Archive for January 2015
With one-in-four Americans turning to questionable financial products like payday and auto-title loans, an unlikely group is stepping in to provide consumers with a less-costly alternative. Churches across the country are helping members escape the trap of revolving debt by aiding them in obtaining safer loans.
The Washington Post reports that faith-based organizations are shifting the way churches approach charity by offering programs aimed at helping parishioners avoid predatory commercial lending agencies.
The church-backed programs assist consumers in obtaining loans through associated church credit unions by providing collateral for individuals who would not qualify for loans otherwise. The resulting loan often comes with near-zero interest rates and more manageable monthly payments.
In Virginia alone, the Jubilee Assistance Fund (JAF) has helped parishioners of the United Methodist Church secure 14 loans ranging from $500 to $8,000 in less than eight years.
According to JAF, the loans are meant to help those in crisis with rent, mortgages, medicine, utilities and food. However, they can also be used to refinance a predatory lender loan and help consumers escape the crushing interest rates associated with those loans.
Rodney Hunter, the pastor at Wesley Memorial United Methodist Church, which has helped a number of parishioners finance loans, tells the Post that churches are uniquely positioned to aid those facing financial hardships.
“This is what the church should do,” he says. “There’s a moral piece, I think, the church should care for the least in society. This is what I think the biblical mandate is.”
Hunter and his church were paramount in helping Nina begin to turnaround her finances.
For nearly three years, Nina was able to avoid accumulating interests on her $700 to $800 open-ended loans from Check Into Cash by routinely paying off the debt and immediately taking out a new loan. But when her hours were cut at work, she was unable to keep up the routine and quickly found the 300% annual interest created another mountain of debt.
In all, Nina estimates she paid $1,100 on the loan in first three-quarters of 2014, and still owes about $650.
Following her experience with the payday lender, Nina turned to her church when she needed assistance in making payments on about $8,000 in credit card debt.
The church offered funds as collateral so that Nina could qualify for a loan through the Virginia United Methodist Credit Union. She agreed to repay the loan at an annualized interest rate of about 6%, creating monthly payments of just $25 for two and a half years.
As part of the qualifying process for the assistance, Nina had to agree to several stipulations carved out by Jubilee and the church.
According to a brochure for the program, to qualify for the Jubilee Assistance Fund,
borrowers must agree to receive financial counseling, loan monitoring and payroll deduction.
Nearby Lakeside United Methodist Church has also helped parishioners in their time of financial vulnerability.
Dina tells the Post that when the pipes on her property burst, leaving a bill for $4,000, she first sought out a title loan. However, after being shocked by the high interest rates, she and her husband turned to their church.
The couples pastor helped them take out a loan for more than $3,000 at an annual percentage rate of about 6% through the Jubilee Assistance Fund. She says they were able to pay off the debt in about a year.
Those who have been helped by the Jubilee Assistance Fund say they are grateful, and hope it can be scaled up to provide a serious alternative to commercial lending.
Charles Swadley, the pastor who helped Dina and her husband, tells the Post that the program takes the perceived role of the church just handing out money to parishioners in need and creates a more meaningful lesson by tying in the financial counseling aspects.
When you give money, you’re not necessarily teaching them how to use the money – you’re responding to the crisis,” he says. “And what we’ve got to do is teach, which is the harder goal.”
Churches step in with alternative to high-interest, small-dollar lending industry [The Washington Post]
Many people had plans to make wealth last year but could not because they were unable to get their strategy right. Not because they did not earn income, but because the funds were wrongly directed to things that will not make it grow. Looking into the future therefore, there are basic principles to wealth creation
An Overland Park-based online payday lending operation accused of deceiving borrowers by charging inflated fees has agreed to pay federal regulators $21 million, the largest such settlement ever.
Most of the record payout will be returned to borrowers as refunds. AMG Services Inc. of Overland Park and its partner company, MNE Services of Miami, Okla., also will forgive $285 million in unpaid fines and loans still owed by customers, according to the settlement announced Friday by the Federal Trade Commission.
“The settlement requires these companies to turn over millions of dollars that they took from financially distressed consumers, and waive hundreds of millions in other charges,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a prepared statement.
