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Students: payday loans are not your only option | Education | The …

The top testimonial for payday loan company Smart Pig is from someone without a surname, who declares in block capitals: “I love you! You are my favourite pig ever! Who needs Peppa when you’re in my life!”

Noor” has clearly only met pigs willing to give her a 782% representative APR loan, a full 1% worse than the offer from Smart Pig.

Smart Pig is just one of a number of high interest payday lenders now offering their services to students. Their adverts, which have been reported to the Advertising Standards Agency (ASA), highlight prizes you can get your hands on, including the opportunity to “win a term’s rent”. All in a space they could have used to explain their APR.

Targeting Students

A worrying number of undergraduates are turning to payday loans. Around 2% of undergraduates used them last year, according to a survey by the National Union of Students (NUS). This may not sound like a lot, until you consider this means up to 46,000 students are risking the debt spiral associated with payday loans.

Despite a NUS campaign in 2013 to ban payday loan adverts on campuses, payday lenders are still heavily targeting students.

Peachy Loans have recently had complaints upheld against them by the ASA for an advert they ran on sandwich wrappers in cafes opposite university campuses and colleges. The campaign, it was found, encouraged a casual attitude to taking out a loan. Its slogan was: “Small bites put a smile on your lips! You can now get a loan from £50 to £500 and pay it back in small bits…” emanating from a cartoon mouth.

People willing to take financial advice from their sandwich wrappers may seem like a financially unsound group unlikely to return your investment but, unfortunately, these are probably the same group of well-meaning but naïve people that will incur late fees.

Scam techniques

There’s a reason payday loans companies use such trite campaigns, and it’s the same reason email scams are so poorly written. You and I may realise the emails are obviously a scam, but that’s because we’re supposed to.

Scammers deliberately use terrible spelling and implausible stories because it weeds out “false positives”, according to research from Microsoft. These are people who will likely figure out it’s a scam before they send off their money.

In the same way, adverts for payday loans weed out the people they’re not interested in, until all they’re left with are the incredibly desperate or the young and unreasonably optimistic.

There is money to be gained from the people optimistic enough to think APR won’t apply to them, as implied by Wonga’s now banned advert which claimed their 5,853% APR was “irrelevant”.

Payday loan companies aren’t looking to attract people who might look up what their interest rate actually means. They’re looking for more vulnerable people.

People who look at smiling pigs with top hats carrying bags of cash and don’t see a monumentally large danger sign. People who are paying attention to the singing Austrian girls handing people wads of money in TV adverts, and not the alarming text at the bottom of the screen.

Or they’re looking for people far too desperate to care. All too often students fit into this latter category.

Other options are available

Student Money Saver’s advice is to go to your university or student union for financial help. No matter how desperate things seem, advice and financial help will be available.

Hardship funds are available to you from your university when you are in dire financial circumstances. Hardship funds are lump sums or installments paid to you when you can’t afford the essentials, such as rent payment, utility bills or food.

Usually these are lump sums or installments paid to you, which you won’t have to pay back. In some cases your university will give you money as a loan, but without the massive rates of interest offered by payday lenders. Talk to your university and they will help you.

You can also request a higher bank overdraft if you haven’t done so already. Banks know students are likely to be high earners when they graduate, and so are likely to allow you this extension as an investment in your loyalty. If one bank won’t offer you an extended overdraft, shop around for a bank that will.

James Felton is the content editor of student finance website Student Money Saver.


Texas Is Throwing People In Jail For Failing To Pay Back Predatory …

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At least six people have been jailed in Texas over the past two years for owing money on payday loans, according to a damning new analysis of public court records.

The economic advocacy group Texas Appleseed found that more than 1,500 debtors have been hit with criminal charges in the state — even though Texas enacted a law in 2012 explicitly prohibiting lenders from using criminal charges to collect debts.

According to Appleseed’s review, 1,576 criminal complaints were issued against debtors in eight Texas counties between 2012 and 2014. These complaints were often filed by courts with minimal review and based solely on the payday lender’s word and frequently flimsy evidence. As a result, borrowers have been forced to repay at least $166,000, the group found.

Appleseed included this analysis in a Dec. 17 letter sent to the Consumer Financial Protection Bureau, the Texas attorney general’s office and several other government entities.

It wasn’t supposed to be this way. Using criminal courts as debt collection agencies is against federal law, the Texas constitution and the state’s penal code. To clarify the state law, in 2012 the Texas legislature passed legislation that explicitly describes the circumstances under which lenders are prohibited from pursuing criminal charges against borrowers.

It’s quite simple: In Texas, failure to repay a loan is a civil, not a criminal, matter. Payday lenders cannot pursue criminal charges against borrowers unless fraud or another crime is clearly established.

In 2013, a devastating Texas Observer investigation documented widespread use of criminal charges against borrowers before the clarification to state law was passed.

Nevertheless, Texas Appleseed’s new analysis shows that payday lenders continue to routinely press dubious criminal charges against borrowers.

Ms. Jones, a 71-year-old who asked that her first name not be published in order to protect her privacy, was one of those 1,576 cases. (The Huffington Post reviewed and confirmed the court records associated with her case.) On March 3, 2012, Jones borrowed $250 from an Austin franchise of Cash Plus, a payday lender, after losing her job as a receptionist.

