CFPB Accuses Online Payday Lenders of Exposing Customers to Hidden Risks

Jun 6, 2016 by

CFPB Accuses Online Payday Lenders of Exposing Customers to Hidden Risks

Dealing with emergency expenses is difficult for even the most affluent among us. Lower income households, however, can fact outright ruin when financial emergencies rear their ugly heads. And many low to mid income households in this country are either underbanked or unbanked, so they often have very few options when they need to borrow money to take care of these types of expenses. Often, these folks turn to alternative financial service providers, like online payday lending companies.

More often than not, people who take out payday loans run into no problems with repaying them, and they are then free to go about their normal routines. In some cases, though, people get hit with fees that they may not have expected. Some reports have shown that borrowers pay an average of $185 in penalties from their banks – usually overdraft or non-sufficient fund fees – when lenders go through the process of automatically deducting repayment for loans given. It is estimated that about a third of online borrowers who winded up with bank penalties had to deal with involuntary bank account closures.

This has happened to consumers when online lending companies repeatedly make debit attempts on their customers’ accounts. This causes extra bank fees to kick in for the account holders, even though these efforts usually lead to no payment being recovered on the part of the lending companies.

Of course, the CFPB is keeping tabs on online payday lending companies, so it comes as no surprise that the Director of the CFPB, Richard Cordray has a strong opinion on these types of issues. Cordray said, “Each of these additional consequences of an online loan can be significant, and together they may impose large costs, both tangible and intangible, that go far beyond the amounts paid solely to the original lender,” said CFPB Director Richard Cordray.

These findings come with the third analysis that the CFPB has done on the United States payday lending industry. Payday lenders provide unsecured loans to their customers, and typically the person who borrowers from one of these lending companies pays the lender back within a few weeks. It used to be that most payday lenders got paid back via a post-dated check. These days, though, online payday lenders usually automatically deduct the loan amount plus fees when the loan has run its term. The Obama administration has always had a disdain for this industry, and has supported the CFPB in its efforts to cook up new regulations that could potentially drive a lot of smaller lending companies out of business.

The CFPB analyzed about a year and a half’s worth of data from Automated Clearing House. This is the financial network used to put money into a borrower’s account and also to extract payment when the loan payment comes due. The data analyzed showed that some borrowers did not have adequate funds in their accounts when the loan repayment request happened, and that this – as one might expect – resulted in people getting hit with overdraft charges from their banks.

Here’s the thing, though – these fees are not charged by payday lending companies; it is the traditional banks that love to profit from imposing these fees. It is not the fault of a lender if a borrower does not live up to their end of the agreement by having adequate funds to cover the transaction in their bank accounts. No matter how much Cordray and his team want to twist these types of situations into being the fault of online payday lenders, the bottom line is that the fees are charged by the banks and happen because consumers fail to keep enough money in the bank to cover loan payments that they knowingly agreed to. End of story.

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How to know if you are prepared to open up a Rewards Credit Card

Mar 15, 2016 by

How to know if you are prepared to open up a Rewards Credit Card

Reward credit cards have been popular for some time now. But they have really gone off the charts over the course of the past few years. Nearly every credit card issuer boasts some kind of rewards program now. Some will offer you the chance to earn gift cards. Some will give you airline miles or credits at hotel chains. Some even offer to give you cold hard cash back for every dollar you spend on certain types of purchases. These are all great incentives. And a rewards credit card can certainly prove to be beneficial to many consumers. There really is nothing like earning perks back for doing something that you would be doing anyway – spending money!

Despite the perks, though, these types of cards are not right for all people. Many rewards cards charge higher interest rates when compared to similar cards with no rewards offers. Some cards even charge high annual fee charges that may prove to be more costly than any rewards that you actually earn. However, like we said, rewards cards can be, well, rewarding. It’s all about making sure that you are in the right place in your financial life prior to getting one. So how do you know if you are ready to upgrade to a rewards credit card? Here are some key signs that show you can move on from a basic credit card to the rewards card of your choice.

