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Sine Ziegler
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posted 23 March 2004 08:49 PM      Profile for Sine Ziegler     Send New Private Message      Edit/Delete Post  Reply With Quote 
This story broke today where Money Mart and Quik Cash are being sued for their illegal interest they charge.

It's about time! I know in Saskatchewan and Quebec, there are tighter provincial regulations on these loansharks, but not enough elsewhere.

Low income people are in a lose lose situation and chartered banks are leaving their neighbourhoods which gives them no choice really.

I noticed this is in the Federal NDP's policy platform for the upcoming Fed election campaign and I am happy to see it.

_______________________________

CBC St John's story

Payday loan companies sued
WebPosted Mar 23 2004 04:11 PM NST
ST. JOHN'S Ches Crosbie, a St. John's lawyer, has filed class-action lawsuits against two money-lending companies.

At a news conference Tuesday, Crosbie announced he's begun the actions against Money Mart and Quik Cash Ltd, both of which provide short-term loans or advances against pay cheques.

Randy Bellows is the lead client under which the claims have been filed. He says he borrowed money from both companies during 2002 and 2003 and ended up paying exorbitant interest rates.

Bellows says he needed cash to buy a suit for his father's funeral, so he went to Quick Cash. He started out with a $200 loan.

He says in order to repay the loan, interest and service charges, he borrowed from Money Mart.

Within a few months, Bellows says he owed $700 on $400 in loans.

Financial nightmare


"It was a complete nightmare, it was nothing but a constant worry, it was a stress," Bellows says.

"It affected my personal relationships with people always worrying about money, always worrying about the repercussions from these companies."

Crosbie says the actions filed by Bellows are on behalf of everyone in the province who has taken out a loan from one of the companies and paid more than the 60 per cent annual rate of interest allowed under the Criminal Code.

Al Antle, a personal credit counsellor, says the additional fees charged by payday loan companies often push the interest rate above the legal limit.

So far, Bellows is the only person who has joined the class actions.

He wants both companies to pay back the interest charges. Crosbie is also asking the Supreme Court to stop the companies from charging what he says can amount to 1,000-per cent in interest and fees.

Money Mart is part of an international company based in the United States. Quik Cash has its headquarters in Newfoundland.

Ron Lawrence, one of Quik Cash's owners, isn't commenting on the class action suit, but he says his company runs its business by the book.


From: Calgary | Registered: Apr 2001  |  IP: Logged
mighty brutus
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posted 24 March 2004 01:02 PM      Profile for mighty brutus     Send New Private Message      Edit/Delete Post  Reply With Quote 
I have no problem with someone charging a fair price for a provided service, but it's about time these bloodsuckers got taken to task for their usurious (sp?) practices.
From: Beautiful Burnaby, British Columbia | Registered: Oct 2002  |  IP: Logged
redshift
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posted 24 March 2004 01:23 PM      Profile for redshift     Send New Private Message      Edit/Delete Post  Reply With Quote 
have a look, all your troubles could be one loan away.
http://www.payday-loans-cash-advance.bz/
and look at those handy tips!

How much does it cost?

Payday loans are $20 to $30 per hundred dollars borrowed until your payday, depending on individual circumstances and locale.

wanna do the math

[ 24 March 2004: Message edited by: redshift ]


From: cranbrook,bc | Registered: Oct 2001  |  IP: Logged
Mr. Magoo
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posted 24 March 2004 02:15 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
He says in order to repay the loan, interest and service charges, he borrowed from Money Mart.

Within a few months, Bellows says he owed $700 on $400 in loans.


I think that Money Mart makes it pretty clear that they're in the short term loan business. In fact their basic services seem to be cheque cashing (at a modest 3% for official cheques and 8% for personal, plus service fees) and payday advances.

If you don't know when, or even if, you'll be able to repay your advance, you're better off not using the service. And I'm sorry, but borrowing from another short term loan service to pay off part of your original loan is only going to make it worse.
I think that outfits like Money Mart aren't out of line to charge significantly more than a bank might. After all, they're basically cashing personal cheques for people who just walk in off the street. They're assuming the risks that banks won't.

Whether their fees are usurious I don't know, but when I tried Money Mart's online calculator, to pretend to borrow $150 until next payday in 2 weeks, the total of fees and interest was about $24. That's not so bad considering that by the time I'm resorting to paying that it's only because I have no savings of my own, do not have or have abused my credit card or line of credit, and have no friends who'd be willing to spot me a few bucks until payday. We could shut Money Mart down, but then who'd help me?