Four months later, she owed almost $1,000 and faced the possibility of jail time if she didn’t pay up.

The issue for Ms. Jones — and most other payday borrowers who face criminal charges — came down to a check. It’s standard practice at payday lenders for borrowers to leave either a check or a bank account number to obtain a loan. These checks and debit authorizations are the backbone of the payday lending system. They’re also the backbone of most criminal charges against payday borrowers.

Ms. Jones initially obtained her loan by writing Cash Plus a check for $271.91 — the full amount of the loan plus interest and fees — with the understanding that the check was not to be cashed unless she failed to make her payments. The next month, when the loan came due, Jones didn’t have the money to pay in full. She made a partial payment, rolling over the loan for another month and asking if she could create a payment plan to pay back the remainder. But Jones told HuffPost that CashPlus rejected her request and instead deposited her initial check.

Jones’ check to Cash Plus was returned with a notice that her bank account had been closed. She was then criminally charged with bad check writing. Thanks to county fines, Jones now owed $918.91 — just four months after she had borrowed $250.

In Texas, bad check writing and “theft by check” are Class B misdemeanors, punishable by up to 180 days in jail as well as potential fines and additional consequences. In the typical “hot check” case, a person writes a check that they know will bounce in order to buy something.

But Texas law is clear that checks written to secure a payday loan, like Jones’, are not “hot checks.” If the lender cashes the check when the loan is due and it bounces, the assumption isn’t that the borrower stole money by writing a hot check –- it’s just that they can’t repay their loan.

That doesn’t mean that loan transactions are exempt from Texas criminal law. However, the intent of the 2012 clarification to state law is that a bounced check written to a payday lender alone cannot justify criminal charges.

Yet in Texas, criminal charges are frequently substantiated by little more than the lender’s word and evidence that is often inadequate. For instance, the criminal complaint against Jones simply includes a photocopy of her bounced check.

Making matters worse, Texas Justice of the Peace courts, which handle claims under $10,000, appear to be rubber-stamping bad check affidavits as they receive them and indiscriminately filing criminal charges. Once the charges are filed, the borrower must enter a plea or face an arrest warrant. If the borrower pleads guilty, they must pay a fine on top of the amount owed to the lender.

Jones moved after she borrowing from Cash Plus, so she did not get notice of the charges by mail. Instead, a county constable showed up at her new address. Jones said she was terrified and embarrassed by the charges. She had to enter a plea in the case or else face an arrest warrant and possible jail time. In addition to the fines, Jones was unable to renew her driver’s license until the case was resolved.

Craig Wells, the president and CEO of Cash Plus, which is based in California but has about 100 franchises in 13 states, told HuffPost that “this was the first I’ve heard of this case.” He said that the company instructs its franchises to adhere to all state laws and regulations. On the company’s website, Wells says his goal is for Cash Plus to be “as-close-to-perfect-a-business-as-one-can-get,” adding that the company’s “top-notch customer experience keeps them coming back over and over again. ”

Emilio Herrera, the Cash Plus franchisee who submitted the affidavit against Jones, told HuffPost that he does not remember her case. But he added that he tries to work out payment plans with all his customers, and that it is common for his customers to pay back loans in very small increments.

In response to a request for comment from HuffPost about Appleseed’s letter, Consumer Financial Protection Bureau spokesman Sam Gilford said, “Consumers should not be subjected to illegal threats when they are struggling to pay their bills, and lenders should not expect to break the law without consequences.”

One reason that lenders’ predatory behavior continues is simple administrative overload. Travis County Justice of the Peace Susan Steeg, who approved the charges against Jones, told HuffPost that due to the volume of bad check affidavits her court receives, her office has been instructed by the county attorney to file charges as affidavits are submitted. The charges are then passed along to the county attorney’s office. It is up to the county attorney to review the cases and decide whether to prosecute or dismiss them.

But Travis County Attorney David Escamilla told HuffPost that his office had never instructed the Justice of the Peace courts to approve all bad check complaints, and said he did not know why or where Steeg would have gotten that understanding. “We don’t do it,” Escamilla said, referring to the usage of the criminal hot checks process to enforce the terms of lending agreements.

When cases are wrongfully filed by payday lenders, how quickly they are dismissed depends on prosecutors’ workload and judgment. Often, it is not clear that theft by check cases are payday loans, since the name of the payday lender is not immediately distinguishable from that of an ordinary merchant.

District attorneys may also receive these complaints and have the ability to file criminal charges. According to Ann Baddour, a policy analyst at Appleseed, the DAs seem to operate with more discretion than the county attorneys, but the outcomes were arguably as perverse. Baddour said one DA told her that of the hot check complaints he had received, none had led to criminal charges or prosecutions. Instead, he said, his office sent letters threatening criminal charges unless the initial loan amounts plus fees were repaid.

The DA, who seemed to think he was showing evidence of his proper conduct, was instead admitting that his office functioned as a debt collector.

With the help of free legal aid, Jones’ case was eventually dismissed, and she said the court waived her outstanding payment to Cash Plus. But not all debtors are as fortunate.

Despite being against state law, the data show that criminal complaints are an effective way for payday lenders to get borrowers to pay. Of the 1,576 criminal complaints Appleseed analyzed, 385 resulted in the borrower making a repayment on their loan. In Collin County alone, 204 of the 700 criminal complaints based on payday lenders’ affidavits ended in payments totaling $131,836.