“It should be self-evident,” Rich said, “that payday lenders may not describe their loans as having a certain cost and then turn around and charge consumers substantially more.”
Unexpected fees and higher-than-advertised interest rates often left customers with debts that more than tripled the amounts they had originally borrowed, the FTC alleged in court documents.
The settlement includes no admission of guilt by the companies. Efforts to reach a company attorney late Friday were unsuccessful.
In legal filings, AMG had argued that its affiliation with American Indian tribes should make the company immune to legal action.
It said the tribes’ sovereign status meant they weren’t subject to state or federal laws. A federal magistrate judge disagreed, ruling in 2013 that the lenders had to obey federal consumer protection statutes, even if they were affiliated with tribes. A US District Court judge upheld that ruling last year.
AMG claimed to be owned by the Miami and Modoc tribes of Oklahoma and the Santee Sioux of Nebraska. But the tribes reportedly received only 1 to 2 percent of the revenue from each loan.
The real beneficiary allegedly was race car driver Scott Tucker, who used $40 million collected from borrowers to sponsor his racing team, according to a 2012 complaint filed by the FTC. Tucker has not settled the FTC charges against him. His case is pending before a federal judge in Nevada.
Lawyers for Tucker have previously said the business practices of the tribes were “fully compliant with federal law” and they would contest the allegations.
A growing number of payday lenders have migrated from storefronts to the Internet in recent years in a bid to sidestep state laws designed to curb predatory loans. Some companies exploit ties with tribes to avoid federal regulation, consumer advocates say.
Friday’s record payday loan settlement is significant because it shows that tribal immunity is not working as a business model for payday lenders, said Ed Mierzwinski, consumer program director of the consumer advocacy group US PIRG.
“Online payday lenders have tremendous power to reach into consumer bank accounts illegally and take excess fees,” Mierzwinski said. “Fortunately, FTC and the courts rejected this one’s claims of tribal immunity from the law.”
Law enforcement officials across the country have received more than 7,500 consumer complaints about the firms in Friday’s settlement, according to the FTC.
The FTC said the two companies are both part of the same lending operation. The agency said AMG serviced cash advance payday loans offered by MNE on websites using the trade names Ameriloan, United Cash Loans, US Fast Cash, Advantage Cash Services, and Star Cash Processing.
The websites advertised a one-time finance fee and promised that customers could get loans “even with bad credit, slow credit or no credit.”
But the FTC says borrowers were misled about the real annual percentage rate of the loans and didn’t realize they would be charged additional finance fees every time the companies made withdrawals from their bank accounts.
Contracts with borrowers indicated that a $300 loan would cost $390 to repay, for example, when it really cost $975, according to the FTC.
The agency also alleges that the companies illegally made pre-authorized withdrawals from customers’ bank accounts as a condition of credit.
The Community Financial Services Association of America, a trade group for the payday lending industry, issued a statement Friday that distanced the group from the two companies involved in the settlement and expressed support for the FTC’s actions.
“These unscrupulous practices are not representative of the entire payday lending industry nor the online sector of it, and they harm the reputations of (association) members who uphold the highest lending standards in the industry,” the statement said. “More importantly, these bad actors create an even more confusing environment for consumers, making them more susceptible to fraud and abuse.”
AMG previously had reached a partial settlement with the FTC in 2013 over allegations that the company had illegally threatened borrowers with arrest and lawsuits. That settlement prohibited AMG from using such tactics to collect debts.
Major healthcare savings, improved road safety, cleaner air and a healthier pocketbook can result by swapping the Bugatti for the bicycle.
Without doubt, the biggest economic benefit of cycling is improved public health.
With the Health Authority Abu Dhabi (HAAD), PwC and Alpen Capital all naming the increased incidence of lifestyle diseases #x2013; diabetes, cardiovascular diseases and obesity-related conditions as the top contributor to rising health costs in the UAE #x2013; it#x2019;s clear that improving the country#x2019;s health is the largest positive benefit cycling brings. Almost a fifth of the UAE#x2019;s population has diabetes, according to the International Diabetes Association #x2013; the 16th highest incidence of the disease worldwide.
Daman, the national insurance company, estimates that diabetes will cost the UAE Dh10 billion per year by 2020 #x2013; and cardiovascular diseases were responsible for more than a third of the deaths in Abu Dhabi in 2013, the most recent year for which data are available, according to HAAD.
