Usury / Predatory lending
||#PoorPayMore … iff-letter for 2017
Hamburg, February 2017 New Year Newsletter 2017 "#PoorPayMore … " Friends of iff, Colleagues, ladies and gentlemen, My best wishes for a Happy New Year for 2017, in which I am now, after continuous involvement since 1983, able to hand over all responsibility for iff to a younger generation. Looking back. On 30 June 1983, we held a press conference at the Hamburg... [more...]
||Interest and Money – Usury and Anatocism – Some basic Q&A about Responsible Credit (to myself)
Have you ever considered a world without interest? Aristotle said interest is theft, in which case bankers must be criminals. Civil law refers to interest as the usus fructus of “money”, a “fruit” in the same way that the labour of the slave was his usus fructus and apples are the usus fructus of the tree. But ancient philosophers, the Christian church and Islam are... [more...]
||1,270% APRC - the new UK usury rate ceiling?
In the UK consumers can still pay extortionate rates of interestwithout being able to blame the banks. So-called ‘payday loans’ in the UK are marketed as an alternative to more affordable overdraft credit. They are extended to people who struggle to make it to the end of the month and their next wages. This liquidity problem is exploited by the banks. But the banks at... [more...]
||UK - ECRC Partner CfRC launches its second edition of Credit Notes (e-briefing service for 2014/15). Subscribe to stay informed
Welcome to Credit Notes | Issue 2 | Free trial continuing through to end of May As well as producing Credit Notes, we shall shortly be publishing our first quarterly e-journal, The CfRC Credit Report, providing more in-depth articles from the Centre and external contributors. In addition, our subscribers and supporters also receive a 10% discount on delegate fees at... [more...]
||IRELAND - Central Bank publishes Report on Licensed Moneylending Industry
The Central Bank of Ireland today (8 November 2013) publishes a report on the licensed moneylending industry in Ireland. The research was undertaken to inform the regulatory approach to the licensed moneylending industry in Ireland and to see how the firms are treating their customers. The licensed moneylender sector has not changed significantly since the Central Bank... [more...]
||UK - OFT refers payday lending market to Competition Commission, and the UK increases the interest rate cap for credit unions
OFT refers payday lending market to Competition Commission 27 June 2013 The OFT today referred the market for payday lending in the UK to the Competition Commission because of concerns the OFT has about deep-rooted problems with the way competition works. The OFT announced its provisional decision to refer the market in March and carried out a public consultation. Having... [more...]
||PPI: EU supervisor finally issues a Report and an Opinion on Payment Protection Insurance - ECRC finds it had to wait a long time and witness considerable consumer detriment before this...
It has taken almost a decade, numerous ECRC stakeholder conferences, and a global financial crisis, for a European financial supervisor to finally produce a report and make a statement like this about a product class that was intentionally constructed and sold to severely compromise consumer value, and have left millions of consumers unknowingly unprotected. Will Member... [more...]
||Payday loans: As complaints about payday loans explodes in the UK, there is now a huge debate on whether these firms should be able to advertise in such a big way as they do (via...
Financial Service Ombudsman Report UK: Complaints to the Financial Ombudsman Service (FOS) about payday lending soared 83% last year, the third highest rise of any sector except home credit (139%) and payment protection insurance (140%). http://www.financial-ombudsman.org.uk/news/updates/annualreview-May-2013.htm Payday loans: cute and cuddly tricks can't disguise... [more...]
||Portugal – Changes to consumer credit law.
Changes of consumer credit law and transposition of the directive nr 2011/90/UE, of November the 14th On 1st of July 2013 it will come into force the latest amendments to the consumer credit regime approved by decree-law nr. 42-A/2013 of 28.3, which transposes the EU Directive establishing additional assumptions for calculating the APR . The law now approved clarifies... [more...]
||Usury laws: UK Research published on the likely impact of a variable cap on the total cost of high cost credit
Paper by the Bristol PFRC https://www.gov.uk/government/publications/the-impact-on-business-and-consumers-of-a-cap-on-the-total-cost-of-credit   and the UK Government Response to it. https://www.gov.uk/government/publications/high-cost-credit-report-by-bristol-university-government-response [more...]