This success in using criminal charges to coerce money from borrowers means that payday lenders have a financial incentive to file criminal charges against debtors with alarming regularity — even if those charges are eventually rightfully dismissed.

Because Appleseed’s study only covered eight of Texas’ 254 counties, there are likely more cases statewide. And Texas is not alone. In 2011, The Wall Street Journal found that more than a third of states allow borrowers to be jailed, even though federal law mandates that loan repayment be treated as a civil issue rather than a criminal one.

“There’s a lot more to learn about the practice itself, how widely it’s used, and its effect on consumers,” Mary Spector, a law professor at Southern Methodist University who specializes in debt collection issues, told HuffPost. “I think they’ve uncovered the tip of the iceberg.”


Micro-loan program launches Philadelphia initiative

Last updated: Wednesday, December 3, 2014, 1:08 AM
Posted: Tuesday, December 2, 2014, 6:16 PM

When Carl Lewis needed a refrigerated dessert display case for his 48th Street Grille in West Philadelphia, he applied for a $5,000 zero-interest loan from crowdfunding website

“I envisioned opening this restaurant. I applied to several banks for a loan, and they all turned me down,” said Lewis, whose Kiva Zip loan was underwritten by 185 lenders as far away as Sweden and Australia.

The money-raising initiative will now be available to more small-business owners and aspiring entrepreneurs with the launch of Kiva City Philadelphia on Tuesday. The program was announced jointly at Lewis’ restaurant by president Premal Shah, Mayor Nutter, and Alan Greenberger, director of the city Commerce Department.

Philadelphia is the 10th U.S. city to join the Kiva program, aimed at starting or expanding businesses that might not otherwise qualify for traditional lending.

The nonprofit Kiva has facilitated “micro loans” to small-business owners in 80 countries for a decade, with 1.2 million lenders funding $650 million in loans.

Borrowers are vetted and must be endorsed by a “trustee,” such as a community group, that’s been approved by the nonprofit. The entrepreneurs must find 15 friends or associates to underwrite them online before the Kiva loan proposal is listed publicly for crowdfunding.

The borrower can receive an initial Kiva Zip loan of up to $5,000 (pledges start at $5). In Philadelphia, loans will be matched dollar for dollar by PNC Bank, the Zisman Family Foundation, Nancy and Greg Wolcott, and Friends of Kiva City Philadelphia, the nonprofit said.

Grants to help the program get started will come from the Barra Foundation, the Philadelphia Foundation, the city Commerce Department, the Zisman Family Foundation, and the Mayor’s Fund for Philadelphia.

Lewis’ lifelong dream was to open his own restaurant, after working nearly four decades in the restaurant and hospitality industry for InterContinental Hotels and Marriott Corp., and as executive chef at Temple University Health Center.

When he learned that Kiva “was giving out these micro loans,” he applied. With his first $5,000, plus a $15,000 interest-free loan from the Hebrew Free Loan Society of Greater Philadelphia and a Small Business Administration loan from the Enterprise Center in West Philadelphia, Lewis then was able to get a bank loan.

Five weeks ago, he opened the 48th Street Grille near 48th and Spruce Streets, serving fresh Caribbean American fare.

Fourteen Philadelphia entrepreneurs have received Kiva loans thus far. Among them are Peter Merzbacher, founder of Philly Bread, a bakery in the Olney section, who received a $5,000 loan underwritten by 135 lenders. Arthur Verbrugghe, who started a custom-clothing workshop in Roxborough, Atelier Arthur L.L.C.. received a $3,000 loan from 86 lenders.

At, small-business owners can apply for micro loans “with zero percent interest, no fees, no mandatory credit check, and no collateral requirement,” he said.

“We call it social underwriting,” said Johnny Price, senior director of Kiva Zip, on hand for the announcement. “Normally, a bank will employ financial underwriting. They will look at your credit score, your collateral, and cash flows.”

Kiva looks at a borrower’s character, Price said. “We ask borrowers to recruit 15 people from their network to fund their loan in private before we post it publicly on the website. Since we rolled out that innovation, we’ve seen a significant improvement in our repayment rate: 90 percent in the United States right now.”

“It’s kind of how banking was done 100 years ago, where people vouch for people,” said president Shah. “When businesses pay back the loan, they can qualify for larger loans from the Internet community. It becomes almost a public credit score, where local banks can get off the sidelines and begin loaning to people like Carl.” 215-854-2831 […]

University Bancorp Signs Agreement to Acquire Final 20% of Midwest Loan Services for $3.1 Million

ANN ARBOR, MI–(Marketwired – Nov 24, 2014) – University Bancorp, Inc. (OTCQB: UNIB) announced that it executed an option agreement that gives it the right to acquire the final 20% of Midwest Loan Services Inc. that it does not own for total consideration of $3,101,463.57. The consideration to be paid at closing will be:

Cash of $521,389.89; 309,361 newly issued shares of University Bancorp common stock valued at $6.95 per share, or $2,150,061.40, approximately 6.11% of the pro forma issued and outstanding shares of University Bancorp’s common stock; and Additional potential interest earn-out from interest on our zero interest rate cost mortgage subservicing escrow deposits of $430,012.28, as discussed below.