In the United Kingdom, where levels of obesity and diabetes are equally high, costs associated with these diseases consume 20 per cent of the national healthcare budget.
#x201c;Hopping on a bicycle can save your life #x2013; if a bicycle and decent streets to ride on are available to you,#x201d; writes Elly Blue, the author of Bikeonomics: How Bicycling Can Save the Economy.
Two studies in public health journals, cited by Ms Blue, show that each dollar spent on cycling infrastructure in US cities saved more than four times as much in reduced healthcare costs.
After London introduced a public bike rental scheme, medical researchers found that increased physical activity reduced heart disease among men and depression among women.
A similar intiative was launched in Abu Dhabi last month on Yas Island. You might think that an increase in health benefits from cycling would be counterbalanced by more road traffic accidents.
Road accidents are a major killer in the UAE, accounting for 12.2 per cent of the deaths in Abu Dhabi in 2013, according to HAAD. That#x2019;s only slightly less than deaths from cancer, which caused 12.9 per cent of deaths in the emirate.
But the evidence suggests that more cyclists faced fewer crashes, not more (see graph). This is known as the #x201c;safety in numbers#x201d; hypothesis.
One offered explanation is that the increased visibility of cyclists changes how drivers drive. When cyclists are a common sight, drivers take greater care.
Whatever the reason, the data does not suggest that having more cyclists on the roads leads to an increase in traffic accidents. A paper from the municipal government of the City of Copenhagen, where more than a third of the population cycles daily, attempted to measure the positive impact of cycling on the city and its environs.
This involves adding together the effects on road uses #x2013; shorter journey times, improved health, chance of accidents #x2013; and the broader social impacts #x2013; effect on road safety, air and noise pollution, congestion, and road deterioration.
Economists call social impacts #x2018;externalities#x2019;. Externalities can be negative: harms inflicted on bystanders such as air and noise pollution or road accidents, and as well as positive: for instance, the social benefits of a healthier population, and improved life expectancy.
Cycling in Copenhagen costs society and the individual #x20ac;0.08 per kilometre, compared to #x20ac;2.15 per kilometre to drive, and #x20ac;3.9 per kilometer to take public transport.
If you look at the social impact, cycling actually saves the city #x20ac;0.5 per kilometre cycled, mainly due to the reduced risk of lifestyle diseases.
This means that investments in cycling infrastructure can pay for themselves very quickly, especially given that they#x2019;re often cheaper to begin with.
One Copenhagen road intersection, the Gyldenlovesgade, was identified as the site of more road accidents than any other. A project to redesign the road took place in 2006 at a cost of about #x20ac;24 million.
The redesign reduced the number of accidents by 3 per year #x2013; equivalent, Copenhagen#x2019;s local government estimates, to a saving of #x20ac;8m each year in reduced health expenditures and fewer days taken off work.
That means it took just three years for the project to break-even. At 33 per cent per year, that is enviable rate of return on any capital project.
Similarly, the construction of 1 kilometre of cycle lane in Copenhagen has a net present value of #x20ac;0.6m over the course of 20 years, but costs only #x20ac;0.4m to build.
A national love of driving is not just bad for public health; it#x2019;s also much more expensive.
Infrastructure spending on roads and government regulations on parking, represent, in economic terms, large social transfers from non-drivers to drivers.
Even in countries where road taxes are high #x2013; the US, the UK and Denmark #x2013; user fees are not high enough to cover the social costs of motoring.
In the UAE, where road taxes are virtually non-existent and fuel prices are subsidised, the government#x2019;s role in encouraging driving is even clearer. In an era of low oil prices, these generous policies may start to look less attractive.
Elly Blue believes that the benefits of expanding road infrastructure are overstated.
She argues that highway construction projects are an example of what economists call #x201c;induced demand#x201d; #x2013; where an increase in the supply of a good also increases the demand for it. In short: building more roads leads to more cars on the road.
Todd Litman, a researcher at the Victoria Transport Policy institute, explains the concept as follows: #x201c;Congestion reaches a point at which it constrains further growth in peak-period trips,#x201d; he says. #x201c;If road capacity increases, the number of peak-period trips also increases until congestion again limits further traffic growth.#x201d;
So Dubai#x2019;s peak-time congestion will not necessarily be eased by building more roads.