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
beverly
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posted 24 March 2004 02:27 PM      Profile for beverly     Send New Private Message      Edit/Delete Post  Reply With Quote 
Money Mart preys on poor people who are having trouble making it from payday to payday. Look at what the guy bought a suit for his Dad's funeral!

However, I wonder how realistic this lawsuit is. If you use the services don't you sign something that explains what you have agreed to? They are moneysucking loan sharks, no better than a character in the Sopranos but then if you go there you get burned, can you claim ignorance?

[ 24 March 2004: Message edited by: kuba ]


From: In my Apartment!!!! | Registered: Feb 2004  |  IP: Logged
Mr. Magoo
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posted 24 March 2004 02:38 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Money Mart preys on poor people who are having trouble making it from payday to payday. Look at what the guy bought a suit for his Dad's funeral!

An example almost too good to be true. But do you genuinely believe that Money Mart makes most of it's profit skimming from people buying crutches for Tiny Tim and medicine for their poor sick granny?

I had a friend who used to use the cash advance all the time, typically so he could go out on weekends or buy some fashion item that he wanted right now.


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
beverly
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posted 24 March 2004 02:42 PM      Profile for beverly     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
But do you genuinely believe that Money Mart makes most of it's profit skimming from people buying crutches for Tiny Tim and medicine for their poor sick granny?

Yes and No. I definately believe they prey on poor people. My neighbour was always short waiting for her welfare or child tax cheques, and would go down there and spend the extra say, $24.00 off the cheque just to make ends meet. So that's $24 that she didn't have when the cheque actually did come.


From: In my Apartment!!!! | Registered: Feb 2004  |  IP: Logged
Mr. Magoo
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posted 24 March 2004 02:59 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Here's a question: why don't social service agencies provide this kind of service, but without the fees and interest?

This occurs to me after noticing a sign in the window of a social service agency in a church I pass on my way to work. The sign advertises voicemail for people without a phone. They pay $3 per month to have 5 voicemail boxes that they can give to prospective employers, government agencies, friends and relatives, etc.

Why couldn't a social service agency have a kitty of money that could be lent out short term? So you need $100 to get you to your next cash input, and when you get your cash you pay it back so the next person can use it. If you charged a nominal fee, like 1%, you could actually watch the fund grow a little too.


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
beverly
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posted 24 March 2004 03:02 PM      Profile for beverly     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Here's a question: why don't social service agencies provide this kind of service, but without the fees and interest?

I guess the answer would be in a perfect world that would be possible.


From: In my Apartment!!!! | Registered: Feb 2004  |  IP: Logged
Mr. Magoo
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posted 24 March 2004 03:08 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Hehe. I think that's actually the opposite of an answer.

Why would the world have to be "perfect" before some agency could take some amount from their budget and try this. It's not like they're actually spending the money... it goes out and comes back and goes out and comes back. Hell, they could just put it right back into the budget if they needed it.


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
DownTheRoad
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posted 24 March 2004 03:27 PM      Profile for DownTheRoad     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
It's not like they're actually spending the money... it goes out and comes back and goes out and comes back.

Not quite. If the clientele were a good credit risk, they could use conventional credit to cover short term emergencies. A substantial part of that money is going go out and not come back. Then you're in the position of charging a substantial fee to cover loan losses, not much different than the status quo. A charitable organization could theoretically charge lower rates since it doesn't have to cover a profit margin, but neither does it have the economies of scale of a Money Mart to administer such a program.

The idea may have some merit, but I see problems with the practical implementation of it.


From: land of cotton | Registered: Oct 2003  |  IP: Logged
verbatim
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posted 24 March 2004 03:34 PM      Profile for verbatim   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Money Mart et al do prey mostly on the uneducated, short-term thinkers, in my experience. However, I think the reality of why it's so used lies in-between Magoo's and kuba's examples. During my anti-poverty work, I had clients who would explain to me that they cashed their welfare cheques at Money Mart because they didn't have a bank account, or they were so overdrawn at their bank that they couldn't take the cheque there for fear it would vapourize. I also knew of a few casual-labour types who did what Magoo's acquaintence did, for similar reasons (impatience).

