Yeah,  Tom Selleck and the Clintsays team have taken a two month break from our personal finance blog for some well deserved rest.  (I know, you are all glad to be back in communcation with the great one.)  As I cleaned up the blog tonight I deleted some 1500 comments that have built up over the past 60 days.   I appreciate the well thought out and contributing comments from many of you.    Your words make this experiment worthwhile.   However, the vast majority of the comments were autogenerated garbage and not worth anything.

On Thursday, April 2, 2009 members of the House subcommittee on Financial services addressed the issue of payday loans. At issue is whether Congress should effectively prohibit such loans by placing a 36% APR on them or to allow these loans to continue to exist but under heavy federal regulations.

The committee acknowledged that the demand and need for the short-term loan product was undeniable and that these loans are often a last line of credit for many Americans. This statement is especially true in light of many banks, credit unions, and other lending institutions who for one reason or another have limited many borrowers access to credit.

Thursday’s hearing showed that these loans serve a useful purpose in today’s society.

As more statistics are gathered regarding payday loans and payday advance providers, we learn more about the realities of these short-term products and fortunately for policy makers have to rely less on the anecdotal experiences repeated ad nauseum by biased consumer activist groups. In the attached report, researchers at Clemson University reveal data that suggests that legality of payday loans in a state does not increase bankruptcy percentages amongst state residents. For years leftists consumer group such as the Center for Responsible Lending, the Coalition of Religious Communities, ACORN and the Consumer Federation of America have falsely repeated time and again that allowing consumers to utilize payday loans increases the probability of bankruptcy amongst consumers. The Clemson Study debunks this myth. Those interested in ready a synopsis of the study can view it here or the full study here.

Policy makers looking to take action against these short-term payday advance loans should carefully review pertinent payday loan studies before making rash decisions at the behest of consumer groups. The findings of the Clemson study is simply another example of how the fact surrounding payday loans reveal how useful a financial tool it can be for those looking at short-term financial needs.

Financially strapped consumers certainly aren’t catching a break from their banks when it comes to the ever-escalating fees and minimum balance requirements for checking accounts and fees and surcharges for ATMs.

There are far safer havens for savvy customers, and if you can live with a free checking account, which generally means no interest, you’ll do your finances a favor.

Here’s what Bankrate found in its 2008 checking study:

-Bounced Check Fees hit New High Again

-ATM Surcharge and fees continue climbing

-Interest Accounts Require High Minimums

-Online Banking Can Be Pricey

Methodology: Bankrate.com surveyed one interest checking account and one non-interest checking account at each of the largest banks and thrifts in each of 25 large markets to find the latest trends on checking account and ATM fees. There were 247 interest accounts and 226 non-interest accounts surveyed at 249 banks and thrifts in the top 25 metropolitan areas.

Cash Advance and Payday Loans pricing remains flat amongst the non traditional segment.  However, as banks and credit unions begin to offer these products, they are increasing their pricing as they find the right pricing point for their customers.

Bankrate.com also looked at 22 checking accounts at 18 institutions offering online accounts and compared them to their brick-and-mortar counterparts.

PR: wait… I: wait… L: wait… LD: wait… I: wait… wait… I: wait… L: wait… C: wait… SD: wait…

A story about the increasing cost of credit for consumers courtesy of the MailOnline website.

-TS
================

American Express has increased the cost of borrowing on one of its credit cards to 46 per cent — more than 30 times the Bank of England base rate.

The company now charges 46 per cent APR on the British Airways Premium Plus card, making it Britain’s most expensive credit card.

Consumer groups said the cost of borrowing on some credit cards had now lost all touch with the base rate.

A series of other cards also have APR over 35 per cent — despite interest rates now being at the lowest level since the Bank of England was set up in 1694.

Other cards include Virgin Money American Express at 37 per cent and Citi MasterCard at 41 per cent.

Consumer group Which!’s credit card expert Martyn Saville said the Amex rate was ‘ridiculous’.

He said: ‘This is over 30 times base rate.

‘Credit card interest rates now bear no resemblance to Bank rates — it is just about what companies think they can get away with.

More…

* Bad news for your nest-egg as the base rate drops to a record low

‘Even at 19.9 per cent it is far too high.’

The Amex rate was sent soaring from 36.6 per cent to 46 per cent because the issuer increased the annual charge paid by customers from £120 to £150.

APR calculations take into account the annual fee, prompting the vast rise.
Enlarge Rates

Four of the five cards with high APR have annual fees of up to £300. Amex said the interest charged on transactions had also risen, from 16.9 per cent to 19.9 per cent.

