Payday Loans - Be Aware

A  Payday loan is a cash advance (loan) from a payday lender to a financially-strapped consumer (borrower) before the borrower receives his or her paycheque. The loan however may not be linked to the borrower’s payday and can be a mere cash-advance.

For a Payday lender these loans bear a sizable risk since the loan itself is unsecured and the rate of default can go over five percent. Therefore the rate of interest charged on these short-term advances is fairly high which can make these loans very expensive. Typically the rate of borrowing could range between $15 to $25 for every $100 borrowed on a 2-week payday loan period.

To prevent a payday lender from charging an excessive rate of interest the maximum rate of borrowing is set by the jurisdiction in which the payday lender is operating. For example the maximum cost of borrowing in the province of Ontario, Canada is $21 for every $100 borrowed over 2 weeks. It works out to 562% APR. Also, if the payday loan is greater than $1,500 or for a duration of more than 62 days then the maximum cost of borrowing is not applicable. In Ontario a payday loan can be cancelled in two business days of receiving the money without any penalty or fees as long as the full amount is returned to the payday lender.

Owing to the high default rate in this form of credit the payday lenders generally rely on aggressive collection practices. However, these collection strategies have to abide by the same industry standard collection practices used to collect other debts, specifically standards listed under the Fair Debt Collection Practices Act in the US.

In the US, Payday lending is legal and regulated in majority of the states but there are still certain states where payday lending is either illegal or not feasible. In Canada, there is a Canadian Payday Loan Association (CPLA-ACPS.CA) with a Code of Best Business Practices for its industry members.

A payday loan agreement between a lender and a borrower must incorporate the following:

·       The ‘Amount’ that is being loaned

·       The ‘Duration’ of the loan and the ‘Date’ by which the loan should be repaid

·       The total ‘Cost of Borrowing’ inclusive of all fees and finance charges.

The loan is given immediately. At the point of lending the lender should not deduct any fees. Nowadays payday loans can be granted online where the borrower completes the loan application online. The money is then transferred by the payday lender by EFT (Electronic Fund Transfer) and deposited directly into the applicant’s bank account. At the time of repayment the lender withdraws its fees directly from the borrower’s ban account on the   borrower's next payday or on the date that the loan has to be paid by. The lender may seek additional documents by fax or email.

A payday lender cannot generally give another payday loan to a particular borrower until that borrower has paid his or her first loan in full.

Remember payday loan is quick cash and quick cash always comes at a cost!

How to go about credit & debt recovery in slowdown phase

New Delhi, Feb 18 (UNI) A new book warns that in the wake of the recent global financial crisis and slowdown, the risks of businesses resulting from bad debt and ineffective credit controls are greater than ever before.

For businesses and institutions to survive in difficult economic times, there must be effective systems in place to successfully manage credit risks and recover bad debt Losses, the book says.
Entitled 'Essential Guide to Credit Management and Debt Recovery in Hong Kong, Singapore, Malaysia and India', the book has been writen by two experts--Roberto (Bobby) Rozario and Puru Grover. The book brings out how credit management is an important business discipline, as it impacts working capital and cash flow of an organisation.

It borrows a common adage in business that goes as follows: 'revenue is vanity, profit is sanity but cash is king!''

Credit is all around us every day. We need to understand that learning about credit management involves gaining greater insight into how it impacts us at the macro and micro level. Business closures, layoffs, higher prices, tax increases and budget deficits are just a few examples of failures in credit management and debt recovery,' the authors say.

The book is a practical, easy-to-follow guide to proven credit management and debt recovery systems throughout the Asia-Pacific region.

It is a book written by leading experts in the financial and credit and money management industry. The authors have drawn upon their years of professional and academic experience to provide a definitive guide for the industries in Hong Kong as well as Malaysia, Singapore and India.

Useful for credit managers and more accessible to beginning students in the field, the book provides a distillation of the essential concepts in credit management and debt recovery. It is supported by current examples and a solid pedagogical framework.

The text has been praised both for its balanced yet solid coverage of traditional topics, and its broad coverage of managing the risk associated with accounts receivable.