Currently University Bancorp owns 100% of University Bank which owns 80% of Midwest Loan Services, a residential mortgage subservicing firm based in Houghton, Michigan which manages over 100,000 residential loans totaling over $15.8 billion for over 360 financial institutions nationwide. The American Bankers Association, through its Corporation for American Banking subsidiary, recently exclusively endorsed Midwest Loan Services to provide an array of residential mortgage subservicing services to member banks and their borrowers nationwide. Midwest is known for friendly, responsive service and industry-leading technology that help lenders retain customers, reduce costs and ensure regulatory and operational compliance. The ABA’s exclusive endorsement was based on both Midwest’s superior technical solution and its superior customer service. Midwest’s customers have 14x fewer complaints than the industry average for the nine months ended September 30, 2014 according to the Consumer Financial Protection Bureau consumer complaint database, despite the fact that 58% of all the complaints in the CFPB database relate to residential mortgage servicing. Since 2001 Midwest has grown its mortgages subserviced at 26% per annum compounded.

We are acquiring the shares from Ed Burger, former Founder and CEO of Midwest, who recently retired. Midwest’s President & CEO is currently Peter T. Sorce, a credit union and banking industry veteran with 23 years of experience in the mortgage servicing industry. Since Mr. Burger owns 20% of Midwest, this places a value on Midwest of $15.5 million versus Midwest’s shareholders equity as of 9/30/2014 of $10.75 million. Our legal counsel is unaware of any regulatory requirement to seek approval of the transaction since it would result in a 100% owned subsidiary of the Bank, however we are in the process of confirming with our regulators that no approval is required, and if we receive that confirmation we intend to immediately close the acquisition. If the transaction had closed 9/30/2014, we currently estimate that the book value per share of common stock of University Bancorp would have increased from $2.174 to $2.466 per share, or an increase of $0.292 per share.

President Stephen Lange Ranzini noted, “The book value of Mr. Burger’s shares in Midwest Loan Services as of 9/30/2014 was $2,150,061.40; therefore, the bank would pay a premium of approximately $950,000 for his shares, which is reasonable considering the long history of profitability and growth of the firm and that it controls about $190 million in zero interest escrow deposits. Midwest and the zero interest rate cost mortgage subservicing escrow deposits that it controls are a cornerstone of the Bank’s profitability and owning 100% of the firm greatly enhances the value of the Bank and its earnings as interest rates begin to normalize from record low levels.”

With respect to the $430,012.28 interest earn-out, we will pay to Mr. Burger in cash following each month-end period, 20% of the amount of the average monthly balance of Midwest escrow deposits held at University Bank and the Federal Home Loan Bank of Indianapolis, or any other depository where University Bank actually receives the benefit of interest earned on these escrow deposits, times the Fed Funds interest rate minus 0.5% with a floor of 0%, until the cumulative sum of $430,012.28 is paid. If interest rates never rise, no amounts will be owed. For example, if the Fed Funds rate is 1.0% and the sum of the average monthly balance of Midwest escrow deposits held at University Bank and the Federal Home Loan Bank of Indianapolis continues to be $190,000,000, then the monthly payment would be $15,833.33 (20% x $190,000,000 x (1%-0.5%)/12) until the cumulative sum of $430,012.28 is paid. If interest rates rise, University Bank will continue to benefit from 80% of the increase until the contract is fulfilled and then 100% after. The Federal Reserve Bank currently projects that the normalized Fed Funds Rate is currently 3.75%.

Because there is an insufficient number of authorized and unissued shares of common stock to complete the deal, the board of directors has authorized and has the authority to create a new series of convertible stock that would be issued to Mr. Burger, and plans to call a special shareholder meeting to increase the authorized number of shares of common stock so that these convertible preferred shares can then be converted into common stock. We hope to both close the transaction and call the shareholder meeting prior to year-end.

Shareholders and investors are encouraged to refer to the financial information including the audited financial statements, Company strategic plan and prior press releases, available on our investor relations web page at:

Ann Arbor-based University Bancorp owns 100% of University Bank which, together with its Michigan-based subsidiaries, holds and manages a total of over $16 billion in loans and assets and our 336 employees make us the 9th largest bank based in Michigan. Founded in 1890, University Bank® is proud to have been selected as the “Community Bankers of the Year” by American Banker magazine and as the recipient of the American Bankers Association’s Community Bank Award. University Bank is a Member FDIC and an Equal Housing Lender. The operating subsidiaries of University Bank which are members of our corporate family, ranked by their size of revenues are:

University Lending Group, a retail residential mortgage originator based in Clinton Township, Michigan; Midwest Loan Services, a residential mortgage subservicer based in Houghton, MI; University Islamic Financial, an Islamic banking firm based in Farmington Hills, MI; Community Banking, based in Ann Arbor, which provides traditional community banking services in the Ann Arbor, Michigan area; Ann Arbor Insurance Centre, an independent insurance agency based in Ann Arbor.

CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future business development, pre-tax income and net income, budgeted income and capital levels, the sustainability of past results, and other expectations and/or goals. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.


Payday loan policy and the art of legislative compromise | The …

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DENVER — De Jimenez is a single mother of three. She works in medical records and one of her children is in college. She recently took out a payday loan and she’s kicking herself, knowing she has paid about $70 to borrow $100.

