Abp Welby wants school lessons on payday loans

[Daily Mail] The Archbishop of Canterbury wants to take his ‘war on Wonga’ into the classroom using Britain’s network of Church of England primary schools to spearhead an educational campaign against high-cost borrowing.

The strategy to teach children the dangers of sinking into expensive debt through so-called payday lenders such as Wonga is being examined by former Financial Services Authority chief and Barclays executive Sir Hector Sants, who now heads the Archbishop’s Task Group on Responsible Savings and Credit.

Archbishop Justin Welby has slammed payday lending as ‘usury’ and last year said the Church would try to ‘compete them out of business’ with its own credit operation.

The full article can be found here

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Merlene Davis: Affordable housing, drug court and payday lending concerns …

Even if the University of Kentucky mens basketball team wasnt playing in the NCAA championship game Monday, a good bit of news was going to be generated in Lexington on April 8.

Mayor Jim Gray will be unveiling his budget for the next fiscal year at the 3 pm council work session, and in it there should finally be some money set aside to create affordable housing for minimum wage workers.

Shortly after 7 pm, Gray is scheduled to appear at the 11th Annual Nehemiah Action Assembly of BUILD to accept accolades for the expected $3 million in seed money, peeled from an unexpected surplus, and to explain why there cant be more.

We will highlight the $3 million, said the Rev. Adam Jones of Open Door Church and co-chair of BUILD. It is a good first step. However, we need a long-term systemic solution; otherwise the city will continue losing homes for low-wage workers.

But Gray, along with council members who have agreed to come, wont be alone in facing some 1,700 people expected to support BUILD that evening.

Danielle Sanders-Jackson, Fayette Drug Court program director, will be asked to provide training for attorneys so that more eligible drug abusers will be directed to that program.

And one or more state legislators will be asked to co-sponsor a bill in the General Assembly that would limit the amount of interest payday lenders can charge.

The Nehemiah Action Assembly is a culmination of a year of work in which BUILD committee members research and question those in authority about problems that affect our city.

BUILD Building a United Interfaith Lexington through Direct Action is an interfaith and interracial proactive organization comprising members of 25 religious congregations. Established in 2003, the grass-roots organization, like Louisvilles Citizens of Louisville Organized and United Together (CLOUT), listens to the concerns of local residents and focuses on problems the group can change. A plan of direct action is developed by committee members.

The three issues this year are affordable housing, drug court and payday lending interest rates.

Jones said BUILD wants more eligible offenders funneled into drug court, a far more successful alternative than incarceration for drug abusers.

BUILD notes that 80 to 90 percent of crimes committed in Lexington are connected to drug abuse. Rehabilitation programs for abusers cost less than incarceration.

Sanders-Jackson agrees.

Currently, 160 people are in the drug court program, she said, and three new programs have been established in recent months: HEAT (Habilitation, Empowerment and Accountability Therapy) for young adult black males, Veterans Treatment Court and Heroin Drug Court. That is a marked difference from recent years, when the state cut the budget for such programs.

BUILD also noted that payday lenders have indebted Kentuckians much longer than advertised, costing consumers $562.65 in fees alone for a $330 loan. BUILD wants interest rates capped at 36 percent.

If none of those issues are resolved at the meeting, Jones said, the group will continue to push for help for their neighbors.

Members have been fighting for the Affordable Housing Trust Fund for six years, he said.

We just keep pushing for it, Jones said. If we let it go, Lexington is heading in a direction where there are less and less places for low-wage workers to live.

Everyone deserves a home in our city, he continued. Thats the kind of city we want.

It may turn out to be a very long day for the mayor.

Merlene Davis: (859) 231-3218. Email: mdavis1@herald-leader.com. Twitter: @reportmerle. Blog: merlenedavis.bloginky.com.

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Stop payday lending ‘vultures’

Dear Editor:

As a Canadian, I am ashamed we allow payday lenders to operate. They are like vultures that prey on the weakest of our society.

Consumer Protection BC has recently ordered one of these companies, The Cash Store, to repay lenders $1 million. Between November 2009 and March 2012, some of the poorest people in BC felt they had no choice to make ends meet than taking out 68,000 loans with the company that was charging well above the legal rate of 23 per cent per month.

