Payday Cash Advance Providers: Hated by Those Who Don’t Use Their Services

Payday Cash Advance Providers: Hated by Those Who Don’t Use Their Services

By the standard definition, payday cash advance and related non-bank financial services are not very popular products. Three to five per cent of American consumers view non-bank financial services or lending as check cashing.

According to Americans for Financial Reform, that thought make those financial products unpopular among the average Americans. As per a recent data from Pew Charitable Trust, seventy per cent of Americans want to see non-banked consumer services and payday lending reformed and eighty per cent believe that they are very expensive.

So, most people hate payday lending and view check cashing as inherently predatory and suspicious.

However, there is one notable minority of American consumers who rather like these products – the ones who uses them. For this group of approximately ten to twenty million Americans, payday is quite popular.

Lisa Servon, Professor of City Planning at the University of Pennsylvania and former dean at The New School, noted that something did not make sense because if payday lending was so toxic and awful, then the number of people using these products would not be rapidly increasing.

Servon told PBS News Hour that she has spent twenty years working in low-income neighborhoods and she knew that people who do not have very much money are well aware of where every penny goes. That is when she thought that there has to be more to the story about the payday lending industry.

In her book, The Unbanking of America, she tried to tell a story – a story that she researched by working in various parts of the non-bank financial services industry including check cashing and payday lender shop.  She said that the reasons are neither hard to understand or illogical.

Consumers like payday lenders since they offer consistent transparency and consistent access to those who are living very close to the financial margin.

Accessibility and Access

When it comes to funds, consumers with savings do not think about immediacy as a driving concern. A check that goes to the bank and is not available for a few days does not seem like a life-and-death situation because the consumer presumably has funds in the account. However, that is not the financial reality for those consumers who use payday loan and check cashing services. Servon observed that this can be the cause why these financial products may seem odd to those outside of the unbanked experience.

Also, ATMs do not give $8 or $13. They give multiples of $20. Since the underbanked consumers need every dollar that they can get access to, everything suddenly makes so much more sense.

She further noted that these consumers require more than just funds in their hand. They also require funds to be distributed. The check cashers often act as a one-stop shop for multiple financial services, such as remittances to relatives overseas, pre-paid cards, paying rent or paying bills. Also, these services are available 24/7 as opposed to the 9 to 5 bankers hours.

Moreover, the payday lenders are fulfilling the basic needs of customers that are non-optional. Consumers pay their bills with payday loans, they do not purchase luxury items.

Servon said that people talk about getting rid of payday lenders without even realizing that their demand is there. Their demand is there because the wages have been decreasing since the ‘70s. since income volatility has doubled, it has become harder for people to predict how much money is going to come week to week. Even though the costs are high, isn’t it better to have access to expensive credit than not having access to any credit? She also urges people to realize that access to funds is expensive no matter where they turn – traditional or non-traditional.

Transparent transactions

Servon made an observation that even though the payday loans, wire transfers and check cashing are high, they are known commodity. People can find brightly colored, large signage all over the locations and customers are aware of exactly what they are paying to make use of funds.

Banks can also be just as expensive or maybe even more, but not in very obvious ways.

She says that the signage found in the bank teller windows resemble the ones that can be seen at a fast-food restaurant, such as McDonald’s. It says that it costs 2.03% the face value of your check to cash it, $1.50 to pay a bill, $0.89 for a money order.

She noted that with banks there is no immediate access to funds and checks can take a day or 2 to get cleared. In case other expenses hit an account during that window, the overdraft fees start at $35. 44% of the banks still stack charge to accounts to maximize the number of fee overdrafts that can be charged. Account service fees, ATM fees are charged if a minimum balance is not maintained. For marginal consumers, banks can prove quite expensive.

Payday cash advance providers are a boon for the millions of American consumers who are underbanked. Servon said that it is important that this industry remains so that millions of Americans have access to funds.