“For rent,” she says of her last loan. “I get them to cover basic needs, really basic needs — food, water, shelter. They’re not for a car payment or anything like that, just to make ends meet because sometimes kids get sick. It goes back to not having paid sick days. I guess it’s a glass half full situation: If they weren’t there, I don’t know where I’d get the extra income, but at the same time, the interest rate is just so high.”

In 2010 the Colorado legislature passed payday loan consumer protections that lengthen the term of a payday loan to six months minimum from the typical two weeks — at which point a borrower has to pay that roughly $70 start-up fee to “roll over” the loan for two more weeks. The average borrower repeated that process for three to six months.

Jimenez feels more could still be done to lower the cost of payday loans, which are still about five times more expensive than credit card debt. Even so, she says the reforms made a crucial difference between just being able to manage the loans and getting caught by them.

“Before, it was like you could see a light at the end of the tunnel but it was so small it looked like a pinhole. Then you were taking out another payday loan just to pay off the first one. It was a vicious, vicious cycle,” she remembers. “At least now the light is a little brighter and the goal a little more easily attainable.”

In addition to setting minimum six-month terms for the loans, the laws also required borrowers be able to pay down the debt in installments, instead of one lump sum, and that they have the option to pay off the loan early in full without paying any fines. Since enacted, borrowers have been saving an estimated $40 million a year on what are still the most expensive loans available on the market.

Now Colorado’s law, considered a compromise between industry interests and consumer protections, may serve as a national model as the Consumer Financial Protection Bureau weighs regulations on payday loans coast to coast.

“The key lesson from Colorado is that successful reform requires tackling the fundamental unaffordability of payday loans,” said Nick Bourke, who has researched the topic for PEW Charitable Trust. “Federal regulations should require a strong ability-to-repay standard and require lenders to make loans repayable over a period of time.”

PEW’s research shows that, of the 12 million Americans who take payday loans each year, most borrowers are asking for about $375 to cover routine expenses. The loans typically are made for a period of two weeks, at which point the lump sum is due or borrowers can re-up the loan by paying the initial fee again, usually in the region of $75. But, PEW found, borrowers can rarely afford to repay the loans after two weeks, since the loan amounts typically account for a third of their take-home pay. As a result, folks end up rolling over their loans for an average of half a year, ultimately racking up “interest” rates that exceed 300 percent. The interest on credit card debt, largely considered expensive, is more like 24 percent.

Most states’ payday loan consumer protections, if they have them, focus on capping that interest rate. This approach has received some push back, with opponents saying it effectively drives payday lenders out of the regulated state. In Oregon, for example, a 2007 law capping interest at 36 percent reduced the number of payday lenders from 346 to 82 in its first year on the books.

“The question is, are those people better off without credit? Current economics hasn’t answered that question yet. Some studies say people do better, that they go to friends and family or just scrape by, others say they do worse, that they get kicked out their apartment, etcetera,” said Jim Hawkins, a law professor at the University of Houston who focuses on banking.

That concern thwarted years of attempts to pass a rate cap in Colorado and ultimately motivated the compromise bill that has garnered so much national attention, according to the measure’s sponsor, House Speaker Mark Ferrandino (D-Denver).

“We were definitely going down,” remembered Ferrandino. “We’d tried for years to get a bill passed. It failed two years in a row and was on the cusp of failing again. So we sat down with key votes in Senate and said: ‘Our goal is to end the cycle of debt. We have no problem with payday loans continuing or with people having access to capital, but let’s not let folks get caught in this cycle. If that’s our shared goal, what are policies we can do to get that done?’”

Legislators focused on affordability, extending the terms of the loans and making them payable in installments. The law acknowledged the 45 percent interest cap the state placed on all loans but is also give payday lenders ways to charge more fees so that the de facto interest rates for payday loans in Colorado now hover around 129 percent.

“Borrowers have been pretty happy with the changes to the loans. They reported that they were more manageable, that they could actually be paid off and were ultimately much cheaper,” said Rich Jones at the Bell Policy Center, who helped draft the bill.

PEW’s national research indicates that 90 percent of borrowers want more time to repay their loans and 80 percent say regulation should require those payments to be affordable — more like 5 percent of a borrower’s monthly income than 33 percent.

Colorado’s bill did end up taking a big bite out of the payday loan industry in the state, halving the number of stores and reducing the total number of loans from 1.57 million a year before the law to 444,000 per year. Even so, supporters of the bill note that the industry fared better in Colorado than it did in other regulated states and that borrowers’ overall access to lenders went largely unchanged.

“It was not uncommon to go to parts of Denver and see a payday lending store on all four corners of a busy intersection,” said Jones. “Now maybe there’s just one or two stores in a block instead of four or five.”

“The fact that we had more payday loan stores than Starbucks didn’t make sense,” quipped Ferrandino.

“Seventy percent of the population still lives within 10 miles of a payday loan store and that figure is roughly the same as under the old law,” said Jones.

Under Dodd-Frank federal law, the CFPB does not have the authority to set the interest rate caps other states have used to regulate payday loans. They can, however, take a leaf out of Colorado statute and require that lenders give borrowers the option to pay down the loans over an extended period of time. In fact, the CFPB could go even further and require that those payments meet an affordability standard based on the borrower’s income.

Bourke says PEW wants to see the CFPB make these kinds of changes in their next round of rulemaking and notes that the agency’s own studies indicate they’re moving that direction.