Thats right, the legal rate is 23 per cent per month, not per year. So, while wealthy and middle-class people pay about three per cent for a mortgage, our provincial government allows payday lenders to charge the poorest people in the province interest rates at about 100 times what well-heeled people pay. Talk about an upside-down world.

I want to know what Burnaby MLAs are going to do to stop this immoral and unjust practice. Kathy Corrigan, Raj Chouhan, Richard Lee and Jane Shin: I want to know what you will do to stop this abuse of those of us who can least afford it.

Remember, we are voters too.

Jacqueline Hardy, by email

 Burnaby Now

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US Supreme Court to decide bankruptcy case involving retirement funds

The matter before the Court stems from a personal bankruptcy case filed in 2010 by a husband and wife after the pizza shop they had opened failed. At the time the couple filed bankruptcy, they owed about $700,000 to their landlord, mortgage lenders and other business creditors.

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Believe It Or Not, Outlawing Payday Loans Will Not Lead To Looting & Pillaging

Critics of payday lending say the practice traps many borrowers in a debt spiral, forcing them to take out additional loans to pay back the first. Yet these short-term loans do have proponents (many of them profiting from the industry) who claim that without this pricey option for quick cash, desperate consumers will turn to more unsavory means, leading to increased crime rates and other doom and gloom predictions. But does that really happen?

According to consumer advocates in states where payday lending is prohibited (but where the masses have not resorted to rampant looting) the answer is no.

Today, 13 states prohibit or ban the short-term, high-interest loans intended to get the borrower through to the next paycheck. The laws generally enact a rate cap which puts the annual percentage rates at or below 36%.

Payday loans are predatory, abusive products that take advantage of disadvantaged borrowers and trap them in vicious cycles of debt, interest payments, and repeat borrowing, Sen. Richard Blumenthal of Connecticut, where payday lending is prohibited tells Consumerist in an e-mail.

While it appears to be a growing trend by states and the federal government to rein in predatory payday lending – no state has allowed payday lending to begin service since 2005 – that doesnt stop the payday industry from using scare tactics and misleading information to keep the practice up and running.

Last week during a Consumer Financial Protection Bureau panel discussion on payday lending, Jamie Fulmer, Sr. VP of Public Affairs with payday lending operation Advance America, said his company found that 98% of customers were satisfied with their payday lending experience.

Every customer who walks in our door can expect to meet their individual needs, he said.

That might be true for the short-term, but a recent report from the CFPB found that 4 out of 5 payday loans are made to consumers who are stuck in a debt trap. By renewing or rolling over loans the average monthly borrower is likely to stay in debt for 11 months or longer.

Many payday lending supporters put an emphasis on the convenience and availability of payday loans.

One report [PDF], titled “Effects of State Payday Loan Price Caps amp; Regulations, from the University of Washington insists that payday loans are the best option for consumers.

Payday loans–short-term unsecured loans intended to be repaid upon the receipt of expected income within a pay period–may legitimately be the most attractive option, due to their convenience, reliability, and availability on short notice.

But what Zywicki and Sarvis fail to demonstrate in their article, and Fulmer failed to mention at the panel discussion, are the future consequences of taking out a short-term, high interest loan.

What happens if a car breaks down and you need $300 to get the car fixed? Ellen Harnick, senior policy counsel with the Center for Responsible Lending says. If you dont fix the car then you lose your job. What payday lending leads people to think is its a good solution so they dont pursue other solutions. They take the loan because theres a shortfall, but in two weeks they have a $345 shortfall because they now have the loan and the fee.

And so the cycle of debt, and creation of a rollover loan situation begins.

The standard argument is consumers really need this thing and thats not true, Harnick says.

Payday industry leaders and supporters often try to illustrate the importance of payday lending by claiming that without the option consumers would have no viable alternatives available at their disposal.

One report [PDF] from the University of Washington Effects of State Payday Loan Price Caps amp; Regulations insists that few financially attractive alternatives to payday lending currently exist in the marketplace.

Without access to payday loans, consumers likely use overdrafts, pawnshops, and late bill payment to cover short run credit needs.