The European Investment Bank invests in road projects across the European Union. When judging the benefits of new roads, it places significant emphasis on time-savings and reductions in congestion. The problem is that if the #x201c;induced demand#x201d; hypothesis is correct, new road projects could have significantly fewer benefits than the EIB estimates. Absent also from the EIB#x2019;s calculations is the consideration of the public health effects of increased road use.
The impact of any individual road project on public health is likely to be virtually zero. But aggregate spending on roads, and the increase in driving that results, is likely to contribute to poorer health.
When these kinds of considerations are factored in, the case for increased road-building becomes much more ambiguous #x2013; and the case for building infrastructure for cyclists instead of cars becomes stronger.
This is exactly what the City of Copenhagen found, when it compared the rate of return on cycling projects to the rate of return on road and rail projects.
Money spent making the city safe for cyclists actually went further than money spent on new roads. There is one more economic factor we should consider: happiness. Ask any regular cyclist, and they#x2019;ll tell you that cycling is fun. Since economics is the study of human welfare, this is not an irrelevant consideration. As John F Kennedy once said, exaggerating his case somewhat, #x201c;nothing compares to the simple pleasure of a bike ride#x201d;. He owned more than forty classic cars.
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Washington, DC – Two payday lending companies have settled Federal Trade Commission charges that they violated the law by charging consumers undisclosed and inflated fees. Under the proposed settlement, AMG Services, Inc. and MNE Services, Inc. will pay $21 million – the largest FTC recovery in a payday lending case – and will waive another $285 million in charges that were assessed but not collected.
“The settlement requires these companies to turn over millions of dollars that they took from financially-distressed consumers, and waive hundreds of millions in other charges,” said Jessica Rich, Director of the Bureau of Consumer Protection. “It should be self-evident that payday lenders may not describe their loans as having a certain cost and then turn around and charge consumers substantially more.”
The FTC filed its complaint in federal district court in Nevada against AMG and MNE Services and several other co-defendants, in April 2012, alleging that the defendants violated the FTC Act by misrepresenting to consumers how much loans would cost them. For example, the defendants’ contract stated that a $300 loan would cost $390 to repay, but the defendants then charged consumers $975 to repay the loan.
The FTC also charged the defendants with violating the Truth in Lending Act (TILA) by failing to accurately disclose the annual percentage rate and other loan terms and making preauthorized debits from consumers’ bank accounts a condition of the loans, in violation of the Electronic Funds Transfer Act (EFTA). MNE Services lent to consumers under the trade names Ameriloan, United Cash Loans, US Fast Cash, Advantage Cash Services, and Star Cash Processing. AMG serviced the loans.
In May 2014, a US district court judge held that the defendants’ loan documents were deceptive and violated TILA, as the FTC had charged in its complaint.
In addition to the $21 million payment and estimated $285 million in waived charges, the settlement also contains broad prohibitions barring the defendants from misrepresenting the terms of any loan product, including the loan’s payment schedule, the total amount the consumer will owe, the interest rate, annual percentage rates or finance charges, and any other material facts. The settlement order prohibits the defendants from violating TILA and EFTA.
Dear Mr. President:
Please make the following two subjects the first part of your [State of the Union] speech. Emphasize these and move your laundry list to the second half because these are the ingredients needed to make your domestic and foreign policy list possible. The two are 1) the goal for the Congress, businesses and local governments to fund new wealth builders and 2) for you and our diplomats to market our secret sauce to the worlds peoples and governments.
You must make the speech in the form of telling two stories. It must be a Kings Speech.
The first story is about what underpinned the fabulous period of 1950 to 2000 when the government and private industry made Ramp;D investments which resulted in an unparalleled period of discovery and the invention and development of new technology, infrastructure, and our quality of life. These started with the innovations that began during WWII and followed with the investments in technologies to fight the Cold War, space exploration, The Marshall Plan, Medicare, and Civil Rights. Included are the Interstate system, our air transportation system, color TV, microprocessors, jet engines, the internet, automation, and fiber optic networks. These 50 years of discoveries and development were wealth builders that spread across the country. And now the impact of these has spread around the world so we need new wealth builders and wealth-building goals.