It's the world of low-finance.


From: The People's Republic of Cook Street | Registered: May 2001  |  IP: Logged
Polunatic
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posted 24 March 2004 05:03 PM      Profile for Polunatic   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
to pretend to borrow $150 until next payday in 2 weeks, the total of fees and interest was about $24. That's not so bad
Let's look at these numbers a little more closely.
1) A $24 fee for a $150 loan = 24/150 x 100 = 16%
2) Term of loan - 2 weeks (1/26 of a year)
3) Annual interest rate: 26 x 16% = 416%

That's not so bad? What interest rate do you receive from a savings account?


From: middle of nowhere | Registered: Oct 2002  |  IP: Logged
Bacchus
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posted 24 March 2004 05:12 PM      Profile for Bacchus     Send New Private Message      Edit/Delete Post  Reply With Quote 
Um I dont think you can compare it to a yearly loan since it is not a yearly loan. The interest rate for the contracted time period was 16%. presumably if he needed a longer time period for a loan, he would contact a financial institution that handled long term loans. Lets make sure we are looking at apples and apples not apples and oranges
From: n/a | Registered: Dec 2003  |  IP: Logged
Scott Piatkowski
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posted 24 March 2004 05:16 PM      Profile for Scott Piatkowski   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
It's more like comparing a dollar with one hundred cents.

That's how interest is calculated for the purposes of lending money, whether it be for a loan or a bank account. Don't be fooled by the fact that the loan sharks are choosing to state their interest rates in a deliberately confusing manner.

[BTW, welcome to the NDP. Just because I'm sorta flaming you doesn't mean that I've forgotten my manners. ]


From: Kitchener-Waterloo | Registered: Sep 2001  |  IP: Logged
Bacchus
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posted 24 March 2004 05:19 PM      Profile for Bacchus     Send New Private Message      Edit/Delete Post  Reply With Quote 
LOL actually Scott, I'd be worried if you took it easy on me because I joined.

Im thinking that the money marts (something I never remember seeing except in the last few years) are the looters of today. They take advantage of the fact that people live paycheck to paycheck or benefit check to benefit check and sometimes the timing of a bill does not coincide with the paycheck (happens to me frequently).

That said, if they werent used, they wouldnt be here and I think for many they do some good


From: n/a | Registered: Dec 2003  |  IP: Logged
Mr. Magoo
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posted 24 March 2004 05:21 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
But Money Mart is a short-term loan outfit. If you borrow money from them for a year at a time, you're out of your tree. The whole idea is that they're not helping you put an addition on your house, they're advancing you money until next payday.

quote:
What interest rate do you receive from a savings account?

Let's assume a fairly generous 2% (I checked RBC.com, but couldn't find anything more accurate) and do the math the other way then.

If Money Mart lent you $150 for 2 weeks at 2%/annum, you'd owe Money Mart $150.12 at the end of the two weeks.

Somehow I don't see Money Mart wanting to open branches, pay employees, advertise, and turn any kind of profit on the strength of that dime and two pennies. More importantly, if only one out of a thousand borrowers ran off with their $150, then Money Mart is in the hole.


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
verbatim
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posted 24 March 2004 06:26 PM      Profile for verbatim   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
I don't think regular paydays are something a lot of Money Mart customers are accustomed to. They are an institution meant to live mostly off the portion of the community who can't secure credit, or have destroyed their credit rating. Which is why you don't see a lot of Lexuses or BMW's parked outside the branch. I would add that if you don't know why people would go to a Money Mart, then you don't know what desperation means.
From: The People's Republic of Cook Street | Registered: May 2001  |  IP: Logged
Sports Guy
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posted 24 March 2004 06:47 PM      Profile for Sports Guy     Send New Private Message      Edit/Delete Post  Reply With Quote 
Magoo, that is a false analagy, no financial institution lends and borrows at the same rate, of course there is a spread. But to even compare a money mart to a credit card rate since both are unsecured and face risk of fraud, yet money mart charges more by an order of magnitude than even the highest credit card. The same service can be profitable at a much lower rate, their rates are disgusting.

As an aside, to individuals who may be over their head with debt of this type or even bank or store credit cards, contact their provincial justice departments, it is likely that they have programs similar to the one here called Debt Management and Credit Counselling which "provides budgeting advice and counselling to individuals with personal debt problems. It may be able to arrange repayment plans with creditors. The Board also deals with problems of debtors related to property tax arrears, eviction of commercial tenants and residential mortgage foreclosures."