But advocates say that simply isnt the case and a number of states have proven its not.

For instance, New York offers two products. The Credit Builder Loan for low-income borrowers with little or no credit, and a Score Builder Loan for those with low credit scores. Both options have a 14.25% interest rate and no fees for a six-month loan.

In North Carolina, the State Employee Credit Union offers a Salary Advance of up to $500 at 12% APR with no fees. The loan must be paid back in full by automatic payments on the next payday.

Borrowers in Connecticut can find help in the form of personal loans from the First New England Federal Credit Union. The loans feature APRs between 10.25% and 17.99% depending on a borrowers credit score.

In the absence of payday lending, people do a lot of things; they negotiate payment plans with creditors, they juggle bills, they sometimes borrow from family and friends, Harnick with CRL says. If its not available they will find other methods.

Of course there have been products masquerading as viable alternatives, such as legitimate banking institutions Direct Deposit Advance programs. The services differ little from the typical storefront payday loan operation – both offer high-interest, short-term loans meant to get consumers out of emergency financial situations, but in reality have been found to trap them in an ongoing cycle of debt.

Facing tighter regulations, banks such as Wells Fargo and US Bank have announced the discontinuation of the programs, something Blumenthal, the senator from Connecticut applauds.

It is also important to ensure that traditional banks do not provide products that are essentially payday-in-disguise, such as ‘deposit advance loans. he says. These products cause real harm to Connecticut families, and we must ensure that such bad actors find no refuge in our state.

Payday lenders often argue that the small-dollar loans help boost the economy in a positive way. The argument is that when a consumer has more money theyll spend it on goods and services, in turn pumping funds into the economy.

Its been argued that traditional storefront payday lending creates jobs, an estimated 77,000 jobs nationally according to the Community Financial Services Association of America (CFSAA), a payday lending advocate.

CFSAA estimates that the industry contributed over $10 billion to the US gross domestic product in 2007.

However, the Consumer Financial Protection Bureau found that in 2011 the US economy took a net loss of $774 million due to the payday loan industry.

The economic activity generated by payday lending firms receiving interest payments is less than the lost economic activity from reduced household spending. Specifically, each dollar in interest paid subtracts $1.94 from the economy through reduced household spending while only adding $1.70 to the economy through spending by payday lending establishments.

Additionally, a number of studies have concluded that borrowers who use payday lending are left in worse circumstances than when they first took out the loan.

A 2008 report from researchers at Vanderbilt and the University of Pennsylvania, Do Payday Loans Cause Bankruptcy [PDF], found that a borrowers chance of filing for chapter 13 bankruptcy doubles within two years after receiving their first payday loan.

Consumer advocates have found that, in reality, regulating or eliminating payday lending actually proves to be better for the economy. Connecticut, North Carolina and New York each reported saving consumers millions of dollars through the use of interest rate caps.

CRLs Springing the Debt Trap report [PDF] found that Connecticut saved $64 million, North Carolina saved $153 million and New York saved $345 million.

Savings and alternative forms of small dollar credit have led to consumers often changing their tune about needing payday loans.

Generally, we can say that when states have adopted rate caps there has not been a clamor from consumers to have triple digit lending come back, Lauren Saunders, attorney with the National Consumer Law Center says. Theres a transition period in those states where consumers get cut off from predatory loans, but once they are gone, people find other options that are better for them.

That certainly seems to be the case in North Carolina. The state offers a unique perspective on payday lending; it was banned for nearly 200 years before the state legislature allowed payday lenders an exemption from the states 36% rate cap.

When the sunset period ended in 2001, the legislature determined the loans werent good for consumers and did not extend the exemption.

Harnick, who works in North Carolina, says the legislatures finding concluded that payday lending not only does not help consumers, but in most cases it makes peoples situation substantially worse.

Shortly after the exemption ended, the North Carolina Commissioner of Banks requested the University of North Carolina conduct a study on the consequences of the rate cap.

The report [PDF] found that 9 out of 10 households said payday lending was a bad option. Additionally, three out of four former payday loan users said the loans were harmful.