“They see there’s tremendous evidence of the problems and potential harm in this market and they intend to do something about it,” said Bourke. “I think there’s a good chance they’ll put in the repayment standard.”

Bourke isn’t the only one with his eye on the CFPB. Folks in the academy are also closely watching the issue.

Hawkins noted that while Texas has very minimal regulations on how much lenders are allowed to charge for payday loans, they’ve tried alternative routes to protecting consumers based on behavioral economics. In Texas, lenders are required to tell borrowers how long it usually takes for people to repay the loans and to provide direct cost comparisons to the same loan taken on a credit card.

“To me that’s an exciting innovation that doesn’t hamper the industry, but still ensures that folks are educated,” said Hawkins, adding that initial research indicates the information does impact borrowers’ decisions.

Hawkins also noted that Colorado’s law hit the industry in fairly specific ways — namely, it vastly reduced the number of small, local lenders. PEW research backs this up. Before the law was passed, large lenders owned just over half the stores in Colorado. Today they own closer to 75 percent.

“It’s just another policy choice. Do you want to only have big companies?” asked Hawkins, noting that the CFPB has made a point of focusing on small businesses.

In all likelihood, the CFPB will be working on this issue for much of the next year, which means they’ll be making these rules while Republicans, who will take control of the Senate next session, continue to chip away at the agency’s authority.

To that end, there might be more to learn from Colorado than policy alone.

“There’s this attitude in Colorado when it comes to policy issues that you don’t have to go all the way or have nothing at all, that you can come up with meaningful compromise,” said Ferrandino. “I think what we were able to do here proves that what the CFPB is looking at is reasonable.”

[Photo by Tom Magliery]

CFPB Consumer protection elizabeth warren Mark Ferrandino Payday Loans […]

Do US presidents carry cash?


18 October 2014 Last updated at 00:33

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President Barack Obama’s credit card was rejected in a restaurant. How often do US heads of state spend their own money, asks Jon Kelly.

It’s commonly said the Queen doesn’t carry cash. It seems her American counterpart doesn’t get his wallet out too much either. Barack Obama told an audience that his credit card was rejected in a New York restaurant last month: “It turned out, I guess, I don’t use it enough.” During his term in office, Bill Clinton once had his credit card rejected too.

In the 1995 film The American President, Michael Douglas’s commander-in-chief attempts to buy flowers but is told his cards are “in storage with the rest of your private things”. It’s a similar situation for real-life White House occupants, says presidential historian Thomas Whalen of Boston University: “Everything’s provided for them – they really don’t need money.” The Secret Service agents who are on hand at all times can provide a loan if necessary. John F Kennedy “didn’t carry any cash at all, even before he was president. His friends would have to foot the bill for the privilege of hanging out with him”, says Whalen.

Others have been less parsimonious. A wallet belonging to George Washington contained a 1776 two-thirds dollar bill and a 1779 one-dollar bill until it was stolen from a museum in 1992. Abraham Lincoln was carrying a $5 Confederate bill on the night he was assassinated. In 1984 Ronald Reagan was once photographed paying for a $2.46 Big Mac meal with a $20 note, and his successor George HW Bush once showed his American Express card (plain green, not gold) to an eight-year-old who had reacted sceptically when informed that she was talking to the president. Some 14 years later, however, his son George W Bush told a Spanish-speaking journalist that all he had in his pockets was a handkerchief. “No dinero,” Bush added. “No wallet.”

The current incumbent – who earns $400,000 (£248,000) each year and has an annual expense allowance of $50,000 – has been filmed and photographed on numerous occasions paying for food with cash. In July he paid for a $300-plus bill at a takeaway barbecue restaurant in Austin, Texas, with a JP Morgan credit card (he was allowed to jump the queue). But now it appears that in New York last month the transaction wasn’t so successful. Thankfully for the president, his wife Michelle was present on that occasion to pick up the tab.

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5 Strategies to Dig Out of Student Loan Debt

Mike Dominguez is the first to admit he should have gotten on top of his student loan debt earlier.

“Looking back, I could have done a lot of things different,” says Dominguez, 33, who lives in Austin, Texas, and recently started a business with his father, selling goods and professional services to government entities.

Dominguez has $71,000 in student loan debt from earning an undergraduate degree at the University of Texas at Austin. He hasn’t paid off a dime of his balance yet and cites living too extravagantly in his 20s and taking on low-paying internships as obstacles. But his credit score is still healthy, and he’s still in good standing with his lenders, who have helped him refinance and consolidate and defer the loans. He feels optimistic that he’ll eventually pay the loans off. Someday.

But the debt has been stressful, says Dominguez, adding that it has hurt his love life. “No one wants to be saddled with that type of debt or even marry someone with that amount of debt,” he says.

Dominguez feels his story is “rather common,” and unfortunately, he is right. U.S. student loan debt exceeds $1 trillion, according to the Consumer Financial Protection Bureau. And last month, a report from the Government Accountability Office got a lot of attention when it pointed out that between 2005 and 2013, student loan debt among seniors 65 and older climbed more than 600 percent from $2.8 billion to $18 billion.

“Student loans are tricky to get rid of, presumably because we want to make sure our citizens are well-educated,” says William Waldner, a bankruptcy attorney in New York City. “If they were easily dischargeable, lenders wouldn’t give them out nearly as liberally.”