||HIGH COST LENDING - UK OFT acts against leading payday lenders and proposes to refer the sector to Competition Commission
See the news at the link below including some infographics. Press releases 2013 - OFT acts against leading payday lenders and proposes to refer the sector to Competition Commission 20/13 6 March 2013 The OFT is giving the leading 50 payday lenders, accounting for 90 per cent of the payday market, 12 weeks to change their business practices or risk losing their... [more...]
||Rate Caps for Responsible Credit – Finally also in the UK
ECRC co-founder Debt on our Doorstep with Damon Gibbons from the Centre for Responsible Credit launched a victory on English predatory lenders. ECRC has been involved in the development of a legal framework for the UK consumer credit market where predatory lenders had found a vast area for exploiting the poor with interest rates far above the average on the continent.... [more...]
||Debate on usury ceilings in the UK continues with a further Policis study against caps.
Credit and low income consumers: new Policis study opposes caps on credit A new study published by the Friends Provident Foundation argues that low income borrowers tend to incur high behaviour-driven costs on mainstream credit and can struggle to avoid unmanageable debt that they cannot pay off. In contrast, it argues that those low-income borrowers choosing to use... [more...]
||Credit Insurance - Whether it is called PPI or CCI, the future for such potentially useful consumer products (for both sides) must be discussed with all stakeholders.
Are Anglo-Saxon regulators in Australia and the UK really trying to improve the past failures of credit insurance products for consumers. In both countries, reports have shown the intentional low-value design by providers and exposed the dirty tactics and uncountable instances of misspelling that have gone unpunished. See the recent market report from Australia and the... [more...]
||Interest rate restrictions: Demands for caps on variable rates in Ireland and update in other countries
Irish news: As posted elsewhere on the ECRC website, (Irish Times , or Trinity College press release), the recent report by Trinity College’s policy institute (Understanding and Combating Financial Exclusion and Overindebtedness in Ireland: A European Perspective) said that the financial crisis offered an opportunity to rebuild the banks to make them more inclusive of all... [more...]
||Payment Protection Insurance - the late fruits of Bank Lobbying: 100.000 Complaints in the UK and mass lawsuits elsewhere
Why too much Lobbying in Brussels may have hurt the Banking Industry In 1998 the EU mandated a study from iff on Payment Protection Insurance with regard to consumer credit. The findings were alarming: up to 50% of credit cost were hidden in such factually linked contracts. Most of this money consisted out of hidden interest since it flew back to the banks in the form of... [more...]
||Usury ceilings – EU report provides extensive detail on systems in place in Europe and findings rebunk some myths concerning the effects interest rate ceilings have on credit markets
In 2010, ECRC partner, iff together with the economic research institute ZEW, conducted research into the subject of interest rate restrictions in the EU on behalf of DG Internal Market and Services of the European Commission. The report was published on the Commission’s website last week and the authors will be issuing a joint-press release in the coming days. The... [more...]
||UK: Potentially good but also bad news in sight for those that want to see predatory lending practices curbed
While the UK parliamentarians will indicate their preferences with regard to interest rate ceilings in the UK, the industry has been trusted to develop responsible behaviour with rgeards to dangerous secured lending in the form of bills of sale (as opposed to banning them outright). Let's see how both turn out.. News from the CfRC January e-newsletter: Stella Creasy MP... [more...]
||Usury legislation and empirical research - The Crown Witness for the worldwide Campaign of the former UK Labour Government, Policis, releases an open lobbying report for the UK mortgage...
Through their mortgage report, the consultants at Policis have once again shown that the research they produce is aimed at assisting the finance industry in defending its own interests. It brings us back to the beginning of this decade when a similar industry-friendly study they did was presented as solid empirical research. In its campaign against usury ceilings in the UK... [more...]
||Ceilings in the UK: Pending the publication of an EU study on interest rate ceilings, UK politicians want a debate now.
MP tables new bill to impose caps on credit costs MP Stella Creasy (Walthamstow, Lab) introduced the Consumer Credit (Regulation and Advice) Bill to Parliament under the ten minute rule and will receive a second reading in Parliament in February 2011. Ms Creasy has also secured a Westminster Hall debate scheduled for Tuesday 9th November at 11am on this issue at which... [more...]
||UK and caps – Interest rate ceilings are suddenly a favoured policy by the Opposition, while even the Coalition Government is calling for evidence for possible interest caps on store...