You Are Ready for a Rewards Card if:

You Have the Household Budget Well Under Control

It is a great thing to earn benefits while you charge your expenses. However, you should not sacrifice your budgeting efforts in an effort to earn more, more, more. In other words, don’t start spending on your card like crazy so you can simply earn more rewards. If you have the ability to create a household budget, stick to it and you manage to put a bit of money into your savings every month, there is a good chance that you might be a good candidate to get a rewards card and to use it responsibly.

You always pay off Credit Card Balances in Full

The rewards that you earn are only really good for you if you carry a zero balance on your card. That way, the miles or cash bonuses that you earn actually outweigh any interest that you accrue on your purchases. If you are one of those people who always makes it a point to only charge as much as you can reasonably afford to pay off in full every month, and you always pay off every dollar that you charge when your bill comes through, then you may find that a rewards card is a great tool to help you get a little cash back or to earn miles for your next vacation.

You Have a Good Credit Score

There are tons of rewards programs available these days. The best, however, are usually reserved for people with good credit scores. It is also worth noting that if you do have a high credit score, you are probably pretty responsible with your credit, which is another plus. Before you fill out any applications to get a rewards credit card, make sure that you pull your credit report/score to find out where you stand right now.

Finally, only get a rewards card that offers you perks you will actually use. If you don’t travel frequently or perhaps don’t enjoy flying, then a card that offers airline miles is probably not right for you. Spend a little time shopping around and comparing rewards credit cards to find the card that offers the types of rewards that you will enjoy racking up.

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Small Mistakes That Cause Big Problems for Your Credit

Feb 2, 2014 by

Small Mistakes That Cause Big Problems for Your Credit

There is probably not one person who wants poor credit. Not many people go around saying they do not care about their credit. There are some small mistakes that anyone can make that can cause big problems for your credit, you need to watch for them and avoid them.

The first mistake is to open too many accounts at one time. Every credit card that you apply for can and will show up on your credit report. This does not look good, the more you have on there the worse that it looks. Each application for a credit card does cost you three to five points on your credit score. They can even show up on your credit score for up to two years, although it only has a negative impact for about half the time that it shows up.

Missing even one payment is another mistake that can cost you big. Missing a payment can cause you to have a larger amount owed. The company that you owe can add late fees to your balance, and not only that the interest will still be adding up. It also looks bad on your credit score, causing it to fall up to one hundred points. Make sure that you are making your payments on time.

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Before closing an old credit card account that you have had for years. If you are looking for a new line of credit then closing an old account is not a good idea. It can negatively impact your credit score. So make sure that you think long and hard before closing an old account. Try to look into your future to see if you can see yourself trying to acquire a new line of credit any time in the near future.

It is obvious for anyone who knows anything knows that it is not a good idea to max out a credit card. Maxing out a single credit card can really hurt your credit score. If you have to make a big purchase you will be better off splitting the cost between two different credit cards. Maxing out one will not only show up on your credit score but can impact your ability to get new lines of credit.

You need to make sure that you are checking your credit score at least once a year. The three major credit reporting companies will give you a copy of your credit report for free once a year. You need to make sure that you are checking your credit card for errors. Any errors that are on your credit report will affect you getting a new line of credit. If you find any errors make sure to report them to the company immediately.

If you have a bill that is unpaid and gets sent to a collections agency and do not pay it, it will seriously hurt your credit. There is no reason to ignore these bills, if you have to contact the collections company and set up a payment plan that you can afford. Most of these companies are going to be willing to work with you in order to get the money that is owed to the original company. So just call and see what they can do to work for you.

There are many small mistakes that can really hurt your credit. Your credit needs to be very important to you. You need to make sure that you are doing what is necessary to keep your credit in a good place. Having good credit can help your financial future, and having poor credit can truly hurt your financial future.

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It’s Okay To Start Small

Dec 10, 2013 by

It’s Okay To Start Small

When friends and family members tend to give you Financial Tips here and there, most of them tend to go in one ear and out the other, so to say.