The book comes at a time when globally experts are striving to improve credit performance. The global financial crisis is linked to reckless lending practices with a broadbased credit boom which fed into a global speculative bubble in real estate and equities that reinforced risky credit transactions. 'Credit Management that encompasses prudent management of cash is the life blood of all businesses, and takes a paramount position when braving an economic downturn.

The effect of liquidity is immediate and mismanagement of credit could be unforgiving,' the book says.

The foreword of this book is written by the president of the Association of the Credit & Collection Professionals (ACA International - Minneapolis, MN US) which is the world's largest association for credit and collection professionals. 'It is so very important that we continue to encourage more youth to consider credit management as a career goal,'the book says.

Mr Bobby Rozario is the Managing Director of Alpha & Leader Risks and Assets Management Co Ltd in Hong Kong and Principal of Alpha & Leader Law Firm in China. He is the current Executive Councillor and Fellow Member of the Hong Kong Credit and Collection Management Association. Having over 15 years of experience, Mr Puru Grover has worked for organisations like Philips Electronics, Bell and D&B. He is currently the General Manager at Credit Guru Inc, a Canadian company.

Gurdip Singh
Head of Business & Economy
United News of India (UNI)

Beware of Free Credit Report Offer from FreeCreditReport.com. Get it from AnnualCreditReport.com

Experian a well know credit reporting agency runs a website FreeCreditReport.com. The service offered by Experian on this website is a bit misleading. On this site it appears that a consumer can get his or her credit report without any charge. In order to do so, one has to give their credit card information. Experian then automatically signs that person up as a member for credit-monitoring service and starts to bill $14.95 per-month. It is up to the person to cancel this ‘automatic-membership enrolment’ by Experian within 7 days otherwise Experian starts to bill $14.95 per-month on the credit card information that they collected for the “free” credit report offer.

You may have seen their somewhat funny TV jingle in which a man sings about his poor credit and about the ‘free’ credit report from FreeCreditReport.com

Experian now also faces a class-action law suit that claims that their advertising is misleading and fraud.

In the past, Experian has settled with the Federal Trade Commission (FTC) by paying more than a million dollars in fines when they had a similar deceptive-advertising problem on one of their other website ConsumerInfo.com. Apparently the Better Business Bureau has thousands of complaints from consumers about FreeCreditReport.com.

Consumers are legally entitled to receive one free report annually from each of the consumer credit reporting agency. Commonly these credit agencies are known as credit-bureaus and they are Equifax, TransUnion and Experian.

The FTC (Federal Trade Commission) runs a website AnnualCreditReport.com. This is the only affirmed site from where you can get a free credit report. So once in every 12 months visit AnnualCreditReport.com and get your free credit report.

Ontario Small Claims Court Raises Monetary Jurisdiction To $25,000

As of January 1, 2010, the Small Claims Court monetary jurisdiction in Ontario will be increased from $10,000 to $25,000, pursuant to O. Reg. 439/08. This will bring Ontario in line with provinces like Alberta and British Columbia.

Currently in Ontario Small Claims Court you can only sue for money or the return of personal property valued at $10,000.00 (Canadian) or less, not including interest and costs. If the amount of your claim is more than the current limit, you may still choose to use Small Claims Court because it is simpler and less expensive. However, you will have to give up any future attempt to recover the excess amount over the Small Claims Court limit, even in another court.

As per the Annual Report published by by the Court Services Division Small Claims Court remains a popular choice for Ontarians for civil litigation as 43 per cent of all civil cases commenced in 2007/2008 were Small Claims Court claims.

Small Claims Court Training Seminar by CreditGuru.com

FTC Red Flag Regulation for Creditors and Financial Institutions

As part of the Fair and Accurate Credit Transactions (FACT) Act of 2003 the Federal Trade Commission (FTC), the National Credit Union Administration (NCUA) and the federal bank regulatory agencies together have initiated the ‘Red Flags Rules’ (regulations) that now requires financial institutions and creditors to implement written identity theft prevention programs.