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Trump’s Reforms and Its Impact on Payday Advance Loan

Trump’s Reforms and Its Impact on Payday Advance Loan

Ever since President Donald Trump, who is a staunch opponent of the Consumer Financial Protection Bureau, got elected, the major question on everyone’s minds has been this- How could the new president’s regulatory reform affect consumer loaning and what will the future hold for payday money lenders and their services like the payday advance loan? In this article, we will try to determine how the executive orders the Trump administration issued over the past few months will influence small scale consumer loaning.

Evaluating The Impact of These Reforms On Economic Growth of the Country

The executive orders passed by Trump don’t overly focus on the impeachment of certain regulatory bodies but they rather speak of setting up a system where every federal bureau is obligated to employ a Regulatory Reform Officer.

The Regulatory Reform Officer will hold the responsibility of making a Regulatory Reform Task Force charged with assessing prevailing rules for the objective of endorsing those which can be annulled, substituted or revised. The Regulatory Reform Task Force will make suggestions based on the condition that the rules:

  • Abolish existing posts and jobs or prevent any possibility of the further creation of jobs.
  • Are unproductive, needless or obsolete in terms of the updated rules, regulations, and demands.
  • Levy costs on industries that surpass the rules’ advantages.
  • Are inconsistent or unreliable with current rules or restrict the executive’s agenda of reform.

When directing these evaluations, the members of the Regulatory Reform Task Force may refer to small businesses for consultation. They are allowed to consult government officials and even non-governmental organizations (NGOs). They are also given allowance to communicate with individual customers and trade groups.

Not a single one of the executive guidelines briefed exactly how the members of the Regulatory Reform Task Force will analyze the way in which the regulations disturb or help business expenses, the creation of jobs or other financial activity.

Protocols and Expenses in Consumer Lending

2014 saw the Credit Union National Association (CUNA) commission a banking consultancy called Cornerstone Advisors to carry out a two-phase study on how guidelines influence credit unions and their associates. The researchers collected information on compliance expenses, third party costs, and reduced revenue openings.

The study found that regulatory expenses made for credit unions in the year 2014 were $1.7 billion more than it should have been if the federal government had not introduced the rules they applied between 2010 and 2014. Furthermore, the rules reduced incomes by $1.1 billion – totaling up to a $2.8 billion economic effect. Along with that, the people involved in the research process discovered that regulations had a bigger economic influence on smaller credit organizations compared to their greater counterparts. This was down to the fact that larger unions had a broader asset base which they spread across the fixed expenses of regulatory agreements.

Looking into The Specifics

What were the few pain points heads of credit unions emphasized in the Credit Union National Association research? The unreliable interpretation of rules and regulations was one of them. That grievance augments another level of complication to Trump’s administrative orders.

What Does the Future Hold for Payday Money Lending?

This is for certain: The changes are happening comparatively fast. Donald Trump’s initial executive on dropping regulation says that every agency must deliver a report specifying the overall incremental expenses associated with the regulations it supervises. The chief variations may not take place until 2018. With the Trump administration making strong improvements, the future of payday money lenders and the services they provide like payday advance loan looks bright, although nothing can be confirmed.

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Payday Lending Opponents Simply Do Not Seem to Understand the Industry

Payday Lending Opponents Simply Do Not Seem to Understand the Industry

There are several consumer advocacy and community groups out there who have been very vocal about their dislike of the payday lending industry. A chief complaint that many of these groups like to bring up is that they believe the lenders charge super-high interest rates. Here’s an example of that thought process: If someone takes out a payday loan and pays $15 or so for every $100 that they borrow for a period of about 2 weeks, then the borrower is paying too much. These folks like to stretch out the $15 fee for each hundred borrowed across an entire year. Borrowers do sometimes roll loans over into new loans, and that leads to higher fees. But are the loan fees really that outrageous to begin with?

What if you ran a payday lending company? Well, for starters you would know that lending involves a certain level of potential risk. There is an increased risk that goes hand-in-hand with making loans to people with lower credit scores and income levels. Banks and credit card companies do everything that they can to minimize risk. That is why these industries don’t offer shorter term loans to people with bad credit. Payday lenders assume a huge amount of risk, and that is one of the reasons that they fees they charge might seem a little too much to folks who don’t understand the lending/risk equation.