Our UK ECRC partner CfRC publishes a weekly newsletter (see www.responsible-credit.org.uk/subscribe-to-cfrc) which shows a major concern of UK policies with access to financial services issues including now especially questions of affordability and social justice. Among rules concerning the overriding in overdraft credit (extreme and non-transparent fees), access by... [more...]
||Payday lending – 2 reports on the UK and 1 US overview of research in this area provide impetus to further debates and policy options.
Coalition partner Damon Gibbons from the CfRC has produced a report on payday lending in the UK which has attracted media attention from the BBC. This report alongside the one produced by the UK consumer body Consumer Focus last August ( ‘Keeping the plates spinning’ by Marie Burto) will hopefully feed into the BIS call for evidence on consumer credit issued in October. In... [more...]
||PPI in the UK – Will the market finally see reform after years of large scale misselling?
Payment protection insurance is known to be expensive and often of little value to consumers because of inadequate policy coverage, consumers pressured or deceived into buying PPI and not having their policy properly explained to them. The FSA has taken action against 24 firms and individuals for PPI failings with fines of £13 million and issued a defacto ban on single... [more...]
||UK regulator completes review of Payment Protection Insurance
FSA completes review of Payment Protection Insurance The FSA has completed the final stage of consultations on its proposals for regulation of the Payment Protection Insurance (PPI) market. PPI covers consumers against being unable to pay off loans because of sickness, unemployment or other circumstances that might affect their ability to service the debt. Despite... [more...]
||UK debate on cap on interest rates – The UK public seem to want caps, but some commentators feel there is simply a gap in supply of credit that first needs to be filled before imposing...
Capping interest rates on high-cost loans may do more harm than good www.guardian.co.uk/money/blog/2010/aug/26/capping-interest-rates-unsecured-credit The public supports a rate cap, but it would be a simplistic measure to a complex problem. We all know that the poor pay more for everything but the unresolved question is – what do we do about it? This week's YouGov omnibus... [more...]
||Payday loans: A report by Consumer Focus shows growing phenomena in the UK and highlights need to improve the safety of payday loans, to address the problems associated with payday...
Number of payday loan users has quadrupled The number of people taking out expensive payday loans has quadrupled over the last four years, a new report by Consumer Focus highlights. Consumer Focus is warning that banks need to offer affordable short-term loans as alternatives, as well as recommending stronger safeguards to protect consumers from spiralling payday loan... [more...]
||SMS loans: Analysis of legal provisions from Estonia.
Article in English below from the European Review of Private Law (2010) [more...]
||Some EU reports on interest rate ceilings
Here below are attached a number of reports produced over the past years on the issue of orice controls in the area of credit. Interest rate restrictions have a strong cultural and traditional foundation and have protected many EU borrowers from exorbitant prices for their credit. Unfortunately, too many of the reports below have been influenced by the findings of a UK... [more...]
||Usury ceilings in Germany - Response to the misrepresentation of facts and law by a survey of TNS Global Market Research 2002 for Policis, which again was paid for and published by the...
Still in 2010 not only the British government but also the Personal Finance Research Centre, and Project Associates, a consultancy study for Providential with regard to Poland rely their findings on statistics which miraculously increase by number every year and relate to a survey of poor people with still unknown questions, methodology, selection criteria and identity of... [more...]
||UK - High cost credit: The UK consumer watchdog OFT has published its final review.
Press releases 2010 - OFT publishes review of high-cost credit 63/10 15 June 2010 The OFT has today published the final report of its review of the £7.5 billion high-cost credit sector. The sector comprises the pawnbroking, payday loan, home credit and rent-to-buy credit markets. Products supplied in these markets are typically used by people on low incomes who cannot... [more...]
||Usury ceilings: German statistics used by the courts were changed as a result of the ECB new series a few years ago.
