Cliff-hanger and the post election hangover
The US election is over, President Obama remains in the White House and we have the impending “fiscal cliff” looming over the US economy. With short term and long term issues at hand the economy is holding on nervously as evidenced by the 400+ drop in the stock market.
The term “fiscal cliff” was first coined by Ben Bernanke, chairman of the U.S. Federal Reserve, he described that "a massive fiscal cliff of large spending cuts and tax increases" would take place on January 1, 2013*1 It is the hope that our government, and the two parties, will find a solution and come to a temporary agreement on some of the tax and spending measures and provide a near term and long term solution and avoid what may be a recession for 2013.
The effects of our current economy and the near zero interest rate levels held by the federal reserve is having a direct impact on the rates provided by major financial institutions, money market accounts, savings accounts and more specifically the structured settlement industry.
The premiums for the placement of structured settlement annuities have decreased steadily since 2008. In 2011 the structured settlement annuity marketplace saw an estimated level of production at $4.97 billion - contrast that to an estimated high of $6.2 billion in 2008.*2
If there is a silver lining to the low interest rate levels it’s that sellers of as well as sellers of investment annuities are benefiting from all time lows in discount levels. The discount rates on structured settlements range from 8% to 20%. The timing and the size of the payments being sold ultimately decide the discount rate applied.
As we near the end of 2012, the cliffhanger of an election over, and as the folks on the D.C. beltway work on fiscal solutions it remains to be seen where our economy will head in 2013.
1. http://www.reuters.com/article/2012/02/29/us-usa-fed-bernanke-idUSTRE81S1DO20120229
Bad credit doesn’t affect your structured settlement
Sometimes in life we delay looking for solutions to our financial problems rather than dealing with them head on. This tactic rarely works because financial problems tend to become worse as the interest fees and penalties continue to grow. Perhaps the fear, depression or mistruths keeps us from realizing all the options available.
When you’re suffering financially waiting for payouts from a structured settlement annuity isn’t the most convenient way to get money. Clearly it would help if you can have access to your money sooner perhaps in a lump sum payment. Maybe you thought about looking into it before but delayed calling because you have poor credit and were afraid you wouldn’t be approved. The good news is that selling your future payments allows you to get the cash you need without borrowing money. It is not a loan it is a transfer of the legal rights to your future payments. So there is no money to pay back or credit approval.
The only way to improve your credit is to pay off your debt and selling your structured settlement could be the key to financial stability. Use the cash lump sum to pay off your credit cards or avoid foreclosure and invest the remaining funds to start earning interest for you. It is time to take control of your finances and reap the benefits of your money.
Working with Rescue Capital to sell your structured settlement for a lump sum has some benefits too. We can custom tailor the package to suit to your needs and goals. They can help you develop a plan to pay off your debts and work with your creditors to pay off the debts immediately. We’re also here to answer your questions without delay. Remember, the money is legally your property so why not use it to suit your needs.
You don’t have to sell you entire settlement. You can sell only part of your settlement, keeping some of your scheduled payments and have an influx of cash for your immediate needs. Cashing out your structured settlements can give you more financial freedom which is something everyone can use.
Don’t delay getting the facts about your financial situation. Call Rescue Capital today to discuss your situation and make your structured settlement to work for you. Call 866.688.3532 for your free no-obligation quote.
Payday loans: Unfortunate trap or necessary evil
Once again payday loans are a trending news topic. Just in the past five days, Pennsylvania and Delaware have introduced legislation to regulate the practice while payday loans from banks are now part of a FDIC probe. Two tribal nations in Oklahoma were cited in a FTC complaint and payday loan lead generation website MoneyMutual.com has also come into fire for its auctioning practices. While some groups and individuals feel that there is a need for these types of businesses, there is a need to protect consumers from themselves as well as predatory, deceptive or fraudulent lenders.