From: where the streets have no name | Registered: Mar 2003  |  IP: Logged
DrConway
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posted 24 March 2004 09:43 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Mr. Magoo:
Here's a question: why don't social service agencies provide this kind of service, but without the fees and interest?

Because they're just cheap bastards and the entire social services system is fundamentally geared towards treating poor people as though they're degenerate wastes of DNA who are irresponsible with money.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
DrConway
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posted 24 March 2004 09:44 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Bacchus:
Um I dont think you can compare it to a yearly loan since it is not a yearly loan. The interest rate for the contracted time period was 16%. presumably if he needed a longer time period for a loan, he would contact a financial institution that handled long term loans. Lets make sure we are looking at apples and apples not apples and oranges

Doesn't matter. The law says you cannot charge more than 60% on an annual basis. Period.

It doesn't matter how the interest rate is stated, whether in terms of a flat fee per $100 or in terms of a daily rate. If it annualizes to more than 60%, it's illegal.

[ 24 March 2004: Message edited by: DrConway ]


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
Sine Ziegler
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posted 24 March 2004 10:00 PM      Profile for Sine Ziegler     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Here's a question: why don't social service agencies provide this kind of service, but without the fees and interest?

Erm because people would NEVER pay the government back. Seriously, the government has a hard enough time recovering overpayments of social programs, and it is very expensive and time consuming.

People abuse programs enough as it is, sorry to have to say.

As another example, in December, the Alberta provincial government gave the monthly welfare cheques out for January, a week before Christmas ( nearly a month early ) which was really nice and generous, but guess what happened to many people in January? They had to go to the food banks because they had "misbudgeted". A lot of people on welfare ( ie. AISH, Assured Income for the Severely Handicapped ) have mental ilnesses which causes difficulties in budgeting.


From: Calgary | Registered: Apr 2001  |  IP: Logged
DrConway
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posted 24 March 2004 10:14 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
So why don't the cheap bastards teach people how to budget properly?

The utter lack of interest in giving welfare and disability recipients the skills they need beyond just admonitions to lie on one's resume (BC's Social Services people used to tell people to claim grade 12 graduation even if they dropped out), and to take the first shitty low-wage job that comes along, is endemic in social service agencies in Canada, and it's particularly grating when people use this kind of circular circumstance(*) as a reason to infantilize and demean welfare recipients by grudgingly slapping a check in their hands once a month and refusing to shield them from the depredations of payday loan companies and/or check cashing companies.

(*) That is, the lack of real skills training coupled with the obvious budgeting difficulties these people have.

----

PS. I have my own beef with Money Mart. If you cash a Money Mart money order at a Money Mart the fucking bastards still clip you a buck-forty-nine plus the 3% fee for cashing a check.

[ 24 March 2004: Message edited by: DrConway ]


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
Sine Ziegler
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posted 24 March 2004 10:16 PM      Profile for Sine Ziegler     Send New Private Message      Edit/Delete Post  Reply With Quote 
I thought of another thing. I think there is some kind of social program in BC and SK where you can borrow ( likely at no interest, because most benefits don't have interest tacked on them ) a downpayment/damage deposit from social services to get yourself into an apartment. Then you have to pay it back.

A lot of people can't pay it back, but I suppose the cost benefit to the situation keeps the program going.


From: Calgary | Registered: Apr 2001  |  IP: Logged
DrConway
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posted 24 March 2004 10:47 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
In BC, the damage deposit, if paid directly by social services, has to be remitted back to social services plus interest. So the program makes a small profit.

A system of borrowing in advance of a welfare check could easily work like this:

Welfare recipient urgently needs $X in advance. Social services gives $X to recipient, and then deducts it off the regular welfare check.

Badum-kish.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
Sine Ziegler
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posted 24 March 2004 10:55 PM      Profile for Sine Ziegler     Send New Private Message      Edit/Delete Post  Reply With Quote 
What if person X is a drug addict?

And they spent two months of Social Assistance on one hit? And now they have to go to the food bank and they get evicted because they can't pay rent?

What if.. what if...


