Illinois attorney general Lisa Madigan has accused payday lender All Credit Lenders of misleading borrowers and skirting the state's usury laws. In a lawsuit against All Credit Lenders, Madigan contends the company deceived borrowers into buying a product pitched as a way to protect them from falling behind on payments in the event of a job loss. But those protections never materialize, the lawsuit said. In fact, the fee is designed to raise interest rates and circumvent the state’s usury cap of 36 percent. The lawsuit referred to the loans as "cash incinerators" with minimum payments that cover only the interest and the mandatory maintenance fee charged each month. “This is one of the more egregious products I have come across,” Madigan said.
ABC Bank hosted the one year anniversary party for Austin Weekly News' West Side Business Network, a group of 75 local entrepreneurs and community members. The evening included refreshments, networking and a presentation from the Oak Park Regional Housing Center on their Austin Ascending program, in which building owners are given grants to improve the appeal of their rentable units. Community organizers Austin Coming Together (ACT) also gave a guest presentation about their many programs and services that build capacity for collaborative action in four focused areas: early childhood, youth, workforce and the built environment.
A new report by the National Consumer Law Center dismisses claims by lending startups that their analysis of big data has allowed them to offer more affordable loans than payday lenders. The consumer advocates found that loans from startups offered effective annual interest rates of 134% to 749%, no better than traditional payday lenders. During loan underwriting, the startups examined variables including rent records, prior payday loan repayment and transactions with pawn shops. But red flags could also include social-media posts about a car breakdown, filling out an application in capital letters or even a user scrolling too quickly through the lender's website without reading materials. The FTC is set this week to discuss whether those algorithms are discriminatory or violate the privacy of borrowers.
Boston-based OneUnited Bank has introduced two new programs designed to help people achieve healthy credit. The bank's Waive Home Loan Program aims to make home financing more affordable by waiving many home loan fees. The program, set to run through the rest of this year, is open to everyone, including first-time homebuyers. OneUnited has also launched the Unity Vista Card, a program that focuses on lending in low- to moderate-income communities. The card features a low annual rate and will not have fees for purchases and deposits. Cardholders are automatically enrolled in OneUnited's "How to Rebuild Credit Program" which offers educational tips and strategies on how a borrower can rebuild and maintain a healthy credit score.
Virginia Community Capital has stepped in to secure financing for Virginia-based excavation business J.R. Caskey Grading & Excavation. The family-owned business had faced significant challenges throughout the recession. The firm suffered a setback when their long-term business lender decided to discontinue all construction financing. Virginia Community Capital has filled that void, providing credit on favorable terms and refinancing J.R. Caskey's existing loans. “VCC was sincere and promised to help us, which they have... VCC did everything possible to keep the ball rolling. VCC and their lending team have been responsive, reliable and determined,” said Ginger Caskey, President of J.R.Caskey.
Virginia Community Capital is providing new financing to IT consulting agency Omegus Prime under the bank's Asset-Based Lending program. The program is designed to assist small government subcontractors in securing their first government contracts and is bundled with technical assistance from a certified small business support entity, in this case the George Mason Enterprise Center. Rashad Rivera, who founded the company after working as an IT consultant on federal contracts for 15 years, hopes the assistance will allow his firm to go from subcontractor status to a prime contractor.
Consumer advocates say the payday lending reforms instituted in various states have failed to adequately address the problems of borrowers. For example, under Florida’s payday reform law, borrowers are limited to one outstanding loan at a time, may not roll over a loan and must wait 24 hours after paying off a loan before taking out another. But lenders have found ways around each of these provisions. They have circumvented the rollover bans by allowing consumers to repay their existing loan and take out another the next day. It is also possible for customers to avoid the cooling-off period entirely by simply borrowing from a different lender. Suzanne Martindale, an attorney with Consumers Union, says meaningful reform will likely require greater national oversight from the Consumer Financial Protection Bureau.
As "crowdfunding" financing platforms grow more prevalent on the web, it is easier than ever for merchants to solicit funds from customers — but is it a good idea? After nine years in Brooklyn, the Chocolate Room, a specialty food shop, experienced a crippling rise in rent. The cafe’s owners, Naomi Josepher and Jon Payson, reluctantly decided to abandon their space and begin figuring out how to finance a $200,000 relocation. They settled on launching a crowdfunding campaign on Kickstarter. Word spread quickly and by the third day, the shop had more than $1,000 pledged toward its goal of $40,000. Then the resistance began. “There’s something about asking your customers to help fund your expansion that just feels a little ... wrong,” posted a commenter on one community website. “Cool or not cool?”
The Senate has confirmed Federal Reserve Governor Sarah Bloom Raskin as deputy secretary at the Treasury Department, making her the highest-ranking woman in the agency’s history. Raskin joined the Fed in 2010 and was known for her focus on consumer protection. In her speeches, she has called attention to problems in the mortgage and foreclosure industries, the consequences of growing wealth and income inequality and the plight of low- and middle-income consumers. Before joining the Fed, Raskin was the chief financial regulator for the state of Maryland. Her confirmation creates another vacant seat on the seven-member board of governors.
Senate Banking Committee leaders Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) have announced an agreement on legislation to wind down government-owned mortgage financiers Fannie Mae and Freddie Mac. Under the plan the financiers would be replaced with a new government reinsurer called the Federal Mortgage Insurance Corp. The senators also plan to replace affordable housing goals that Congress had given Fannie Mae and Freddie Mac with new housing-related funds to ensure the availability of affordable rental properties. To create space for community banks in the system, the senators said they would seek to establish a "mutual cooperative jointly owned by small lenders" to offer a cash window for eligible loans while allowing the institutions to retain mortgage servicing rights.