Three-quarters of low- and middle-income people were unaffected by the ban on payday lendingof those that were affected by the end of storefront payday lending, more than twice as many reported that the absence of payday lenders had a positive impact on their lives.

Even consumers who were presently facing a shortfall of funds said it was better that payday lending was not available, Harnick said.

Even with strict rate caps, predatory lending has found its way to consumers in states like Connecticut through the Internet.

Sen. Blumenthal has been working to prevent online payday lenders from skirting state regulations and taking advantage of consumers.

Like many states, Connecticut has strong usury laws that have all but eliminated storefront payday lending in the state. But out-of-state, online lenders continue to try to skirt Connecticut’s restrictions, he says in an e-mail to Consumerist. In fact, many of the constituent complaints I hear in Connecticut are about these sorts of online lenders, which is why I have co-sponsored the SAFE Lending Act – a bill that would close loopholes in federal law that enable these abuses.

The payday lending industry and their supporters continually push to be let back into states where they are banned.

North Carolina has been fortunate that our legislature has banned payday lending, but there have been efforts to bring it back, Harnick says. Lenders are eager to bring it back. The North Carolina legislature has thankfully not taken the bait, but lobbyists have invested a lot of money to try to take back the state.

States such as Connecticut, North Carolina and New York have proven that enacting rate caps can have a positive impact on consumers and the economy. And that should be used to help further extend protections to other states and the federal government.

I think that people have spoken in these states and legislatures have listened and that what we are seeing now is continued pressure to put in strong federal standards, Tom Feltner, Director of Financial Services with Consumer Federation of America, tells Consumerist. So that those states that have taken steps can keep protections and states where they are unprotected this will be a baseline that states and federal regulations can build on.

And federal protections could be in place soon.

Last week, CFPB director Richard Cordray announced the agency was in the late states of working on rules to stop predatory lending.

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Short Payday Lenders: DOJ/CFPB Out For Blood

The news out of the payday lending sector is grim. Without warning, banks that hold depository, ACH, and operational accounts for payday lenders began telling those clients to take their business elsewhere.

Cash America International (CSH), First Cash Financial Services (FCFS), EZCORP (EZPW), DFC Global (DLLR), QC Holdings (QCCO), and all privately-held companies are in a world of trouble.

Although no official reasons are being provided by the banks for this sudden change in policy, the action appears linked to the Department of Justices ongoing Operation Choke Point, which is designed to kill the payday loan industry.

The problem is there is nowhere else for payday lenders to take their business. They engage in over 100 million consumer transactions annually, and only large banks like Bank of America (BAC), Wells Fargo (WFC), Fifth Third (FITD), and JP Morgan Chase (JPM) can handle this volume and complexity. Without a banking relationship, a cash-intensive transactional business like payday lending cannot survive.

To make matters worse, the Consumer Financial Protection Bureau surprised the industry on March 25 by announcing it was in the late stages of its rulemaking process. The bureau held a hearing in Nashville and simultaneously released a paper excoriating the repeat usage of the product by consumers. Despite not having or presenting any evidence that such repeat usage definitively harmed consumers, the CFPB seems content to issue rules that will likely result in a significant revenue haircut for the industry.

The CFPB cannot institute rate caps. However, the bureaus focus on repeat usage suggests it will institute rules that severely restrict industry revenue. The most likely changes will be any or all of the following: limit the number of loans an individual may take out in a given time period; require a lengthy cooling off period between loans, perhaps as much as 30 days; require a 3 to 6 month repayment period. Any of these would materially impact industry revenue.

Yet CFPB action would appear to be moot if there is no payday lending business.

Operation Choke Point hit the industry in waves, beginning last year. The first wave consisted of the FDIC and OCC creating a de facto ban on banks providing deposit advances – their own version of payday loans. Particularly notable is that these loans were 33% to 50% cheaper than most storefront payday loans, and 66% to 75% cheaper than online loans. The act sent a chilling message: offering a vastly cheaper product means nothing. Clearly the federal government wants to kill consumer lending.