From: Calgary | Registered: Apr 2001  |  IP: Logged
DrConway
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posted 24 March 2004 11:23 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
Obviously $X can't be more than what they get in any given month, for the simple fact that borrowing so much would put them in arrears to social services.
From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
verbatim
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posted 24 March 2004 11:46 PM      Profile for verbatim   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Unless it's changed, my understanding is that you can receive a damage deposit only twice, and you have to repay outstanding deposits back at a monthly rate from your cheque. Ironically, the damage deposit is usually paid directly to the landlord, and when the recipient moves, the returned damage deposit is deducted from their cheque as "income." If the money is repaid directly back to the Ministry, the recipient is not given the cheque. The reasoning behind it all being, of course, that it's not the recipient's money in the first place, it's the taxpayers'.

[edited to add:]

Also, advances on a welfare cheque are limited to $20 a month, for food. This can create interesting situations when a recipient enters the system out of phase with check cutoffs and issue dates. I remember going to tribunal a couple of times over this.

[ 24 March 2004: Message edited by: verbatim ]


From: The People's Republic of Cook Street | Registered: May 2001  |  IP: Logged
Mr. Magoo
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posted 25 March 2004 03:09 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Magoo, that is a false analagy, no financial institution lends and borrows at the same rate, of course there is a spread.

I was responding to a poster above me.

quote:
The same service can be profitable at a much lower rate, their rates are disgusting.

Let's look at the math again, using more appropriate numbers. Having found that 2% over two weeks would yield a profit of 12 cents for Money Mart, further math should be easy.

A rate of 20%, comparable to your credit card, would see Money Mart pocket a profit of $1.20 for your two week loan of $150. If only one person in a hundred does not pay back the loan then they will have eaten up all profit from the other 99 and then some.

A rate of 40% would yield profits of $2.40, and now if one out of every hundred borrowers absconds with the cash, Money Mart will still show some profit, but whether it's enough to pay the light bill is another story. If one out of every 50 borrowers is a bad risk, they're back to being in the red.

A rate of 60%, at the cusp of legality, would return a whopping $3.60 in profit for every borrower who repaid. Still, if even 1/30th of the borrowers turn out to be bad risks, the profit's gone.

Would you lend $150 to a stranger in the hopes of (maybe) getting it back, along with $3.60?


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
DrConway
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posted 25 March 2004 03:19 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
Tough. The law says 60% or more is illegal. If you want to take pity on the poor underappreciated *coughloansharkscough*, go take it up with Paul Martin and convince him to get it taken out of the Criminal Code.

Usury was rightly condemned for a variety of reasons, primary among them being that the lender should not be profiting from the misfortune of the borrower.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
Mr. Magoo
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posted 25 March 2004 03:30 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Well keeping Money Mart afloat isn't really my rallying cry. I'm just pointing out that when dealing with high risk borrowers (and let's be honest here you don't end up as a Money Mart customer if you have established credit) then maybe there's more to their fees than just naked greed. I suspect that if someone could run a Money Mart with lower fees and still find it worth their while, they would.

Meanwhile, if Money Mart and its ilk are driven out of business, who do you suppose will take their place? Is this actually a good news for people who use Money Mart? The good news being that you'll never have to pay $20 to borrow $150 again! The bad news being that even if you really, really need that $150, tough luck.


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
Hinterland
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posted 25 March 2004 03:34 PM      Profile for Hinterland        Edit/Delete Post  Reply With Quote 
quote:
The good news being that you'll never have to pay $20 to borrow $150 again! The bad news being that even if you really, really need that $150, tough luck.

Magoo, try to stay in character. These people will have to tighten their belts, suck it up, get off their lazy behinds and go get jobs.

...oh my God, now I'm writing scripts for Magoo. It's been a really bad week.


From: Qubec/Ontario | Registered: Apr 2003  |  IP: Logged
Sports Guy
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posted 25 March 2004 03:43 PM      Profile for Sports Guy     Send New Private Message      Edit/Delete Post  Reply With Quote 
I do not object to a nominal service fee say even $5/transaction and an interest rate equivalent to other unsecured creditors 20-25%. While even these rates are high they are commensurate with the risk such an establishment is exposed to.

Using your example of $24 cost on a $150 transaction, if you assume a fee of $12 and interest of $12 still results in an effective annual interest rate of over 200%. At a $5 fee and 25% interest rate the cost would be $6.44/transaction (assuming a 2 week period), therefore there would have to be a default rate of over 1/4 to result in negative gross margin.