Your speech has to be about finding the new wealth builders such as high-speed-internet into every home and class room and inventing energy saving things, new healthcare delivery systems and products to be used here and exported, new medicines and cures, and education delivery.
You have to say that our new policies should be based on making peoples lives better and our need to build new wealth builders over the next 50 years. It means finding the new moon shots and Cold War surrogates. The Affordable Care Act and Infrastructure rebuilding are moon shots. You must ask Congress to move out of reverse.
The second story is about promulgating Americas secret sauce. This is our sets of laws which separate church and state which established all religions as a protected class. Our earliest laws prohibited states from choosing one particular Protestant sect as had occurred across both Catholic and Protestant Europe. Our forefathers in particular sought to escape petty bickering among sects and said the state will not endorse any one religion or sect (Methodist, Lutheran, Episcopal etc.) but will protect the members of all.
It tacitly endorsed Judaeo/Christianity but the way the laws were written allowed all religions to co-exist, be protected, and seek equal and fair treatment under the law. These laws became the foundation for other eventual civil rights wins such as the freedom of the slaves and minority and womens rights.
This means the US has to push across Europe, the Middle East, Asia, and Africa and ask these countries to write new constitutions which establish all religions as protected classes. It is the only way to fight Islamic extremism, dangerous dysfunctional religious prejudice, and harmful backwardness.
So you have to tell two stories first about how and why we need to find and invest in new wealth builders, and second, how and why we came up with the recipe for a great secret sauce and why its the crucial thing needed to achieve quality of life across the world. Continued…
- See Full Story
For more than a decade Holguin has tried to grow Secure Origins, a Downtown El Paso-based company aimed at using technology to speed commercial truck shipments across the border.
Holguin, a civil engineer by training, became an El Paso entrepreneurial super star and a high-tech guru in the 1970s, when he started a software development company that grew into Accugraph Corp., with $100 million in annual sales and 150 El Paso employees by the 1990s. The company was later sold and its operations moved out of El Paso.
Stephen Darling, in a bankruptcy court filing, argued that Holguin has failed to adequately value his 2 million shares of Secure Origins stock. For that and other reasons, Darling asked the court to reject Holguins financial reorganization plan.
A bankruptcy court hearing on Holguins plan is set for Jan. 14.
Holguin filed for personal bankruptcy protection in September, about two months after a state court ordered him to pay Darling almost $190,000 for the unpaid loan, which includes interest and attorney costs. The court cases came to light publicly only recently.
Holguin told the El Paso Times that he no longer holds any official position with Secure Origins, but, he said, he continues to work for the companys shareholders.
I had to make a major decision to even file for bankruptcy, Holguin said. If there was any other way for me to keep my obligation to the company, I would have done it. This was the only way left to fulfill my obligation to all the shareholders.
Everything I have is in the company (Secure Origins), Holguin said.
In his bankruptcy filing, Holguin lists his only income as $2,588 per month he and his wife receive in Social Security benefits. His main asset is his Upper Valley home, which he valued at almost $978,000 — the appraised value set by the El Paso Central Appraisal District.
Holguin said he left Secure Origins two years ago, when The Tecma Group, an El Paso company operating maquilas in Juarez for a variety of manufacturers, agreed to buy it. Tecma managed the company for about two years.
However, several months ago, Tecma officials decided not to buy the company and Tecma is no longer involved in it, said Alan Russell, Tecma president.
We had an operations guy try to turn the company around and get it on its feet, and we decided not to go forward with the option to buy Secure Origins, Russell said.
Darling said hes a shareholder in privately held Secure Origins. But, he said, his loan dispute with Holguin is not related to the company.
Area bankruptcy filings declined in 2014, continuing a downward trend following the Great Recession.
According to monthly filings from the US Bankruptcy Court’s Western District of Missouri, two of the most common personal bankruptcy codes, Chapter 7 and Chapter 13, both showed decreases this year.