It is true that using a short term loan to deal with daily expenses or emergency expenses is not a great situation to be in. However, the opponents of payday lending simply don’t realize that the lenders provide an important, much-needed service to lots of American consumers every year. The alternatives to payday loans (i.e. potentially turning to a loan shark or other illegal lender) are much worse than any payday loan could ever be.

While people from various walks of life take out payday loans, the average payday loan customer is likely to have a subprime credit score. This leaves them with fewer borrowing options than someone with normal or good credit. Banks, credit unions and credit card companies realize that these types of borrowers present a higher risk, and they will not lend money to these people. The fact of the matter is that these types of borrowers are more likely to default on their loans. These same consumers regularly default on their payday loans, but the lenders in this industry continue to take that risk, and they have to charge loan fees to get compensated for the risk that they take on with each loan that is made.

Higher risk borrowers are more likely to pay higher loan/APR fees. People with great credit scores/histories are more likely to score low APR fees. It is really that simple. If you look at payday loan fees in light of this basic information, it is hard to consider these lenders as being predatory in the least. If you were going to lend someone money, and you knew that they were not likely to pay you back, would you still do it? Probably not, but payday lenders do that every day!

It is easy to get passionate about these types of topics. No one wants to see lower income consumers having to pay expensive fees to borrow money. However, we need to consider how much worse-off these people would be without the ability to take out small dollar/short term loans. If the watchdog groups get their way, lower income Americans with bad credit scores may have a very rough financial road ahead to face before too long.

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Need Help Paying for an Expensive Divorce? This may be what you have been looking for!

Need Help Paying for an Expensive Divorce? This may be what you have been looking for!

There is nothing easy about getting divorced. Some people are lucky enough to go through amicable divorces, but even those situations are sad, as they represent the finale of a relationship that was built on love. There is also the fact that assets must be divided, someone usually has to find a new place to live and the emotional rollercoaster that are all unique to a divorce. And no matter how you look at it divorce is expensive.

Many women have found themselves in situations where they are not financially independent enough to get by after their marriages come to an end. Many experts advise that wives keep secret savings funds set up that they can use to help pay for costs associated with a divorce. Many people – both men and women – find themselves in a situation where a divorce is looming, but they don’t have any money put aside, or maybe not nearly enough. Some people even consider using crowdfunding sites or pandering for money on social media sites to help pay for their divorces when they don’t have enough money on hand.

Though women are a major part of the workforce these days, it still pans out that husbands are usually the ones with the most money, which makes many wives dependent on their spouses with regards to finances. Some women have even given up on working, choosing to be stay at home moms, so they have no income at all of their own. And even those women who have a lot of their own money may find the costs of divorce to be too much.

If you are a woman who is going to be getting divorced soon you there may be something you can do to help pay for your legal team costs. A new business niche has arrived on the scene that helps women to pay for divorce costs. The providers of these types of services believe that they level the playing field a little bit, and prevents rich husbands from dragging their feet during divorce proceedings to drive up the legal costs of a divorce. This tactic can sometimes lead to women running out of money and having to give in to their husbands’ demands in court. A bit of independent divorce financing can help these women to go after settlements that they may not be able to get when funding a divorce on their own.

The firm that is really getting this new industry moving forward is called Novitas US. This company gives their clients non-recourse advances to pay for expenses related to divorces. The financial advances can pay for legal help and can even be used to pay for expert fees and some personal expenses. This company even offers funding advances for loans with no payment being required unless a settlement is reached or a judgement is given on the divorce.

The team at this company believes that providing outside funding to women will fundamentally change the way that women pay for divorce proceedings. The monetary assistance won’t make going through a divorce easy, but it can help some women to get through the experience of getting divorced without access to a ton of cash from the very beginning. Other firms will likely jump into this industry, and some may offer different versions of the types of advances that Novitas US is currently offering. It will be interesting to see how this industry evolves over the next few years. In the meantime, though, divorce rates are lower today than they were in the 1980s, so maybe less women will actually need the type of financial assistance this company offers before too long.