Just because a demand exists for a product doesn't necessarily mean that the supply should be legal or unregulated.


From: where the streets have no name | Registered: Mar 2003  |  IP: Logged
Sports Guy
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posted 25 March 2004 03:49 PM      Profile for Sports Guy     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
For a society devoted to fairness and nondiscrimination--as well as the quintessentially American goal of homeownership--the prices, terms, and overall economic impact that we see in predatory home mortgage loans cannot be justified. They are just plain wrong. And, quite apart from the values issue, it is difficult to imagine a less rational, less efficient economic practice than lending of this sort. At the micro-level, it results in a gross misallocation of costs--imposing higher costs than the market requires on those least able to bear them. At the macro-level, it denies lower-cost capital to whole classes of persons who would otherwise qualify for it and to neighborhoods whose economic vitality depends on it. In these circumstances, government must step in to curb predatory lending and encourage the flow of fairly priced capital to sectors where it is needed and will be well-used.

The above is from an article by Eliot Spitzer, Attorney General of the state of New York and Andrew G. Celli, Jr. former chief of the Attorney General's Civil Rights Bureau. While it is dealing with mortgage lending in the US I think it is on point with this discussion.


From: where the streets have no name | Registered: Mar 2003  |  IP: Logged
Mr. Magoo
guilty-pleasure
Babbler # 3469

posted 25 March 2004 03:57 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Using your example of $24 cost on a $150 transaction, if you assume a fee of $12 and interest of $12 still results in an effective
annual interest rate of over 200%. At a $5 fee and 25% interest rate the cost would be $6.44/transaction (assuming a 2 week period), therefore there would have to be a default rate of over 1/4 to result in negative gross margin.

Well, if jerrymandering is permitted under the law, they could also institute a $23 "fee", claim a dollar in interest, and still pull in $24 for a $150 transaction.

And if the profit to MM were $6.44 on a $150 loan then only 1 in 25 people would have to default in order to eat up any profitability.

$6.44 profit X 24 = $154.56 profit

$154.56 - $156.44 default = $1.88 in the hole.

This is simplified mathematics of course, that assumes Money Mart has no overhead, no wages to pay, etc. Factor those in and you don't need many defaults to ruin whatver actual profitability you may have.


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
DrConway
rabble-rouser
Babbler # 490

posted 25 March 2004 04:27 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
Sports Guy says you'd need a 25% default rate.

Now I recall vaguely of my mathematics of finance class that there's a way to factor in such a rate, but I forget how.

So you won't mind demonstrating why your math differs from Sports Guy's and enlightening this young chemist in the process.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
Mr. Magoo
guilty-pleasure
Babbler # 3469

posted 25 March 2004 04:44 PM      Profile for Mr. Magoo   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
This is sort of perverse, insofar as I'm an idjit with money, and in fact am surprised that I've never been a desperate Money Mart customer! But anyway...

If 25 people borrow $150 from Money Mart, and if Money Mart charges fees and interest such that each pays back the principal, as well as $6.44, then Money Mart stands to profit by ($6.44 X 25), which works out to $161.00 exactly.

If, on the other hand, one of those 25 skips off with the $150, and the $6.44, then Money Mart's profit is ($161 - $6.44) = $154.56, but of course they just lost $150 of their capital too, so their profit is effectively shot.

And again, this assumes that Money Mart has no other costs other than loss to defaults. If you factor in the normal costs of doing business then their profits are probably gone as soon as one out of every 50 or even one out of every hundred defaults. It certainly doesn't need to be one in four.


From: `,_,`,_,,_,, | Registered: Dec 2002  |  IP: Logged
.
rabble-rouser
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posted 25 March 2004 05:26 PM      Profile for .     Send New Private Message      Edit/Delete Post  Reply With Quote 
Cash advances from a credit card cost about 3% in fees in addition to the cards interest rate. If the debt is repaid in 14 days at 20%, the charge is ((14/365)x0.2)+0.03=0.03767, or 3.767%, which annualizes to 98.2% even without compounding.

Evidently usury laws allow lenders to charge a fee that isnt considered interest, since such credit card lending is legal. Furthermore, many Money Mart customers wouldnt have good enough credit ratings to qualify for a credit card.