Finance

Finance (Photo credit: Tax Credits)

While it is nice to know that people care about you enough to give you tips to help you with your finances, you tend not to go ahead with their advice until you recognize that you have to. The thing about finances is that most people do not take action until they need to. If they are comfortable with their current financial situations, they aren’t usually willing to “rock the boat”, so to say, and try something new. The thing is, when financial issues do start to occur, it is the time to start taking some of that advice that you get from people who care about you.

Starting Small Is Okay

The last thing that you want to do when it comes to finances is to get overwhelmed. While there are a lot of things that you can do to try and help your finances off, you should not jump into something that you simply are not comfortable with. Starting small is okay when it comes to making chances in your financial situations; jumping into something you don’t understand will not end up helping you like you would want it to. If you are confused about what you should be doing, take the time to talk to a financial professional who can show you what you should be doing step by step.

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Back To School Spending Got You Down? A Cash Advance Can Help

Sep 5, 2013 by

Back To School Spending Got You Down? A Cash Advance Can Help

When the summer is winding down it’s time to start thinking about going back to school and school supplies. In a recent survey parents said they spend the most on clothing and accessories to get their child ready for the new school year. According to the survey, the average person will spend $250.00 on clothes, $217.00 on electronics and $130.00 on shoes to send their child back to school. That is not including notebooks, pencils, backpacks or school fees. A short-term Cash Advance loan can help with these yearly expenses.school-supplies

If your child is participating in marching band, flag corps, cross-country track, football, soccer or cheer leading the beginning of the school year may also require the additional purchase of uniforms and equipment. Other charges and fees may apply as well such as registration fees, technology and lab fees, art and music fees. Unfortunately, with many schools struggling with funding cuts the costs have trickled down to the students and parents.

For many families, especially those with numerous children the start of the school year puts additional stress on their finances and becomes a burden. It’s a lot of money for them to have to come up with in just few weeks’ time. For example, parents of elementary aged children can expect to pay approximately $1,000 per child on extracurricular activities for sports equipment and uniforms. Middle school children will spend even more about $1,500 per child. When your child is in high school, expect to pay for extracurricular activities and more such as prom, homecoming and driving lessons.

What Are Payday Loans?

A payday loan, which is also known as a paycheck advance or cash advance is a small, unsecured, short-term loan. You generally may use a payday loan when you are short on money and you borrow just enough to get you through until your next payday. Amounts that can be borrowed vary on the amount you are borrowing. Based on the information provided on the application, qualified applicants can receive a loan from $50 up to $1500 or more. A fee is charged according to the amount that is borrowed.

How Do Payday Loans Work?

  • Visit an accredited payday loan lender. Most payday loan services consists of a lender network that will typically match most applicants with a loan. You can visit in person by phone or online. The application is a simple process and basically consists of contact information, banking information such as your checking account and routing number, income and employment verification, social security number and references. There is no credit check required. You write a check for the amount you need to borrow, or if you are applying online, your checking account will be used to pay the loan amount back. The requirements and fees of each lender may be different. Ask about the current rates and policies.
  • When approved, money will then be deposited into your active checking account or a check is written to you.
  • The lender cashes your check or debits your checking account when payment is due, normally within two weeks.

Advantages

  • Ease and convenience, you can apply securely online 24 hours a day 7 days per week. The loan application process is designed to be quick and easy.
  • A payday loan is flexible and you may be able to extend it if you need more time to pay.
  • No credit check required in most cases. Your application can be approved quickly, which will put the cash in your hands fast. Easy access usually within 24 hours.
  • Useful form of short-term credit such as helping with the back to school fees and clothing.
  • Avoid late charges because of late payments and unpaid bills. Emergency funds can help cover the cost.
  • Valuable for emergencies.

Careful budgeting is important and it’s difficult to ask for help but Unexpected Bills can catch you off guard. Car Repair emergencies come up at times as well as medical emergencies. Other expenses can be over looked such as the various fees needed at the start of the school year. Quick payday loans are designed to give you that boost of cash that you need to get you through until your next payday.

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