), LendUp uses Big Data to do instant risk analysis and evaluate creditworthiness, weeding out those who have bad credit for a reason from those who may have become victims of the system.

Along with eschewing hidden fees, rollovers and high interest rates, LendUp streamlines the application process for loans — which traditionally takes forever — by customizing the process. In other words, rather than make everyone submit bank statements, credit reports and so on right from the beginning, it crunches available data and approves those with good credit instantly. It only requests more information from you if questions arise, approving or rejecting as soon as it has enough information to make an informed decision.

Co-founders Jacob Rosenberg and Sasha Orloff tell us that they’re able to build a dynamic application that changes in realtime based on customer risk profiles and segment with a higher level of accuracy by utilizing data sources that most banks or credit bureaus don’t consider. That could be data from social media or other lesser-used credit institutions.

With its foundations in place, today the startup is taking its formula one stop further, offering instant online loans. This means that LendUp now has the ability to deposit money in your account in as little as 15 minutes, so that consumers not only can apply for and get approved quicker than than they normally would, but they now have near-instant access to that loan.

LendUp loans are also available on mobile, so unlike its aforementioned lending competitors, LendUp deposits that money into your bank account, which you can then access from your laptop or while you’re on-the-go.

Orloff, who has nearly 15 years of experience working in credit analysis at the World Bank, Citigroup and others, says that the biggest problem inherent to the current lending process is that it can take up to four days for people with good credit to be approved for loans. When you need money right away because of impending deadlines, when it’s an emergency, that’s too long to wait.

By depositing loans directly into your bank account and making that capital available while you’re on the go, the founders believe that they’re removing one of the last advantages of going to a payday loan store rather than borrowing online. Participating banks offer instant direct deposits and loan decisions through LendUp, while users with non-participating bank accounts will receive loans the next business day.

It also hopes to incentive users by offering financial education through its “LendUp Ladder,” which aims to help borrowers with poor credit improve their credit scores by using LendUp to pay their loans on time.

With its new announcement today, LendUp is removing one of the last barriers that stands in the way of short-term, payday lending that actually offers fair terms to the consumer. So, while the word “disruption” is overused in Startup Land, LendUp has begun to create a service that seems like it could have real disruptive potential in the predatory world of payday lending.

Find LendUp at home here.


December 25, 2011

LendUp is a socially responsible lender that offers a safe borrowing alternative to consumers that banks and credit unions decline. The LendUp Ladder changes the dynamics of the small dollar loan: rather than being a dangerous first step into a cycle of debt, it becomes an opportunity to learn good financial behavior and to build credit through education, gamification and a transparent fee structure. Learn more at

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April 1, 2005


Y Combinator is a venture fund which focuses on seed investments to startup companies. It offers financing as well as business consulting along with other opportunities to 2-4 person companies looking to take an idea to a product. Y Combinator looks for companies with “good” ideas over companies with experience and a business model. The company made its first investments in Summer 2005. Y Combinator selects companies to finance and consult with twice a year. They are located in…

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Cash Advance Online – Easy Option to Get Payday Loans for This Holiday Season

NEW YORK, June 11, 2013 /PRNewswire-iReach/ — Travel expenditures are usually significant to the average individual and during current economic conditions it is reasonable to expect that many people will have to reduce their leisure travel. On the other hand, people look forward to summer vacations – from families with or without children to single individuals planning to travel and explore new places. Consumers may find themselves running short on cash and they should be considering cash advance online loans to cover the short-term need.


Summer holiday payday cash advances from are a viable option when individuals need money urgently – they can get up to $1,000 cash in their bank account, money that can be repaid with the next paycheck (electronically, by debiting the bank account on the pay date). The application process is completely free – never charges it’s clients a fee for completing the application form.

Interested customers need to apply online with – this means they have to fill in a simple 5 minutes form. The approval is very quick and the cash is transferred in the same or the next business day. There are just a few eligibility criteria in order to be approved for a payday cash advance: legal age, US/UK/Canada citizenship, regular monthly income and owning a bank account.

Payday loans are useful to numerous families and individuals when planning their summer holidays because they provide money when it is needed quickly. This cash will help customers get the best travel deals just on time. But customers should only consider cash advance online loans as a last resort because this type of loan is designed for a short term. is an independent cash advance online loan matching website and is working to provide an option of emergency lending for cash-strapped consumers over the summer 2013 vacation.

Of course, customers from the United States, Canada and the United Kingdom can use‘s online cash advance loans for other financial necessities too – like an unexpected cash expense, a medical or car repairing bill and so on.

To read more about payday cash advance loans or fill a free and easy application form, visit

Media Contact: Mark Wekberg,, 323 419 3505,

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