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Courts ‘fair’

Courts is hitting back against a claim that its “instant cash” loan offer is less attractive than it seems.

Trisha Tannis, managing director of Unicomer (Barbados) Ltd, which trades as Courts Barbados Ltd, insisted that the “Courts Ready Cash” offer rate is the lowest on the market, in response to an accusation that the company was charging customers too high an interest rate.

Through the programme, Courts’ “loyal” customers were sent cheques valued at between $500 to $1 000 redeemable in cash. The interest rate is 2.4 per cent with equal monthly payments of $191 for six months.

However, Grady Clarke, chief executive officer of Caribbean Credit Bureau Ltd, better known as Credi-Check, said the effective interest rate of the Courts loan worked out at close to 50 per cent.

“Based on my calculations,” said Clarke of the $191 for six months, “this amounts to a total of $1 146 being paid, and when you subtract the $1 000 principle, you are left with $146. If this represents the interest income that is charged on the loan over a six-month period, and the fact that the average balance of the $1 000 loan repaid in equal instalments over six months is $500, the effective interest rate works out to be close to 50 per cent.

“How many customers would actually know the true cost of borrowing?” Clarke said. He added that “customers have a right to repay the funds and have the loan cancelled if they were not aware of the cost”.

Please read the full story in today’s SUNDAY SUN, or in the eNATION edition. […]

Payday loan costs cap unveiled by George Osborne | Money | The …

Link to video: Payday loan cap announced by chancellor George Osborne

George Osborne executed a hasty politically driven U-turn, surprising even coalition Liberal Democrat ministers, when he ended years of resistance and announced a legal cap on the overall cost of payday loans.

In a sign of the speed of the Treasury about-face and the secrecy surrounding the chancellor’s move, papers distributed on Friday for Monday’s inter-departmental ministerial meeting on consumer credit contained no reference to the policy shift.

Labour claimed the move showed the success of its cost of living agenda and revealed the Tories’ strategic confusion and weakness, including in Osborne’s own attitude to the role of the state in regulating markets.

Osborne may feel he has shot one of Labour’s foxes and done something to dispel the impression that the Conservatives do not represent the low-paid.

He presented the move as “a logical next step” to regulate a market left unregulated by the previous Labour government, adding that evidence in Australia showed caps on the overall cost of loans could be effective.

The chancellor said that there would be controls on charges, including arrangement and penalty fees, as well as on interest rates. “It will not just be an interest rate cap. You’ve got to cap the overall cost of credit.”

He said the move would “make sure that hardworking people get a fair deal from the financial system, whether it’s the banks or the payday lenders or the internet lenders”.

A possible catalyst for Osborne’s move was a renewed push from backbench Lib Dems to impose a cap using an amendment to the banking bill in the Lords this week. Earlier this month the Treasury had been given full ministerial responsibility for consumer credit, taking responsibility from the business department.

In another sign of the haste of the decision, the Treasury has yet to set out its alternative amendment.

Osborne said he would be imposing a legal duty on the Financial Conduct Authority to impose an overall cap on the cost of credit. The FCA already had the power to impose a cap, but now it would be forced to do so. The chancellor said it would be for the FCA to decide the specifics of how the cap would work.

Osbornemade his decision even though the Competition Commission had just started an inquiry into the industry.

A Lib Dem source said: “The Lib Dems have been pushing for tougher action on payday lenders for well over a year – at every step of the way this has been met with strong resistance from Conservatives in the Treasury. It seems the Tories read the runes on this one and realised that increasingly the evidence and political tide were against them. Their change of heart is very welcome but none of this positive action would have happened without the Lib Dems in government.”

The Lib Dem backbencher Lord Starkey held discussions about his alternative amendment last week with the Lib Dem consumer affairs minister Jo Swinson and Treasury chief secretary Danny Alexander. Starkey was calling for a maximum cap on the size of a loan of £300and admitted that he was astonished by Osborne’s decision.

Australia has an interest rate limit of 4% per month, after a maximum up-front fee of 20%. However, even in Australia, borrowers can still face charges, and penalties for late payment are allowed to be as much as twice the loan amount.

The chancellor praised the shadow consumer affairs minister Stella Creasy for her campaign.

Creasy, the Labour MP for Walthamstow, who has campaigned against the payday lending industry’s practices, criticised the government for sending “confusing” signals to the regulator, and said the coalition was “playing catch-up” with Labour, who have said they would bring in a cap if they were handed power in 2015.

In an interview on Radio 4’s Today Programme, Creasy said that introducing a duty to cap at this stage would “leave in tatters the consultation announced a few weeks ago where ministers specifically ruled out the move to introduce a cap”.

Creasy said the regulator had told her it was not using its existing powers to cap interest rates in the sector because there was insufficient political will for it to do so.

[…]

Malawi: Filp Is a Loan Programme and Not a Hand Out – Dr. Munthali

Minister of Agriculture and Food Security, Dr James Munthali has clarifies on the Farm Input Loan Programme (FILP) saying it is a loan programme and not a hand out or subsidy programme.

In the programme, farmers are expected to pay back with cash and not maize in return for the loan after the harvest season.

This was disclosed Thursday when the minister in conjunction with the Malawi Rural Development Fund (MARDEF), which will implement the FILP programme, held a press conference in Lilongwe to enlighten the media on the technicalities and implementation of the programme.

Malawian farmers in cooperatives, associations, clubs, groups, saving and credit groups as well as youth groups with potential to repay back the loan will get a loan of 2 bags of fertiliser, one of NPK and one of Urea.

However, each beneficiary is expected to pay for an administration fee pegged at MK575 and a bank card at K1, 800 with the card charge varying with membership of the group.

Farmers are expected to deposit 5 percent of the total loan amount as collateral and a premium of 0.5 percent of the total loan as insurance translating into K170.

Total contribution of a farmer amounts to K3, 200 and farmers are expected to repay the loan by October, 2014.

“I would like to state here that this is a sort of a revolving fund that farmers are expected to pay back the loan after harvesting and selling part of their harvest. The more people repay the more inputs will be made available to the farmers. And similarly, the more fertilisers we use, the more yields we shall have.

“This is so because from the two bags of fertiliser, a good farmer is expected to get more than 25 50 kilograms bags of maize. And from that if we look at the total loan which is about K34, 000 that only requires 7 bags of maize at K500 per kilogram and the remainder is what the farmer uses,” said Dr Munthali.

The minister, however, said the more important thing is that if the farmer has food, they will have more time to spend on other income generating activities which would in one way improve their livelihoods and simultaneously provide a good chance of sustainable food supply in the country.

Malawi

Govt Cuts Travel to Cut Costs

President Dr. Joyce Banda Saturday said the cutting down of external and internal travel Government instituted recently … see more »

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