This became even more evident in Choke Points second wave, when third-party payment processors were prohibited from handing online lending transactions. The ostensible legal reasoning was that certain lenders were making loans into states where such loans were prohibited by law. These lenders were either sovereign Indian tribes, operated offshore, or operated under choice of law models, in which the lender was located in a state without a usury cap such as Utah, and the consumer agreed that Utah law was how their transaction was governed. With ACH processing now cut off, there could be no transactions. The only online lenders left standing were those operating legally under the laws of the 30 states that permitted payday lending.

With the elimination of payday lender bank accounts, the remaining online lenders and the nationwide footprint of storefronts are being choked off. The fact that this third wave has come in such close proximity to the initial attack on bank deposit advances, and the imminent rule-making by the CFPB, gives credence to the notion that there is ideological intent behind the killing of payday lenders.

I spent much of this week on phone calls and engaging in correspondence with my many contacts in the payday loan industry, and in trying to solicit comment from the banks. Other than stock language from the banks, nobody would go on record, insisting that they would only speak on background. Here is a smattering of the comments I collected:

From the spokesman of a large lending company:

I think that it is timely and relevant that you are looking into this. I would gather that our experience is substantively no different than others you have spoken with. We have lost some long-term relationships with no warning or real explanation. It is certainly a challenge to operating a business. I am not sure where the program originates…it is ostensibly focusing on a number of risky industries, but so far I am not aware of any others besides ours that has been targeted. [Emphasis added]

From a large lenders service provider:

Operation Chokepoint left unfettered is going to cripple this industry. My bank accounts are being closed. Not just ACH, and not just transactional, but operating accounts because were in this space. A friend of mine operates a pawn business. He opened a new pawn store, went to the local bank to open an account, and because he operates a payday loan business elsewhere, the bank said they wouldnt open the account – even though the payday lending operation is in another state, and had nothing to do with that account.

From a lobbyist:

[I can ] confirm that I was told by a prominent banker at a large bank located in a Midwestern town that theyve been threatened with fines for even as much as opening an account for us.

From a banker:

That space has become even more challenging for my institution, and I dont think Id even be able to get accounts opened.

From another industry service provider:

Yes, they [the DOJ] are trying to cut off the checking accounts of legitimate payday business and other types in the money service area.

Its not just the big players. Even small chains are being told to walk. One lender in the western US tells me, Were not getting any more than evasive, general language from Wells Fargo. Weve been with them for ten years. They make a lot of money on us. Its shocking. Theres no rational business reason for this. Its a non-issue from a banking perspective. With all the fees banks can charge us, they should be falling over themselves for us. Instead, weve exited the payday space.

Senior management at a midsized chain told me, every lender is having problems. One bank, which has serviced the industry for many years, told its clients they had 30 days to move their accounts elsewhere.

The sudden announcements from the bank and the short time frames to abandon the accounts lends further credence to the notion that the DoJ is, at a minimum, pressuring banks to comply.

In response to request for comment on the situation, Bank of America spokesman Jefferson George said, At Bank of America Merrill Lynch, we routinely evaluate our business practices and the services we provide to clients in various industry sectors. Over the last several years, we have not pursued new credit relationships in the payday lending industry, and over time many clients have moved their banking relationships. In 2013, we made the decision to ultimately discontinue providing extensions of credit to payday lenders. In addition to not pursuing any new business opportunities in this sector, we are also exiting our existing relationships over time.

Fifth Third Banks spokesman Larry Magnesen said almost the same exact thing. When I asked if there was a specific threat from the DoJ delivered to the bank, he demurred, saying, As a matter of policy, we do not discuss regulatory issues. This was the same policy stated to me by Wells Fargo spokesman Alanson Van Fleet.

How is this actionable?

In a word: short.

It is entirely possible that payday lenders find other entities that will bank them. It is entirely possible that the CFPBs rules will not materially harm revenue. The payday loan industry has shown tremendous resiliency and resourcefulness over the years. However, as with any investment, the question is one of risk vs. reward.

As it is, the secular environment for payday lenders — even those diversified into pawn and other services — has been abysmal. The country was saturated years ago. Store count has drastically contracted. Same-store revenue has been flat to negative as employment has gradually improved. On the pawn side, gold prices cratered, taking scrap revenue down with it. Pawn secular growth is 2-3%. The only bright spots were online lending – now killed by Choke Point – and Mexican pawn, which is still going strong.