From: so close to america, so far from god | Registered: Sep 2003  |  IP: Logged
Sports Guy
rabble-rouser
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posted 25 March 2004 05:27 PM      Profile for Sports Guy     Send New Private Message      Edit/Delete Post  Reply With Quote 
My apologies, I meant to put 4/100 not 1/4. That being said all the figures are just off the top of my head.

As well, Magoo, I said that $6.44 was cost to the consumer and gross margin not profit. Gross margin is calculated before costs.

I am not particularily familiar with Money Mart's practices and what kind of agreement one has to sign with them, I always understood that they tended to cash cheques and pay only 70% of face value rather than providing cash to borrowers and requiring a payback. Can anyone provide more info on this as it changes the level of risk that the company is taking.


From: where the streets have no name | Registered: Mar 2003  |  IP: Logged
beverly
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posted 25 March 2004 05:45 PM      Profile for beverly     Send New Private Message      Edit/Delete Post  Reply With Quote 
WOW way too much math going on for me.

I had a similar question to above, and I asked it once already. At Money Mart, do you sign an agreement? If so, its a legal document... isn't it? Is the onus on the M.M. customer to know what they are signing?

That being said, I still think Money Mart prey on the poor and disadvantaged.

As for the damage deposits in B.C. in an ideal world Social Services was suppose to pay the landlords directly, and then the landlords would repay the office, with appropriate interest when the tenant moved out. However, as so many landlords tack on so many charges that they shouldn't when folks move out, and the receipent didn't stick around to fight them or didn't know that they could go through an arduous process with Residencial Tenancy to get the matter adjudicated the landlords never coughed it back up to Social Services. So they in turn, went back to the client. Like everything else for the poor, its a vicious vicious circle.


From: In my Apartment!!!! | Registered: Feb 2004  |  IP: Logged
Lard Tunderin' Jeezus
rabble-rouser
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posted 26 March 2004 12:01 AM      Profile for Lard Tunderin' Jeezus   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
WTF???

Why does everyone want to make this a social services issue?

Does no one remember the days when the motherraping Chartered Banks used to provide customer services?

Like cashing gawddamned cheques that have their own gawdamned logos on them?

It is the fact that they've been allowed to abdicate their obligations (you know, the ones we as a society impose upon them for the right to function under our charters) that has allowed the bottomfeeders like Money Mart to thrive.

While the major Canadian banks have thrived by supporting the likes of Enron, instead of Canadian industry.

Something's got to change.


From: ... | Registered: Aug 2001  |  IP: Logged
Sine Ziegler
rabble-rouser
Babbler # 225

posted 26 March 2004 12:35 AM      Profile for Sine Ziegler     Send New Private Message      Edit/Delete Post  Reply With Quote 
Precisely - and this is what the NDP is advocating in their platform this Federal Election.
From: Calgary | Registered: Apr 2001  |  IP: Logged
verbatim
rabble-rouser
Babbler # 569

posted 26 March 2004 03:19 AM      Profile for verbatim   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
If the NDP is taking on the banks, then they won't be allowed to win. Haven't you guys read the rules?
From: The People's Republic of Cook Street | Registered: May 2001  |  IP: Logged
Tommy_Paine
rabble-rouser
Babbler # 214

posted 27 March 2004 05:15 PM      Profile for Tommy_Paine     Send New Private Message      Edit/Delete Post  Reply With Quote 
Thing is, we regulate money lenders because, if left to thier own devices, they'd start demanding your children as repayment.

Read a history book.

The law says 60%, which is beyond argument, way to high to begin with. And if you think Pawn Shops, Money Mart or Quick Cash are bad, do the math on a "Rent to Own" deal.

The only time I wouldn't piss on these entrepeneurs is if they were on fire.

But if concervatives want to make them poster boys for thier new Sadonomics, be my guest.


From: The Alley, Behind Montgomery's Tavern | Registered: Apr 2001  |  IP: Logged
lmnop
recent-rabble-rouser
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posted 27 March 2004 05:56 PM      Profile for lmnop     Send New Private Message      Edit/Delete Post  Reply With Quote 
Just thought I could add some perspective here as I operate a few payday lending stores in Ontario.