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Arizona Lawmakers Trying to Breathe New Life into Controversial Loan Bill

Arizona Lawmakers Trying to Breathe New Life into Controversial Loan Bill

The consumer lending industry in Arizona has been working diligently to get new legislation passed. This legislation would see the consumer lending industry contributing a portion of their profits to charities. In exchange, the industry would be granted the right to make loans to consumers and to charge interest rates that some say can add up to about 15 percent in interest rates.

A conference committee approved this legislation that will allow consumer lenders to make loans for up to $2,500 for terms of up to 18 months. This comes after supporters added language to the bill that would set up a fund that would be given to the Governor’s Office for Children Youth and Families and could also be used to provide grants for other charitable organizations. Opponents of this legislation say that it was purposefully crafted to not mention how much each lending company would have to pay from their profits. This is due to the fact that the Arizona Constitution has a requirement where a 2/3 vote must pass in order for any new assessment. That is a vote that this plan has not managed to pull off.

The legislation does, however, leave it up to the Governor, Doug Ducey, to provide an appointee who would be tasked with deciding how much to assess. There is currently no minimum amount defined, but the cap on how much can be collected is officially $10 million over the next ten years. Additionally, the measure mentions that if fewer than five lenders go into this lending industry in Arizona that the monetary requirements would be taken away and the fund would not be created.

Kelsey Lundy is a lobbyist for the lenders and says that this new legislation could act as a type of reform that would benefit consumers. She said that rates are not any higher than what some lenders currently charge for car title loans. These are loans where consumers use their vehicle titles as collateral to their lending companies. Lundy also talked about how the change could get rid of registration loans. These loans exist because of legal loopholes that allow people who do not outright own their vehicles to borrow money from title loan lenders at the current rates.

Representative Debbie McCune did not argue this fact. However, she did say that the state should not be involved with new laws that create more opportunities for what she referred to as “predatory lending”, especially being as Arizona voters voiced their opinion less than a decade ago to get rid of payday loans and other types of non-bank consumer loans.

McCune was tame in her opinion of the consumer loan industry when compared to Representative Mark Cardenas. He was very upset about the 11th hour offer to give charity grants in order to get votes. Cardenas said that assessments for grants would be predicated upon the amount of business that a lending company managed to drum up from people who do not have the option to get money from banks or credit unions.  Cardenas summed up his view on this situation by saying, “So it’s a tax on the poor to help pay the poor.”

The legislation still has to get enough votes from the Senate in order to get enacted. If consumer lenders are allowed to open their doors for business in Arizona, though, they are likely to face some vocal opposition from local consumer advocate groups and political leaders. Of course, providers of alternative lending services have almost come to expect this kind of opposition as of late.

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Here’s How to Save Money while paying off a lot of Credit Card Debt

Here’s How to Save Money while paying off a lot of Credit Card Debt

When people get their first credit cards, they often make the mistake of thinking it is a dream situation. They now have an open line of credit to go out and purchase everything they want to. That works out just fine, until the first credit card bill comes due. That’s when you see how much you owe, and how much extra you’ll pay due to interest rate fees over time. If you cannot pay off that whole balance immediately, you soon wind up in the cycle of seemingly never ending interest rate fees to pay. And that’s when reality sets in: having a lot of credit card debt is a real downer!

If you’ve been accruing credit card debt for a while now, you probably know all about the scenario we just discussed. And you may be at a point in your life where you are ready to pay off your credit card balances, but are having a hard time doing so because of the additional expense of interest rates on your account growing larger and larger. Unfortunately, it is the law that you have to pay these fees. But there is a completely legal way to avoid paying interest on all of your debt. All you have to do is move the debt around. You can do this by transferring the balance over to a credit card that offers you an introductory interest rate of 0 percent on transfers.