The middle class is in terrible shape. Wages are stagnant, the middle class’s share of the nation’s wealth has been declining for decades, and ordinary Americans feel like they’re just exiting a recession that ended years ago. But could 2015 be the year that marks a turning point for rebuilding middle-class wealth? Two new retirement savings initiatives, myRA and Illinois’s Secure Choice, offer hope that financial security and wealth building aren’t relics of the past for the middle class.
One reason the wealth gap between middle-income and high-income earners is so stark is because of a lack of diversity of assets held by middle-income families. Middle-income wealth is locked up in the value of the home. Almost three-quarters of the wealth of middle-income families is held in a primary residence, compared to only 9 percent of the wealth of the highest 1 percent of income earners.
Families with higher incomes have more diversified balance sheets, allowing them to take full advantage of the growth, stability, and tax advantages offered by different asset types. During the past few years, the value of financial assets like stocks and mutual funds has risen much faster than housing prices, overwhelmingly benefitting higher-income households: The wealthiest 10 percent of Americans own 81 percent of all stock held directly, in mutual funds, or in retirement accounts.
That last one–retirement accounts–may come as a shock. 401(k)s are often thought to be a significant source of family wealth for the middle class. But only about 50 percent of families making around median income (in the 40th to the 60th percentile) even have a retirement account, and the median value of the assets in the accounts among those who have them is just $25,000. If you include the millions of Americans who don’t have a retirement account, the typical working-age household in the US has just $3,000 saved for retirement.
In order to rebuild middle-class wealth, building assets in forms other than housing has to be easier. Retirement assets are a good place to start, but doing so requires paying attention to the financial challenges that ordinary Americans face. Americans recognize that retirement savings are important, but 44 percent of households don’t have the kind of emergency savings cushion that financial advisors recommend as a first step. Is it realistic to ask these families to lock money away for 30 years when their personal safety nets are so weak?
It finally could be. Here’s why 2015 could mark the first steps on a new path toward greater, more diversified, and more flexible asset accumulation for the middle class.
In his 2014 State of the Union, President Obama announced the creation of myRA, or “my Retirement Account,” an opportunity for employers that do not offer retirement plans to connect their employees to a “starter” retirement account. MyRAs are essentially Roth IRAs invested in Treasury bonds, offering a safe, low-yield investment option. Once account balances reach $15,000, participants would roll the funds over into a Roth IRA offered on the private market. The concept is simple, but it could have a big impact. The reason? Roth IRAs allow workers to access their contributions at any time to weather unexpected expenses without taking out expensive debt or paying the taxes and penalties that make 401(k) withdrawals so painful. Think of it as an easy way to diversify assets through time: saving for the short- and the long-term simultaneously.
The other program that could improve middle-class wealth in 2015 is the Secure Choice Retirement Savings Program, which was signed by outgoing Illinois Governor Pat Quinn this week. Secure Choice would require employers with more than 25 employees to automatically enroll their employees in the Secure Choice plan. Employees could opt out at any time, but would be defaulted into saving 3 percent of their pay into a low-fee retirement account. Like the myRA, the funds would be invested in a Roth IRA structure so that employees would have access to the funds–penalty-free–if they need them for emergency expenses.
Secure Choice and myRA are promising because they are built on key principles that have been shown to promote sustainable, lifelong asset building. First, easy access is critical to promoting savings. Automatic enrollment, as in Secure Choice, has been shown to yield the highest participation rates, opening the door to retirement savings for as many as 2.5 million workers in Illinois. With myRA, although enrollment is not automatic, accounts could eventually be made available to all workers with earned income through online enrollment or by opening an account on the tax form. The second principle the programs share is that they allow for a diversity of uses. That’s critical, because families have myriad savings needs. For instance, saving for a retirement 20, 30, or 40 years in the future is not always appealing or possible for low- and middle-income families. Statistics bear that out: Over 25 percent of households that use a 401(k) have withdrawn money from it to meet non-retirement needs–and paid penalties in process. The Roth structure of both myRA and Secure Choice creates useable wealth in the near term while encouraging the pursuit of long-term goals. That’s a structure that will help many more families than the 401(k) model.
MyRA and Secure Choice won’t bring ordinary Americans much closer to the top 1 percent. But together they’re putting in place new models to help build up the wealth of the American middle class. 2015, you’re off to a pretty good start.
This post appears courtesy of New Americas Weekly Wonk magazine.