So when one adds in a downright hostile federal regulatory environment, I see absolutely no upside to buying or holding any stock in the sector at this time. I would sell any holdings you have.

I consider the situation to be so grim that I have shorted Cash America, First Cash, EZCORP, and hold puts on them as well.

The debt of many companies, both public and private, can be traded. There may be temptation to scoop up the debt of these companies at distressed prices and high yields, but I would avoid that move. You can find those yields in less-risky vehicles.

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Dozens turn out to bid as Norton Oil trucks, equipment goes up for auction

Dozens of bidders turned out today to snatch up the remnants
of a Phillipsburg oil company that abruptly closed last year, leaving customers who paid in advance without oil or refunds on their payments.

Roughly 140 people showed up in person or online during a two-hour
auction to bid on hundreds of items once owned by Norton Oil Co., put on the
auction block by creditors after owner Richard Norton filed for personal bankruptcy.

That includes the days big ticket seller, a 2007 Kenworth
tank truck sold in a $56,000 bid.

About half the bidders watched from their computers while a
crowd of about 70 people waited inside the oil companys former Marshall
Street headquarters as Steve Comly, owner of Comly
Auctioneers amp; Appraisers, fast-talked through the auction process.

Many of those who made the trip to Phillipsburg
were business owners or representatives from local oil companies looking to
stock up on equipment and supplies at a cut-rate price. Randy Rotondo, owner of
the Easton-based Fast Lane Towing amp; Transport, snatched up a Kenworth
tractor with a $50,000 offer.

I think I got a good deal on the truck, he said after. You
cant find another one like this anywhere. Buying it from a persons private
fleet was definitely an advantage.

Others, such as Erich Kaufman of Harmony
Township, said attending auctions
was a hobby. While he had yet to buy
anything as the auction reached the halfway mark, Kaufman said he has been
traveling to places such as Richmond, Va.,
and Wilkes-Barre for the past 35
years in search of deals.

You can get things for pennies on the dollar, he said. Usually
the local ones I definitely attend because of the proximity. If I get something
big, its no big deal. I just haul it 10 or 20 minutes.

Among todays sales were the contents of a side office –
including copy machine, computer and desk — that went for $100. Three Ford
Cargo vans were sold to bidders at prices ranging between $12,000 and $12,750.

Anthony Febbo, who runs a Palmer
Township home renovation company,
was working a job across the street when he saw signs for the auction. After
scanning the inventory, Febbo bid on, and won, several ladders for $250.

He estimated he would have paid four times that at retail

We found some stuff we could use so we figured we would
take advantage of that, Febbo said.

Todays auction comes roughly four months after the oil
company abruptly closed its doors, citing circumstances beyond our
control. Customers who prepaid for oil, including a Bethlehem
church that laid down $26,000 for its subsidized apartment building,
received neither oil nor a refund from the Phillipsburg

About a month after Norton Oil closed its doors, Norton and
his wife filed for Chapter
7 bankruptcy in federal court for the Eastern District of Pennsylvania. In
court papers, the couple cited more than $2.85
million in liabilities compared to their listed $703,000 in assets.

Nortons attorney, Charles Laputka, said previously the
auction was ordered by EH National Bank, the first creditor in line to collect
payment. After cleaning out the companys Marshall
Street headquarters through auction, the next step
will be for the bank to formally foreclose on the property and sell the real
estate through the courts.

While he was able to score a good deal on his truck, Rotondo
said the circumstances that led to the auction were unfortunate.

They were a great company and had been around for many
years, he said. Their equipment was always very well maintained. Thats another
reason why people came here to buy their trucks.

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Wonga chairman to step down as FCA prepares to rein in payday lenders

The multi-millionaire figurehead of the controversial payday lending industry is to stand down from his job as chairman of Wonga as a new City regulator prepares to impose tougher rules.

Errol Damelin will stand down in the next couple of months, according to sources close to the company, but the South African retains a valuable 5% share in the company he founded, with an estimated value of £50m.