So if you’re struggling to pay off or manage your mountain of student loan debt, here are some strategies consumers employ, along with the pros and cons of each.


What it is. With this option, you defer paying your loans for a few months or possibly years. You may already be doing that if you’re missing payment dates, but now you’ll have permission from your lender.

Pros. You get a break from paying your loans with no hit to your credit score. You can use the extra money to pay off other debts, so you’ll be in better shape when you start paying off the student loans. Even better, the government may (emphasis on “may”) pay the interest on some of these loans, according to the Federal Student Aid website ( Specifically, it may pay the interest during this time on the Federal Perkins Loan, a Direct Subsidized Loan and/or the Subsidized Federal Stafford Loan.

Cons. If the government doesn’t pay the interest, you will. In that case, Chuck Mattiucci, a financial advisor at Fragasso Financial Advisors in Pittsburgh, has a plan. “Most banks and lending institutions will allow interest-only payments while loan principal payments are in deferral,” he says. “This would be the best option for most because the interest payments are a fraction of what the monthly principal and interest payments would be.”


What it is. It’s essentially the same as deferment, with one difference: If you are rejected for deferment but are given forbearance, you will definitely be paying the interest that accrues during your break in making payments.

Pros. As with the deferment, you get a break from paying your loans.

Cons. As noted, the infernal interest. Usually, the interest you’ve accrued will be added to the principal balance, so you’ve just stretched the length of your loan, and you’ll pay more in the long run.


What it is. Consolidation turns multiple loans into one loan, meaning one payment. If you have federal loans, you can apply to consolidate them at If you have multiple private loans you’d like to consolidate, you can apply to a private lender, like a bank.

Pros. Instead of having two or three or eight student loans to pay off, you’ll just have one, often with a lower monthly payment. That’s the main draw for a lot of consumers. Also, only having to make one monthly payment could help your cash flow.

Cons. The interest will be whatever the average is of your loans, and it’s possible that by consolidating your loans, you may pay more in interest in the long run.

Federal student loan forgiveness

What it is. In this case, the federal government will cancel part or all of your federal student loans. You have to apply for it and can download the application at the Federal Student Aid website.

Pros. Pretty obvious: You’ll have no or less debt.

Cons. Not only is it a long shot, but you’ll only be able to qualify in certain circumstances, such as working in the military or for certain nonprofit organizations or teaching or practicing medicine in low-income and rural communities. In other words, if you’re doing something noble with your career and you’re not likely to earn a lot of money, you may be able to get out of paying your student loans.

Student loan bankruptcy

What it is. This isn’t much of a strategy, and it’s generally something that people who feel buried under student loans wish could happen. You may end up going through bankruptcy, but odds are, you’ll emerge with your student debts in tow. “There is a hardship discharge, but this is a very difficult thing to show,” Waldner says. “If we can show that the debtor can’t work or earn income and hasn’t been working for a long period of time, the debt may be dischargeable.”

Pros. Who wouldn’t want to get rid of their student loans?

Cons. This is another long shot, and if you go into bankruptcy and try to unload your loans, “the student loan company will likely fight this, and the result will likely be a full-blown trial,” Waldner says.

And, of course, a trial is likely unrealistic. If you can’t afford to pay off your student loans, you probably can’t afford a trial.

Financial AidFinanceStudent loans […]

Banks offer cash to lure customers

BANKS are offering steep interest rate discounts and even throwing money at home buyers as they compete for a slice of Australia’s booming housing market.

WITH demand from home buyers heating up across most capital cities, lenders are doing all they can to snare new customers.

National Australia Bank stepped things up a notch on Monday by offering a free $1,000 gift card for customers who take out a loan of $300,000 or more. Canstar research analyst Mitchell Watson said with interest rates low across the board and most banks offering similar terms and conditions on loans, lenders were increasingly looking for extra incentives to attract customers. “There does seem to be a trend with offering incentives,” he said. “Home loan features are now fairly homogeneous and rates are fairly competitive across the board so offering incentives like this will make a product stand out.” University of New South Wales economist Tim Harcourt said the incentives and discounts on offer were a sign that competition was strong in the banking sector. “It shows even with the four pillars system there is still plenty of competition,” he said. NAB is not the only bank offering a cash incentive to borrowers, with the Commonwealth Bank providing a $1,000 rebate to first home buyers . Meanwhile, Westpac says it is not currently providing any additional monetary incentives but does offer a discount of 0.7 per cent or more on its standard variable rate. ANZ did not respond to questions about what incentives it offered. A recent report by JP Morgan found all the major banks were offering significant home loan rate discounts, with wealthy borrowers receiving the best deals. The report found first home buyers were often only able to access a discount of 20 percentage points, while richer and apparently safer borrowers were receiving up to 140 percentage points off their loan. Mr Watson warned buyers not to be taken in by the incentives and to instead focus on getting the lowest rate and most flexible loan available. “While $1,000 will help you now, a lower rate will help you over the next five to 15 years,” he said. Meanwhile, ratings agency Moody’s recently warned banks were lending money at a faster rate than they were taking in deposits, meaning they were increasingly reliant on international wholesale funding markets. That could affect the banks’ credit ratings, especially if lending continued to grow, the agency warned. But Dr Harcourt said there were no signs banks were taking on too many risks to increase their loan books. “I don’t think any of those major four banks would do anything too silly given the experience of the GFC,” he said.