An Amex spokeswoman said fees had not gone up for the last seven years.

‘We”ve held off making any fee increases, however the cost of providing these products has increased.

‘Rather than reduce the benefits on offer, we’ve slightly increased the fee.

The card offers British Airways frequent travelers benefits including 1.5 Air Miles for every pound spent on the card. British Airways said the APR was a matter for Amex

Thanks to Lauren Dorgan for this story:

This shows that as long as consumer demand is in place for short-term credit, lenders will find the means to provided it.

Payday Lender Hopes To Dodge Rate Cap ; One Business Thinks It Found A Loophole

The Concord Monitor

December 30, 2008

New Hampshire

By Lauren R. Dorgan

The lights have gone out at Main Street Payday Advance in Concord. A sign posted on the door explains that the store is closed “due to recent legislation passed by your elected officials!”

That’s just what many lawmakers hoped would happen last winter when they voted to cap annual interest rates at 36 percent starting Jan. 1, 2009. The restrictions effectively banished two growing loan industries: title loans, which charge 350 annualized percent interest, and payday loans that typically top 500 percent annualized interest.

But a block down South Main Street, something is happening that no one expected: An Advance America shop is still open for business and has no plans to close. If proprietors get their way, that shop and 23 other branches statewide will continue offering high- interest loans long into the new year.

According to a letter sent to the New Hampshire Banking Commissioner, Advance America wants to switch over to doling out open-ended small loans, which, it claims, are “not legally subject to the 36 percent interest rate cap” on title and payday loans, according to a letter written by attorney Steven Lauwers of Rath, Young & Pignatelli.

“(T)he interest rate on open-end small loans is not capped at 36 percent,” Lauwers wrote in a letter dated Dec. 9. “Instead, any interest rate is permitted, provided it is agreed to in writing by the lender and the borrower.”

Advance America has asked Banking Commissioner Peter Hildreth for his opinion on whether it’s right about the lack of limitations on the interest-rate cap. Hildreth has not made a ruling yet, but he said he’s talking to lawyers and considering the likelihood that Advance America would take its case to court if he rules against it. He said he would likely make a judgment call this week or next.

“They’re saying it isn’t a payday loan - it might have a high interest rate but it’s not a payday loan,” Hildreth said. The bill that passed the House and Senate last winter specifically refers to a cap on “payday loans.”

Although Hildreth spoke out in favor of the payday lending restrictions last year, he said that has little to do with his decision now.

“I have to do what the law says,” he said. “That’s what I’ve sworn to do. So it doesn’t really matter what my position on the bill was.”

The new product Advance America is pitching has terms that sound akin to a credit card with extremely high interest rates. According to the letter Advance America sent to Hildreth, the new “Credit Line Product” would involve offering consumers a line of credit in the range of $500 to $700 and allow them to withdraw advances on this line in $10 increments.

If a customer pays off the debt by theof the month, no charges will be added. But if the customer rolls over debt, Advance America would charge interest at an annual rate of 365 or 465 percent, the lower rate going to those who allow the company to deduct the “finance charges” directly from their bank accounts.

At present, payday lenders typically give two-week-long loans in amounts ranging from $100 to $500, with interest of $20 per $100, which equates to more than 500 percent on an annualized basis. The loans are secured with a pay stub, while title loans are guaranteed with a borrower’s car put up as collateral.

The industries’ supporters say car and title loans give an option to those people with spotty credit history who have little chance of getting a bank loan and who otherwise might turn to the welfare office. They also argued that the payday lending industry provided jobs to 200 New Hampshire residents.

But opponents won the day in the House and Senate last winter by arguing that the interest rates trap borrowers in a cycle of debt with oppressive rates.

“Interest rates just got out of sight,” said Sen. Lou D’Allesandro, a Manchester Democrat who supported the payday lending crackdown last winter. “People were just amazed at the 500 percent. I think in good conscience the idea was to get rid of it and look for an alternative.”

Yesterday, Advance America spokesman Jamie Fulmer said the company had no plans to shut down any of its 24 branches in New Hampshire, which he said employ 50 to 75 people.

“We look for ways to satisfy consumers’ short-term credit needs,” he said. “Especially in today’s economic environment, access to credit is extremely important to consumers.”

Yeah, as many readers of ClintSays know, we are big fans of the cheesy Cash4Gold commercials. We’ve noticed that recently an uptick in the number of commercials they are running this Christmas Season. However, we regret to report that our favorite characters have been replaced with less “freakish” actors.

See the new video here:

Clintsays readers can see the original classic here.