The 44-year-old has grown weary of having to constantly defend the company from political attacks and public outcry. Criticised by the Labour MP Stella Creasy for legal loan-sharking, Wonga charges interest at 5,853% APR.

That equates to a customer who borrows £400 having to repay £551.48 after 36 days.

His exit comes as the new City regulator, the Financial Conduct Authority prepares to impose tough rules to try to prevent payday lenders preying on struggling families, when it takes control of the industry on Tuesday.

The FCA has promised take a hands on approach to regulating Wonga and other payday lenders, including unannounced visits to companies offices to inspect how they handle defaults and examine adverts and promotions.

Damelin is particularly frustrated about the company being referred to as a legal loan shark. He believes Wonga should be regarded as a technological innovation, rather than a money lender and refers to it as Britains version of Facebook, Amazon and Apple.

A fitness freak who has competed in the Antarctic Ice Marathon on a glacier near the South Pole in temperatures of -30C, Damelin regularly runs to Wongas stucco-fronted offices near Regents Park from his six-bedroom Hampstead home. He founded Wonga in 2007 with the engineer-turned-artist Jonty Hurwitz.

A source close to Wonga said the companys board had decided that Damelin was no longer the right person to lead the company. We will become FCA regulated from Tuesday, the business will be regulated like a mainstream financial services business. With additional investigations, the role of chairman has changed, the source told the Guardian . We are looking for a financial services heavyweight.

Martin Wheatley, the FCA chief executive, said: There will be no place in an FCA-regulated consumer credit market for payday lenders that only care about making a fast buck. Our new rules will help us to protect consumers and give us strong new powers to tackle any firm found to be overstepping the line.

The chancellor has also instructed the FCA to introduce a cap on the amount of interest Wonga and other payday lenders are able to charge. George Osborne said the cap would make sure that hardworking people get a fair deal from the financial system, whether its the banks or the payday lenders or the internet lenders. The cap, which had previously been blocked by Tory MPs, is expected to be introduced on 2 January 2015.

Damelins privately held stake in Wonga could be worth hundreds of millions of pounds if the company is sold or floats on the stock market. He owns 9.8m Wonga shares, according to the firms latest filing with Companies House. Wonga made pre-tax profits of £84.5m in 2012, a 35% increase on 2011.

The Tory party donor and venture capitalist Adrian Beecroft also stands to benefit if the company succeeds in its plans to float on the Nasdaq stock exchange in New York with a £1bn valuation.

Beecroft, who has donated £537,076 to the Tories, is chairman of the private equity firm Dawn Capital, one of the biggest holders of Wongas stock.

Damelin has also attracted the ire of the Church of England. Last year, the archbishop of Canterbury, Justin Welby met Damelin and personally promised to compete you out of existence by expanding credit unions.

Welby, however, was later embarrassed by the revelation that the churchs pension fund held a stake in Wonga. It admitted this month that it still holds the £80,000 investment, despite Welbys promise to sell it.

Wonga, which sponsors Newcastle United, Blackpool and Heart of Midlothian, issues loans online within 15 minutes. It says its secret algorithm analysis 8,000 pieces of information to determine the applicants credit risk, including their Facebook profile.

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How to Ditch Overspending Tendencies As Instructed by National Debt Relief

National Debt Relief revealed that overspending is an American spending habit that has to change.

Dallas, TX (PRWEB) April 05, 2014

National Debt Relief, the leading debt settlement company in the country, recently released an article that would like to address the overspending problem of Americans. According to the article published on March 31, 2014, most Americans are guilty of spending beyond their means. The article titled “How To Ditch The Typical American Spending Habit” concentrated on how the spending behavior of consumers affect their financial situation.

The article compared the spending of Americans with other countries and it showed areas where consumers can improve. With that, the article provided 6 ways that consumers can avoid overspending.

1. Go on a debt diet. The first suggestion provided by the article is to go on a credit diet. That means the consumer should only spend using cash. If they do not have cash, they are not allowed to use their credit card.

2. Always have a shopping list. This will help consumers stick to what they only need to buy. It will keep them from buying things that will make them go over their budget.

3. Stay away from catalogs. The article warned against the use of catalogs. These can be a temptation to buy things that are not necessary. The consumer should be wary of these tools that can get them to spend.

