ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
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Houston debt buyer asks for new trial after $25 million verdict
Houston debt buyer Joseph Onwuteaka is asking for a new trial after a jury in June imposed $25 million in civil penalties against him and the companies he controls for unscrupulous collection practices that included suing nearly 900 consumers who live far from Houston and were unlikely to show up in court to defend themselves.
The jury, which deliberated for two days after a two-week trial, found Onwuteaka, a lawyer who operates out of an office on the edge of Sharpstown, violated state consumer protection laws that require debt collection lawsuits to be filed in the county where the person lives or the loan documents were signed. The Texas Attorney General accused Onwuteaka of obtaining default judgments and orders to freeze bank accounts, and then collect money from consumers who might not have legally owed the debt.
Onwuteaka says the jury in state district court in Harris County made its determination based on hearing evidence from a small number of witnesses and then unfairly extrapolated to other instances, according to court records. He also says that the jury's finding was not supported by evidence that either he, his law firm or debt management company violated the state's prohibition against deceptive trade practices.
The penalties are excessive, especially for a sole practitioner like Onwuteaka, said Houston lawyer Michael Essmyer, who is representing Onwuteaka, his law firm and investment management firm.
"This isn't a guy who has $26 million floating around," said Essmyer, who tallied the $25 million jury verdict and the $560,000 Onwuteaka was also ordered to pay in attorney's fees to the State of Texas.
Read more at CHRON.COM
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What is the concern about payday loans?
Q: I'm always hearing how bad pay-day loans are, but I don't understand what the issue is. Sometimes money is tight, and the loan is only for a week or two. What's the concern? - Tamara
A: The issue is the cost of the loan. The interest on pay-day loans starts at 300 percent, but because - as you mention - the loans are very short-term, most people don't see it. Let's say you take out a $400 loan for a week. You pay it back a week later, along with the $25 in interest. Doesn't seem too bad, right? But if you do the math, you quickly discover that ?the $25/week, multiplied by 52 weeks in a year, comes out to $1300, or over three times the amount of your $400 loan.
Now if you only did this one time, it might be less of an issue. Except now, the moment your paycheck is handed to you, you get $400 (actually $425) less than you normally would because you have to pay the loan back. If your wages weren't enough to cover your expenses last week, how are those same wages, minus $425, going to be enough this week? Thus it becomes a habitual crutch. ?And of course, if you make the mistake of not paying the loan back in-full right away each week, there are additional fees as well that quickly add up.
Now, we've all found ourselves in a tight spot now and then. It's why I'm such a strong advocate of emergency funds. But assuming you're in such a spot now and have not planned ahead for this particular emergency, there are options. My favorite is going to your nearest credit union for a short-term loan. Loan approval at a credit union is often quicker than at a bank, and the fees are lower, saving you both time and money. But whatever you do, look for financial counseling at the same time. The circumstances that caused this need today could re-appear down the road without a corresponding change in behavior.
Read more at THE KANSAN
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Bank Verification. Will the check clear? Is the account information accurate? Know for sure.
Bank verification is a critical part of risk assessment. Understanding a prospects banking status and history can help you understand their propensity for managing credit.
Bank verification can also play a role in identifying the assets and tracing the location of customers whose accounts may be delinquent.
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OKLAHOMA: State's payday loan usage rate highest in nation
OKLAHOMA CITY - Elise Robillard was desperate for a quick cash infusion the first time she walked into a payday lending store.
A long-term substitute teacher and mother of two young children, Robillard's tires were bald, and she couldn't afford to replace them.
So she turned to small, short-term payday advances thinking they would keep her afloat. The loans have few financial qualifications, but annual interest rates as high as 391 percent.
More and more overextended Oklahomans, like other Americans, are using advances to cover everyday expenses - mortgages, rent, utilities, or outstanding credit card debt, car repairs or medical bills, studies have found.
But unlike Americans living in other states, Oklahomans use the loans at a staggeringly high rate, according to analysts.
In all, an estimated 1 in 8 Oklahoma adults has taken out a payday loan - the highest usage rate in the nation, said Nick Bourke, director of consumer finance at Pew Charitable Trusts. The typical borrower takes out 10 payday loans per year, often relying on new loans to pay off old cash advances, he said.
Nationally, the average usage rate is closer to 1 in 20, Pew found.
"If you think about the core reasons why people use payday loans in the first place ... (Oklahoma's usage rate) may have something to do with the fact that there are a lot of people living paycheck to paycheck in Oklahoma and not a lot of other programs set up in Oklahoma to help people be financially successful," Bourke said.
Read more at ENID NEWS
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CANADA: Province promises to rein in payday loan industry starting in 2018
New regulations coming to help protect New Brunswick's most vulnerable borrowers
Consumers who resort to the most expensive way to borrow money - the payday loan - will be better protected under regulations going into effect next year, the province announced Friday.