Cash warning for university expansion


18 September 2014 Last updated at 01:21

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Delicious Digg Facebook reddit StumbleUpon Email Print By Sean Coughlan BBC News education correspondent An extra 180,000 students could be added by removing limits on numbers

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Student loan system ‘tipping point’ Students ‘worth £264,000 more in tax’ Tuition-fee change savings ‘unclear’

University budgets could be put under “severe strain” by plans to remove limits on student numbers in England, research analysing the proposals warns.

The Higher Education Policy Institute says the increase, announced last year, was “sprung on universities”.

“One critical outstanding question is how the policy is to be paid for,” says institute director, Nick Hillman.

A Department for Business, Innovation and Skills spokesman says it is “removing the cap on aspiration”.

The Higher Education Policy Institute report says the government’s proposals, to be introduced from autumn 2015, are expected to mean a 20% increase in UK undergraduates.


Such an expansion could “transform lives, improve social mobility and raise economic performance”, says report author Mr Hillman, a former adviser to David Willetts, the previous Universities Minister.

But the think tank’s report says funding arrangements for adding another 180,000 students remain “fuzzy”.

There are warnings of universities having to stretch budgets more thinly

After three years without number controls, there is an anticipated cost of £720m in extra grants and teaching costs and £700m in loan write-off costs.

The option of raising funds by selling the student loan book has been blocked by Business Secretary Vince Cable, who in July ruled out such a sale before the general election.

The report raises concerns that it could mean the existing higher education budget being stretched more thinly, putting pressure on spending per student.

The expansion in student numbers might not be in traditional universities. The report says that international evidence suggests that much of the growth might be in private providers.

Without any limits on numbers, there could be much more recruitment of European Union students, suggests the research.

‘Aspirational policy’

The research concludes that there is a risk of a “substantial decline” in the amount available for each student’s education, or else there could be “changes to student loans to recoup more of the costs” or the “re-imposition of number controls in some form”.

The think tank analyses why the government has made this shift in policy – arguing that abolishing the cap on numbers has political and economic benefits.

Allowing more people to go to university can be “sold as an aspirational policy” in the run-up to the election, the report says.

It also a recognition that increasing graduate numbers is a way of boosting economic performance.

And the report says that since demand for higher education is continuing to rise, the policy is making a “virtue of reality”.

“The decision to remove student number controls is a vote of confidence in universities and young people,” says Mr Hillman.

But he warns: “It is hard to square current forecasts on the future number of students with the expected cuts to public expenditure.

“Spending on each student may come under severe strain whoever wins the next election.”

Wendy Piatt, head of the Russell Group of leading universities, said: “This report is right to highlight the uncertainty behind the government’s plans to increase undergraduate student numbers in England.

“It would be very worrying if this policy leads to less funding per student. Good teaching requires proper levels of investment.”

“Higher education is not something to be piled high and provided on the cheap,” said Sally Hunt, leader of the UCU lecturers’ union.

“While the policy is admirable in its intention to widen access, the government needs to clearly spell out where the extra funding will be found and introduce robust quality controls.

“Recent concerns about for-profit companies milking the system, while delivering qualifications of questionable value, must be properly addressed.”

A Department for Business, Innovation and Skills spokesman said: “Removing the cap on student places will make a reality of the Robbins ambition that university should be open all who are qualified by ability and attainment.

“This year has seen record numbers of young people admitted to university, including the highest ever number of people from disadvantaged areas.

“These crucial reforms, which have removed the cap on aspiration, have been specifically funded in the Chancellor’s last autumn statement.”


More US seniors burdened by student loan debt

Washington (AFP) – Decades after their university days, an increasing number of US seniors are still struggling to pay off student loan debt, according to a new report.

And for some retirees, that means smaller Social Security checks — sometimes the only funds elderly Americans live off when they leave the workforce.

For those aged 65 and older, the total amount of federal student debt ballooned more than six-fold from some $2.8 billion in 2005 to about $18.2 billion in 2013, says a Government Accountability Office report released last week.

That’s a small fraction compared to the $1 trillion in total federal student loan debt held across all age groups.

But it can still hit cash-strapped seniors hard since, according to the report, a cut of the borrower’s Social Security disability, retirement, or survivor benefits can be claimed to pay off the loan in question.

The GAO found that, from 2002 to 2013, the number of people who saw their Social Security benefits offset to pay such debt rose about five-fold — from some 31,000 to 155,000.

In the 65 and older age group, that number grew from approximately 6,000 to about 36,000 during the same timeframe, representing roughly a 500 percent increase, it said.

While limits have been implemented on the amount that monthly benefits can be offset, “the value of the amount protected and retained by the borrower has fallen below the poverty threshold,” the GAO found.

It warned that student loan debt held by seniors can be especially difficult to deal with “because, unlike other types of debt, it generally cannot be discharged in bankruptcy.”

“Such debt can reduce net worth and income, thereby diminishing overall retirement financial security,” the GAO said.

Still, only about three percent of households headed by those aged 65 or older have student loan debt. That compares to about 24 percent of households headed by those 64 or under.

In fact, older Americans are more likely to have other types of debt, the GAO said, noting for example that 29 percent of those aged 65 and over have home mortgage debt and 27 percent owe money from credit card use.