Good bye crazy old lady and black widow who hocked her wedding band from her first “mar-wage.”

ANYWAY, gold prices remain strong and a reliable source of funds for those looking for a quick infusion of cash. With the Fed’s decision to drop rates to near zero, gold prices should increase as the dollar drops in value.

You are Welcome!

That’s right, Clintsays.com, has become a dofollow blog. That way we can share the “link love” with those who want to post meaningful comments. Spammers can turn the other way and do not need to drop their garbage here!

We’ve also activated Feedburner as a way to easily subscribe to Clintsays.com.

We appreciate everyone’s readership and hope we can continue to provide meaningful contributions to personal finance subjects for years to come!

On Tuesday, the Federal Reserve moved the short-term interest rate down to 0%. This allows banks to borrow from one another at no cost. This is the first time in the history of the Fed that they took the rate to zero percent. So what does this mean for consumers? How does it hurt or help the average person in America?

1) Mortgages: Mortgages will be unaffected by the Fed’s move because the interest rate drop only relates to short term products. Mortgage rates move in response to bond prices and in all probability will not move much with this rate. However, if they do move, it should be slightly to the south. (Tom Selleck, the genius behind the miracle of Clintsays.com just refinanced at 5.00% APR!!!) The prime interest rate drop may prove beneficial to homeowners.

2) Credit Cards: Credit card rates are tied to the prime interest rate and credit card rates will drop for prime customers. Customers with poor credit will not see a benefit from the rate reduction.

3) Savings Accounts: As the prime lending rate drops, so does the interest rate that your bank or financial institutions pays on savings and money market accounts (MMA). If a person has money parked in a savings account, the bank will be paying less for you to keep it there. Concerned depositors looking for decent interest rates should look to online banks such as INGDirect, Zions Bank, or Emmigrant Direct. As of the time of this writing, these banks are paying 2.5 to 3.5% on Internet Savings Accounts. The best place to look for interest rates is here. Not bad when you consider most banks will be paying next to nothing.

4) Home Equity Lines of Credit (HELOC): These loans normally have an adjustable interest rate associated with its issuance, so homeowners with these loans will see a reduction in their monthly payment within the next six months. It may be a good time to abandon this ship and get on a fixed rate loan. Especially when interest rates move up again.

5) Other short-term loans: Payday loans, cash advance loans, and payday advance products are not tided to the federal rate and will not be affected by the latest rate cut.

6) Car Loans: The interest rate reduction will best serve auto lenders and auto dealers. Consumers should prepare themselves to see 0.9 and zero percent interest deals from their auto dealers in the coming weeks. The only problem is that those with fair to poor credit histories will not qualify for these auto loans.

In light of the interest rate reduction many consumers will benefit from the Federal Reserves rate cut. However, the cut will stir inflation and lead to bigger issues down the road. Consumers should continue to be careful as they select what credit products they need during this latest economic downturn.

On Friday the 10th Circuit Court of Appeals handed down a unanimous ruling in Quik Payday v. Kansas State Banking Commissioner in favor of the commissioner’s office. At issue was the legality of Quik Payday, an payday lender who used to offer online payday loans through its Utah deferred presentment license to residents in all 50 states. The state of Kansas took issue with Quik Payday’s claim that it had the right to offer loans over the Internet in any jurisdiction using a license issued in Utah. The Banking Commissioner fined Quik Payday $5,000,000.00 for illegally issuing loans to Kansas State residents and the matter went to trial. It is unlikely the US Supreme Court will review the lower court’s ruling and this will lead to a fundamental change in how Internet cash advance lenders operate in the United States.

The majority of Internet payday lenders have followed the pattern established by Quik Payday: A lender gets a license in a single state and then requires payday loan borrowers to agree that the transaction is occurring in and governed by the state where the lender is licensed. On Friday, the Appellate Court affirmed states’ ability to dictate how financial transactions will occur within their boarders. State agencies that have jurisdiction over cash advance transactions within their states will be emboldened by the 10th Circuit to take enforcement action against lenders who refuse to license with them. The result? Consumers will see fewer lenders using a single state’s license to offer loans across the country. Many lenders who have utilized this operating method will be forced to shut down due to the high costs associated with licensing in each state where their borrowers live. Online lenders who have licensed in each state they offer loans state stand to gain market share as their single state competitors either go out of business or are forced to spend more for licensing and compliance.

This decision is a mixed bag for borrowers. A reduction in the number of available online lenders always hurts competition and generally increases costs for borrowers. However, consumers will deal with well regulated online loan providers who will be required to follow state laws enacted by borrowers’ legislatures.