There is some abiquity regarding the new series. Below is the Bundesbank explanation when they stopped producing the old series used by the courts. Also below is a Study on the implications of this change in series for asessing the ceilings. Both are in German [more...]
||Tying of financial services - A response to the EU Consultation on the recent Study on tying/bundling
Consultation on the Study on tying and other potentially unfair commercial practices in the retail financial service sector The EU commissioned a study on tying and bundling of financial products which is more known as "linked products". The study has been conducted by CEPS, who largely depends on ECRI, a bank sponsored research entity in Brussels. (See recent ECRC... [more...]
||Doorstep Robbery: A new report by ECRC partner New Economics Foundation makes its arguments for a more complete set of regulation in the UK
http://www.neweconomics.org/fairlending 25/11/2009 Doorstep Robbery Why the UK needs a fair lending law The very poorest people in the UK are paying thousands of pounds to legal loans sharks who charge them over the odds for sommething that most of us can easily access at the bank: credit. This report calls for immediate Government action to curb high-cost predatory... [more...]
||Anglo-Saxon countries rediscover consumer credit regulation through interest rate restrictions - Payday lending is being targeted in South Australia in an amendment bill 2009.
Below is the text from the South Australian Payday Lending Bill which was raised a few months ago. There is a similar Bill in the pipeline in Western Australia. Three Australian States and ACT have already imposed payday lender interest rate restrictions, with the above two States having Bills in the pipeline. This reassessment of existing non-regulation has also been... [more...]
||INTEREST RATE CAPS – The ECRC partners will need to discuss the arguments of this subject at their next international conference in July 2010. Differences between partners still exist.
"Capping interest rates is not the way to stop irresponsible lending to people who can't afford the loan" microcredit activist Faisal Rahman tells the Guardian. In an Interview to the Guardian Faisal Rahman argues that continental anti-usury legislation is no way to cope with predatory lending. Instead he favours penal sanctions. This kind of interview is in line with... [more...]
||A Swedish Seminar "Towards a more effective control of financial crimes and the financial interests of the EU" will be held in Stockholm, 13-14 October 2009
Strengthening cooperation between judicial and police authorities in the EU The seminar is free of charge (no registration fee). Financial crimes are serious and growing threats in all EU Member States. For the past decades the European Union has given high priority to detecting, investigating and tackling this problem and to bringing offenders to justice. The... [more...]
||UK lending 'extortionate' - Barnardo's 'Breadline Britain' report is further evidence that some providers continue preying on some of Britain's poorest families with +500% APR loans.
Press release from DOOD blog website BARNARDO'S SLAMS PROVIDENT RATES OF 545% Wednesday, 29 July 2009 at 14:04 Barnardo's 'Breadline Britain' report, published yesterday, rightly slams Provident's 545% APR loans to some of Britain's poorest families as 'extortionate'. The report comes on the same day that Provident announced a rise in pre-tax profits in the first six... [more...]
||PAYDAY LOANS – Why do borrowers pay over 400% APRs?
A recent study by economists at the University of Chicago examined the effects of payday lenders being required to better explain the long-term financial cost of their loans. However, although providing a clear and tangible description of a loan's cost reduced the number of applicants choosing to take payday loans, this only applied to 10 percent of borrowers. This means... [more...]
||QUICK SMS LOANS - Finland has been using these new forms of credit for a while and forthcoming regulation may not meet expectations of the consumer advocates.
Are these a new European equivalent to payday loans? Is this a Finnish phenomenon or do we know about similar loans in other countries? In Finland the Parliament is (hopefully) going to accept a law to prevent SMS loans to be paid out at night time. But no interest ceiling so that the interest can be even over 1000 % p.a. Read the abstract and article below THE USE OF... [more...]
||ANTI-USURY: The coalition has promoted discussions on the issues of interest rate ceilings for many years. A desire by 100+ US community leaders to see rates capped at 36%, not only...
100 + DIVERSE NATIONAL AND STATE GROUPS SUPPORT DURBIN’S S. 500 BILL March 2, 2009 Dear Senator Durbin: We applaud you for introducing S.500 that would stop a wide range of lending abuses by capping interest rates for consumer credit at 36 percent annually. Cleaning up the finance industry is essential to a sustainable economic recovery. The “Protecting Consumers from... [more...]
||Vietnam – Central bank removes interest rate ceilings.
Door to consumer credit open wide 08:08' 10/02/2009 (GMT+7) VietNamNet Bridge – Right after the State Bank of Vietnam removed the ceiling interest rate on consumer credit, commercial banks rushed to launch several thousand billion VND of new consumer credit programmes onto the market. However, the interest rates of the loans are ‘unnattractive’ to many borrowers. The... [more...]
||Payment protection insurance (PPI) – The UK Competition Commission releases its final report: Lack of competition between providers means the following measures will come into force in...