This program is to help prevent identity fraud by detecting and mitigating any instances of it. These instances, responses, patterns or specific activities that could lead to identity theft are termed ‘Red Flags”. It is an attempt on part of the regulators to make organizations handling vulnerable consumer accounts, keep an eye out for red flags that signal identity theft.

The Red Flags Rules apply to financial institutions and creditors with covered accounts. Under the rules a covered account is an account that involves multiple payments or transaction. Examples of a covered account would be credit card accounts, automobile loans, mortgage loans, margin accounts, telephone bills, utility accounts, checking accounts, and savings accounts. These accounts are typically consumer accounts for personal, family or household purposes. A covered account may also include accounts of small businesses or sole prop accounts as they can also attract the risk of identity theft.

From a creditor’s standpoint it is interesting to note that by merely accepting credit cards as a form of payment does not in and of itself make an entity a creditor. For the purpose of this regulation a creditor is any entity that regularly:
• extends, renews, or continues credit;
• arranges for the extension, renewal, or continuation of credit;
The creditor can also be any assignee of an original creditor who is involved in the decision to extend, renew, or continue credit.

May 01, 2009 onwards the FTC will start enforcing these regulations. Every creditor and financial institution with ‘covered accounts’ must have in place a written policy to detect, prevent and mitigate the possibility of identity theft in connection with opening, maintaining and operating a covered account.

The current challenge for organizations affected lies in a) identifying their account-specific (covered-account(s)) Red Flags and b) writing a customized ‘Red Flag Program’.
As an example the written program may include things like, unusual account activity, fraud alerts on a consumer report or attempted use of suspicious account application documents. In writing such a program it should simultaneously describe appropriate measures the organization would take to prevent and mitigate anticipated or occurred crime and have provisions to update the program.

The Red Flag Program must be managed by the Board of Directors or senior employees of the financial institution or creditor. It should be inclusive of staff training for Red Flag Program and provide for oversight of any service providers.

This highlights the importance of the credit function in assessing the risk associated with covered accounts and gettting actively involved in developing and implementation of a written identity theft prevention program under the new "Red Flags Rules."

Article contributed by:
Puru Grover MD CreditGuru.com

Canadian Business Bankruptcies drop by 2% in 2008

Feb 11, 2009: According to the latest stats released by the Office of the Superintendent of Bankruptcy for the year 2008, 6164 Business Bankruptcies were filed in Canada. This is a 2% drop from the year before i.e. 2007.

Although the absolute drop in numbers 2008 over 2007 is 2%, if we compare this to the 6.8% drop in the numbers of 2007 over 2006 the trend seems to be reversing.
This 6.8% decrease in business insolvencies in 2007 came in a more favourable economic climate wherein the gross domestic product growth (GDP) was 2.71%. This number has dropped to 0.95% in 2008!

The current economic climate is threatening the GDP growth which is primarily driven by consumer demand, consumer expenditure, government expenditure and business expenditure. Media constantly bombards us with bad economic news which kills consumer confidence and it is consumer spending that drives two thirds of an economic recovery cycle. While the economic indicators of inflation, job loss, housing starts and consumer confidence are not showing a very encouraging start in 2009, the Bank of Canada, Governor Mark Carney projects a 3.8 per cent growth for the Canadian economy in 2010. It is heartening to note this optimism which the governor denotes confidently as realism.

Consumer Bankruptcies Rise in 2008 in Canada

Feb 09, 2009
Consumer Bankruptcies:
Comparing 2008 numbers to 2007
These following numbers were released on Monday by the Office of the Superintendent of Bankruptcy Canada.



Consumer bankruptcies in 2008 jumped up by 13.5% over 2007. In all of last year 90,620 Canadians filed for bankruptcy as opposed to 79,847 that filed in the year 2007.
In 2007, the number of consumer insolvency cases per thousand residents 18 years of age and older increased by 0.1 cases over 2006. Whereas the same metrics increase now in 2008 over 2007 would be close to 0.3 cases.

Considering the job losses announced and poor housing starts for January, consumer bankruptcies are predicted to go higher in the coming months.