Following in the steps of other provinces, the New Brunswick government said it wants to protect vulnerable people from being exploited by lenders.
With a payday loan, a consumer gets a small amount of money for a short term, at a very high interest rate. The money is supposed to be paid back by the borrower's next payday, and the penalties can be punishing if the payment date is missed.
"We know that people who take out a payday loan often do not have a choice," Finance Minister Cathy Rogers said when the coming changes were announced in Moncton. "It is a last resort."
Starting in January, people who offer or make payday loans must be licensed by the Financial and Consumer Services Commission.
Lenders will have to provide consumers a rundown of all the costs of the loans they take out, and can charge no more than the maximum interest rates and fees set by the regulators.
Consumers will have a 48-hour grace period if they choose to cancel.
"By implementing these new rules around payday loans we will help to ensure that New Brunswick families are not taken advantage of," said Rogers,
The province also wants to make sure the payday loan industry is a viable one, the government said.
Read more at CBC.CA
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PayPal Scoops Up Swift Financial
Online lending M&A is under way. PayPal is bolstering its merchant lending capabilities with the addition of Swift Financial. While the deal was kept under wraps, some industry participants heard some buzz about a possible combination.
PayPal has been investing in its lending arm of late, evidenced by the addition of former Amazon executive Mark Britto as senior vice president and general manager of global credit in July.
Noah Grayson, South End Capital managing director and founder, weighed in on the deal.
"A merger of two industry leaders like this is not surprising. As the economy continues to improve and small business owners have access to more financing options, alternative business lenders are going to continue to consolidate to stave off competition, retain deal flow and secure profitability," said Grayson.
Dave Girouard, founder and CEO at Upstart, a consumer lending platform that uses machine learning, reacted to the deal:
"I expect to see more consolidation in online lending across both consumer and small business in the next year. Platforms with either giant balance sheets or proprietary technology will likely stick around, but others will struggle to compete," Girouard told deBanked.
Read more at deBANKED
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More consumers sue Miami auto lender over debt cancellation product
Doubling the size of her loan is not what Christina Resuello expected when she signed up for a $5,000 line of credit with Marlin Financial. But that's what happened, she said, because of a misleading debt cancellation product the company included in her agreement.
"I was like, 'I'm not paying this. I want to redo this,'" she said. "I don't want to pay back that kind of money."
The Boca Raton resident is among a smattering of consumers statewide who claim they were duped by Miami-based Marlin.
Resuello, like others, went to Marlin for a loan against her car. Marlin's website says it offers title loans for cars and boats - although Florida Office of Financial Regulation records show it is not licensed to issue title loans. Instead, its product is actually a longer-term loan that uses the borrower's car as collateral.
According to Allison Friedman, a lawyer representing Marlin, the debt cancellation product at the crux of most disputes is an optional add-on that wipes out any unpaid debt left on the loan should the car be totaled. And it is pro-rated.
Borrowers say the confusing product, which they could not opt out of, wound up doubling the principal balance to pay off.
The Better Business Bureau has received 17 complaints about the company within the past three years. Often, the BBB said on Marlin's page, the complaints follow a particular pattern:
"Consumers allege they took out a loan with Marlin Financial, and when they went to pay off their loan a few months later their loan had significantly increased," the site said, sometimes doubling the loan balance.
Read more at TAMPABAY.COM
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Nationwide Mutual Insurance agrees to $5.5M settlement over data breach
Nationwide Mutual Insurance company will pay a $5.5 million settlement for the 2012 data breach that exposed personal information for an estimated 1.27 million consumers, state officials said Wednesday.
Carried out by computer hackers, the data breach scooped up Social Security numbers, drivers license data, credit scoring information and other personal data collected to provide insurance quotes to consumers who applied for Nationwide's insurance plans.
Attorneys General in 32 states alleged the breach was made possible by the failure of Nationwide and an affiliate to apply a critical security patch intended to stop potential hackers.
"Nationwide demonstrated true carelessness while collecting and retaining information from prospective customers, needlessly exposing their personal data in the process," New York Attorney General Eric Schneiderman said in a statement about the agreement.
Nationwide detected, dealt with and reported the breach. The company "is pleased to have reached a settlement that we believe is consistent with our longstanding commitment to protect customer information," said spokesman Eric Hardgrove.
Read more at USA TODAY
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ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
AFSPA helps our members grow their Alternative Financial Services business by providing them with the best information, research, data, support, relationships and by vetting and presenting the best available product and service providers for the Alternative Financial Services Industry.
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Alternative Financial Service Providers Association 757.737.4088 315 Tuscarora St., Lewiston, NY 14092 dan@afspassociation.com www.afspassociation.com |
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