Current times will lead to a greater need for consumers to obtain some form of protection (PPI cover or other), the Competition Commission releases its final report and say that high prices and little choice will change. This means initial credit providers will have to compete (no more 'point-of-sale' advantage) and there will be a requirement on all PPI providers to... [more...]
||Interest Rate Regulation Developments in Japan
In this short piece, we describe the process by which Japan came to regulate interest rates and to require that lenders not lend too much to any borrower. We welcome any comment. [more...]
||UK PAYMENT PROTECTION INSURANCE (PPI) INVESTIGATION - As UK indebted households face difficult times ahead, the UK Competition Commission concludes that these insurance products have...
The remedies proposed by the Commission include: 1) Banning the sale of PPI to a customer within 14 days of taking out a loan. 2) A ban on the sale of single-premium PPI policies. Industry has voiced its disappointment at the Competition Commission’s provisional decision on remedies for the PPI market saying that vulnerable people will now go unprotected and that it... [more...]
||'PAYDAY' LOANS - Not just a US phenomenon. The Office of Fair Trading in the UK will investigate these. ECRC partner DOOD is in contact with OFT which is about to start a year long...
Two articles below show the renewed interest by regulators in responsible credit. CALL FOR ACTION ON PAYDAY LOANS (BBC, live interview with Damon Gibbons on Saturday 26th July) Debt advice groups are calling for urgent action over payday loans that charge extremely high interest rates. They want the market regulator to make lenders behave responsibly, as some... [more...]
||USURY: US Senator proposes national usury rate which would cap max interest APR at 36%.
SENATOR PROPOSES NATIONAL USURY RATE; WOULD CAP MAX INTEREST APR AT 36% Dan Ray | July 22, 2008 | http://blogs.creditcards.com A high-ranking U.S. Senator has filed a bill to revive an ancient but dormant practice by creating a national usury law that would cap consumer credit rates at 36 percent. Sen. Richard A. Durbin, a second-term Democrat from Illinois, filed the... [more...]
||PAYMENT PROTECTION INSURANCE – Some comments resulting from the UK's Competition Commission report on PPI
From the FTAdviser FISA: PRICE CAPS ON PPI WILL HARM CONSUMERS Sharon Flaherty, Magazine: FTAdviser, Published Thursday , July 03, 2008 Banning the sale of payment protection insurance (PPI) at the point of sale of other credit products would "run counter" to the Financial Services Authority's (FSA’s) Treating Customers Fairly (TCF) principles, FISA claims. FISA, the... [more...]
||AUSTRALIA – Existence of irresponsible lending has led to the Federal Government being set to take control of all consumer credit products.
The Age - Melbourne,Victoria,Australia, Annabel Stafford, July 4, 2008 DEAL ON CONSUMER CREDIT DODGY pay-day lenders and unscrupulous companies that hand credit cards to teenagers may soon face tougher regulation after state and territory leaders agreed to centralise the responsibility for regulating consumer credit in Canberra. The Council of Australian Governments had... [more...]
||UK DEBT CULTURE – The Church strongly criticises loan sharks and doorstep lending companies.
ARCHBISHOP OF CANTERBURY: UK DEBT CULTURE STRAINING FABRIC OF SOCIETY (By James Kirkup, Political Correspondent, 28/04/2008) Britain's debt culture, the millionaire bankers who have profited from it and the ministers who have allowed it have all dangerously strained the fabric of society, the Archbishop of Canterbury has said. In a pessimistic analysis of modern British... [more...]
||AUSTRALIA – Mortgage lending shows similarities with the situation in the US and are a cause of concern: Property bubble about to burst, housing affordability low, mortgage stress...
WEATHER THE PERFECT STORM (www.theage.com.au, Kelsey Munro, April 23, 2008) High interest rates and faltering property values in Australia and recession in the US are creating "the perfect storm" for debt-laden consumers, according to the author of a research paper on mortgage stress. Fujitsu Consulting and JP Morgan's latest data predict that almost 1 million households... [more...]