Pennsylvania
The PA house voted to approve an industry backed bill to regulate short-term lending. The bill, which hasn’t been approved by the PA State Senate, would require short-term lenders to obtain state licenses and limit borrowers to a 25% max of their gross monthly income or $1,000, whichever is less. Lenders could charge only 12.5% interest plus a $5 fee for each loan. For example, a $300 loan would cost $42.50 if it was repaid at the end of two weeks. However, consumer groups argue that the interest and fees would equal to 369% when calculated as an APR. PA currently has a maximum APR of 24% that can be charged by licensed lenders. [i]
One short-term lender stated that a 24% APR on a $100 loan is not economically feasible because only $.92 cents would be generated by the end of 2 weeks. If one person defaults, it requires 108 successful loans to recover the lost principal.[ii]
Delaware
State lawmakers in Delaware have taken a different approach. Under House Bill 289, borrowers would be limited to 5 payday loans in any 12 month period including loan rollovers and refinancing. In addition, they could only borrow $1,000 or less and the state would establish a database to track the number of loans a person has taken. The Bill was established in order to prevent the number of defaults within the state. Currently there are 70 licenses lenders with approximately 200 locations throughout the state. The bill is waiting for the signature of Gov. Jack Markell.[iii]
Detractors of both bills believe that these restrictions will force individuals to go out of state or online where there are fewer restrictions. Currently 13 states prohibit payday loans, while another 21 state prohibit rollovers. Only 13 states have statewide databases that track these short-term loans.[iv]
Bank Payday Loans
In response to a February petition signed by consumer rights advocates, the FDIC announced it will investigate payday loans from banks. According to the petition, several banks including Wells Fargo were called out for their lending practices. In addition, the petition cites Fiserv’s lending software, which promises to increase fee income, as a contributor to the problem.
Oklahoma
The Federal Trade Commission (FTC) complaint states that two American Indian tribes in Oklahoma are allegedly operation payday loan companies that add hidden fees, violate lending laws and threaten customers will false arrest for defaulting. In the complaint, the tribes are citing tribal immunity but the FTC states that tribal affiliation does not exempt them from federal law, in this case the Truth in Lending Act. On a $300 loan borrowers were told they would pay $90 in interest. But the lender automatically renewed the loan at the end of two weeks resulting in fees of $975. The FTC stated that they have received 7,500 complaints about the defendants over the past 5 years.[v]
MoneyMutual.com
You may have seen their commercials on TV featuring former talk show host Montel Williams as their pitchman, but Money Mutual isn’t actually a lender. They are a lead generation website that auctions off prospects’ information to the highest bidder. Sometimes it is a legitimate lender but other times it could be a fraudster who has enough information to make unauthorized withdrawals from unsuspecting consumers’ accounts. While the company claims to take “extraordinary” steps to protect their information, others might disagree. The Director of the Consumer Financial Protection Bureau is reviewing how the sites treat data and the FTC has received numerous consumer complaints about the firm.[vi]
The parent company of Money Mutual doesn’t believe that government regulation of the industry is necessary because the industry is policing itself. Consumer advocates believe that it is a huge risk to consumers. In one case, information collected by an unnamed lead generation website was used by call centers in India to badger consumers into paying debts they didn’t owe.[vii]
Thoughts and considerations
Payday loans are a tricky business. Some individuals believe that people without access to traditional forms of credit have a legitimate need for these services. Consumer advocates believe these types of products prey on the poor and cause them to become deeper in debt. The industry believes it doesn’t need government regulation but at the same time current regulation has caused individuals to seek riskier internet based alternatives. So in those instances is the regulation really helping?
One of the biggest issues is the lack of authority over the tribal nations; the government needs to get that issue under control. But there needs to be a balance. Obviously states will have a hard time finding legitimate lenders if the interest rate caps are so low that the lenders won’t make money. Consumers need access to cash in a hurry but they also need to some sort of regulation that will prevent them from financial disaster. While it is difficult to regulate the Internet, there needs to be a way of protecting users from fraud and harassment.
If you look at other industries such as structured settlement factoring, government regulation has helped the consumer. While not logistically possible for payday loans, each structured settlement factoring transaction requires court approval to determine if the sale is in the best interest of the seller. Perhaps a nationwide database used by lenders to limit the number of transactions an individual could take in a 12-month period we could prevent some issues. A cap in the loan amount could also help. There also needs to be uniform laws nationwide regarding this type of lending that applies to online as well as offline lenders.
Sources:
[i] http://www.cbsnews.com/8301-505245_162-57448930/pa-house-approves-payday-lending-bill/
[ii] http://www.cbsnews.com/8301-505245_162-57448930/pa-house-approves-payday-lending-bill/
[v] http://www.loansafe.org/two-oklahoma-tribes-payday-loan-operations-cited-in-ftc-complaint
Our Favorite Things: 06/08/2012
Structured Settlement surveys, retirement suggestions, budget travel tips, weddings on a budget and Zombies in this week's favorite things.
- Get the 411-The statics about structured settlements and what they really mean.
- Social Security for retirement-Why Boston College thinks you should use Social Security as an annuity and why we don't.
- Getting away-7 Budget travel tips from Savvy Sugar.
- Budget Weddings-How to have a 100 person wedding for under $4,000.
- Just weird-Zombie proof condos in Kansas sell out.
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