4. Adapt the rule of exchange the old and new. This rule basically states that the consumer has to discard an old item before buying a new one (eg clothes). Sometimes, the value of the old item will keep them from buying. And it will also keep them from acquiring too much possessions.

5. Wait before buying. The article also suggested that consumers try to wait before making a purchase. That way, they will not be a victim of impulsive buying.

6. Buy things online and budget it. The article also advised the consumer to shop online but make sure it is budgeted. That way, they will not go beyond what they can afford to spend.

National Debt Relief believe that with discipline, Americans can learn how to control their overspending ways. This will keep them from going beyond what they can afford to spend and thus avoid debt too.

To view the full article about overspending and how to correct it, click on this link: http://www.nationaldebtrelief.com/ditch-typical-american-spending-habit/.

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For the original version on PRWeb visit: http://www.prweb.com/releases/2014/overspending/prweb11724366.htm

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Half of all payday lenders could be ‘taken out of the market’

Half of all payday lenders could choose to close rather than adopting tough restrictions imposed by the sectors new watchdog, a trade body has claimed.

On Tuesday, the Financial Conduct Authority (FCA) took over regulation of 50,000 consumer credit firms, from credit card providers to lenders offering high-cost short-term borrowing on the high street and online.

The FCA has already outlined new restrictions on payday lenders, set to come into force in July, which will limit the number of times loans can be rolled over and how often firms can unsuccessfully attempt to collect repayments from borrowers bank accounts.

It has also said it will take a close look at how borrowers are treated if they are unable to meet their repayments, and has been tasked by the government with devising a cap for the total cost of credit. It will visit the five biggest lenders to check that the new rules are being implemented.

Lenders in the sector often charge interest rates in excess of 5,000% APR and although they say borrowing is designed to be over a short period and cheaper as a result, costs quickly add up if a repayment is missed or a loan is rolled over.

Previously the regulator has suggested that a quarter of firms could leave the market after the new rules come into force; some have already pulled out of the business since being told to clear up their act 12 months ago.

The Consumer Finance Association, which represents 12 payday lenders making up 60% of the £2bn industry, said the new rules and a cap on costs could encourage up to half of firms to leave the market.

The CFAs chief executive, Russell Hamblin-Boone, said: No other credit market has faced such intense scrutiny in the past year.

If the new FCA rules are applied fairly and the regulator targets the worst practices not just the best known lenders, many more businesses could be driven out of the market.

Hamblin-Boone said the CFAs members already had a voluntary code in place to protect borrowers.

Speaking to the BBC, the head of the FCA, Martin Wheatley, said the regulator had to balance the fact that some people use and value this service against the fact that some people are abusing its delivery.

Parts of this industry – not all – are offering loans without doing any affordability checks and loading costs on to people who simply cant afford to pay – and thats the part of the industry we want to take out, he said.

Wed like firms to rise to our standards but if they cant wed like them to leave the industry.

Paul Blomfield, a Labour MP who put forward a private members bill calling for a cost cap on payday loans, said he hoped the FCA would provide more robust regulation of the consumer credit industry than its predecessor the Office of Fair Trading.

On payday lending, for example, Im pleased that theyve responded to most of the issues on which I was seeking to legislate, but Im concerned they havent gone far enough and will be looking to see how the rules are enforced.

Millions of people who have been ripped off by payday lenders need a strong regulator and the FCA must punish non-compliance.

Blomfield called on the FCA to commission a real-time database of loans to stop people being offered debts they cannot afford to repay.

The FCA must also ensure the new levy collected from payday lenders is used to provide more resources for the stretched debt advice services that are resolving the growing problems created by the sector, he added.

Recently it emerged that Wonga, the biggest lender in the sector, was trialling six-month loans among existing customers. These are still covered by the FCAs rules, and could allow the lender to offer money to people who may have struggled to repay their entire debt in the maximum period it previously offered.

Charities have expressed concern that customers who are no longer able to access payday loans could be driven to use less scrupulous lenders, including those offering logbook loans.

On Sunday, the FCA said it would review that market amid fears of widespread rogue behaviour.

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