For the record, I am having to fork out dollars to defend against a money-grab lawsuit targetted at the industry. The suit is very poorly organized , and in order to find someone - anyone - who could help them get this certified they apparently scoured small claims court databases to find people. So they're trying to introduce a matter that's already been decided by the Court and use it as "evidence" the other way in another suit. We'll see how that plays out. But it's obvious to everyone (I hope) that this isn't about protecting the world from high interest. It's about lawyers trying to get their name in print and spooking corporations into settling the suits, and the lawyers would come out of any settlement with far more money than anyone. Of course the industry is defending itself vigorously, and rightfully so.

Obviously my own opinion is that there are no laws being broken whatsoever.

As for the socialist aspects, I have helped far more people get the money for car repairs or saved them from getting a utility shut off than I have people who get themselves into a situation where they continue to roll-over the loan endlessly.

There is much talk about regulating of the industry (government officials met in Winnipeg in January to discuss it), and there is a new association being formed headed by Money Mart, The Cash Store, Instaloans and UniCash that will represent us as an industry on all fronts - including helping the government in their regulation of the industry. Their initial meeting was March 11th in Vancouver.

I'm all for regulation aside from the fact that whenever government officials put their pointy little heads together and come up with a plan it has a tendency to do more harm than good. But we need to protect consumers and our businesses, so formal government regulations about payday lending are welcome by 90% of payday lenders that I've spoken to.

I'm not really sure where all the disdain comes from about our business.. yes the interest is high but we specifically state verbally, in writing, and every way we can that these loans are for emergency purposes only. If someone wants to get a loan to have extra spending money for their trip to Cuba (and believe me some have) well, from my point of view, they're adults and they can make that decision if they want to.

Lastly, I would like to completely scoff at the notion that we prey on the poor. At my company, we don't even offer loans to people who make less than $2k/mo at their jobs. We require employment, and a chequing account. And for those who do get "trapped" into the loan we give every incentive we can to help them pay it off as quickly as possible.

In summarizing everything I've read, some of your concerns are valid.. and some are just completely misinformed.

Thanks for your time.


From: Ontario | Registered: Mar 2004  |  IP: Logged
DrConway
rabble-rouser
Babbler # 490

posted 27 March 2004 09:18 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by lmnop:
There is much talk about regulating of the industry (government officials met in Winnipeg in January to discuss it), and there is a new association being formed headed by Money Mart, The Cash Store, Instaloans and UniCash that will represent us as an industry on all fronts - including helping the government in their regulation of the industry. Their initial meeting was March 11th in Vancouver.

You should be saying that the industry will "help" the government write the regulations as loosely as possible.

quote:
Lastly, I would like to completely scoff at the notion that we prey on the poor. At my company, we don't even offer loans to people who make less than $2k/mo at their jobs. We require employment, and a chequing account. And for those who do get "trapped" into the loan we give every incentive we can to help them pay it off as quickly as possible.

I'm having a hard time deciding what's worse:

Stiffing people who need to borrow the money and will have the ability to repay it, just because they're not quite good enough,

OR

Lending the money anyway and happily piling on all the late charges and interest that comes when one out of every twenty unfortunate $1500/month souls can't quite come up with the dough fast enough.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
lmnop
recent-rabble-rouser
Babbler # 5301

posted 27 March 2004 09:49 PM      Profile for lmnop     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by DrConway:

You should be saying that the industry will "help" the government write the regulations as loosely as possible.

------------

I'm having a hard time deciding what's worse:

Stiffing people who need to borrow the money and will have the ability to repay it, just because they're not quite good enough,

OR

Lending the money anyway and happily piling on all the late charges and interest that comes when one out of every twenty unfortunate $1500/month souls can't quite come up with the dough fast enough.


The association will be helping the government by giving the industry's point of view.. ultimately it will be up to the various governments to write the regulations..

And I really don't see it as "stiffing" anyone or being "good enough".. it's simply establishing lending criteria..

Looking at that article at the beginning of the thread, that gentleman had no problem accepting the money when he needed it to buy a suit and no one else would help.. but he balks at having to honour the agreement he made and gets in touch with an attorney..

Morally, it'd be like if he sold his bike for $300 to buy the suit, even though he knows it was worth more than that. He tried to get more, but no one would pay more than $300 at that time. He was stuck and really needed the money for this suit, so he relents and says "okay" and makes the agreement to sell the bike. Then after his emergency is over and he is allright, he hires a lawyer to sue because he's upset only got $300 for his bike.

Anyway I am just trying to provide a perspective from the other side of the table.

Take care.


From: Ontario | Registered: Mar 2004  |  IP: Logged

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