Once you switch the balance of a credit card to a 0 percent APR balance card, the debt will cease to build up interest rate charges for the entire time that the card allows you to keep the 0 percent incentive. Usually, the term is for a year, or maybe 15 months. That is not a long time, but it is long enough to help you save hundreds, possibly even thousands of dollars while you pay off your credit card debt.

Before you do this, though, you need to be prepared. Here are some things you should know about prior to applying for a balance transfer credit card.

You need a decent credit score. The majority of the 0 percent APR offers out there come with a few hitches. One of them is that you usually need a fair-to-good credit rating in order to qualify. Make sure you know what your credit score is prior to applying. If your credit score is on the lower end of the spectrum, you may want to take some steps to improve your score prior to applying.

There are often balance transfer fees that you have to pay in order to qualify for a balance transfer credit card. The credit card issuers usually charge a fee that is around 3 percent of the balance you are transferring. Let’s say you are going to transfer $2,000 in debt. With the 3 percent fee, you’d pay $60. With this in mind, be sure that the money you will save on interest rate fees is more than the transfer fee that you’ll have to pay in order to open the balance transfer credit card.

In addition to these two points, you should also know that your credit limit will usually wind up being the same as your credit limit on the new card. You’ll also have to transfer from one issuer to another in order to get your new balance transfer card. Whatever you do, make sure to pay off the entire debt before your 0 percent introductory term expires. And once it does, don’t make the mistake of racking up a bunch of debt on the card once it has higher interest rate fees to contend with.

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How Fathers can teach their kids about Finances

How Fathers can teach their kids about Finances

Fathers play an important role in the lives of their children. Yes, mothers do too, but this post is about the relationship that fathers have with their offspring. As you know, most parents dread the time when they have to have the “big talk” with their kids. But when it’s all said and done, most parents are able to get through this discussion without stressing out too much. But there is another important topic that fathers must address with their kids: finances! There are too many people in this country who make it through childhood, adolescence and even young adulthood without ever getting any real guidance on money matters. As a father, you don’t want to see your kids struggling with money as they live out the rest of their lives. There are some unique methods that you can use, as a father, to talk to your kids in an effective manner about money issues.

Financial Self-Control

One of the foundational financial concepts that you can teach to your kids is to be financially responsible and under control. When you take time to teach your children to plan their financial actions, you will be doing them a huge favor. Spend time with your kids and talk to them about saving, budgeting, paying bills and being under control with regards to finances. Too many kids get a feeling of a bit of money “burning a hole in their pockets.” Unfortunately, this impulsive urge to spend, spend, spend can be one that carries over into their adult lives. Help kids to learn the longer term benefits of saving versus simply blowing every dollar as soon as they get it!

Children, however much you talk to them, though, will ultimately end up copying what they see you do. This is not a bad thing, as it provides an opportunity for you to model some positive financial behaviors to your children. Start taking them to the bank with you, and tell them what you are doing. Take them grocery shopping, and explain the prices and how to find the best bargains. Make sure you tell them to ask you any questions that they might have. These are the kinds of moments that allow you to not just pass on solid financial behaviors, but also to spend more time bonding with your children in a whole new way.

You don’t have to be a financial genius in order to inform your kids about finances. Even if you struggle yourself, you should do what you can to get the dialogue started with the kids at an early age. Like other things in life, your kids are going to learn about money somewhere and from someone. As a parent, your goal is to be the one who informs your kids. Even if it involves you telling your kids about times that you fell short of being fiscal, these types of discussions go a long way in showing your kids the importance of being financially responsible as they grow older.

Most of us dads want to leave a legacy behind for our kids. And while most of us will never have statues built in our honor, or our names in the history books, we do have the ability to put energy and time into making our kids more financially responsible. There are a heck of a lot of skills and wisdom that you dads can pass along to your kids. Be sure to make financial stability and responsibility important concepts that you pass down to your children. By doing so, you will secure your legacy as a dad who cared enough to help his kids avoid financial stress and problems in the future!

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