Beware of Fast Cash

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Like local car dealerships and personal injury law firms, short-term and payday lenders tend to have the most annoying commercials on TV. They’re often tacky and annoying, and tend to air during daytime talk shows or very late at night. Their promises of “fast cash!”, “guaranteed approval!” and no “credit check required!” are enough to make you change the channel—and yet, if you ever find yourself in a situation where you need to get your hands on some extra money fast, those commercials might start making sense to you. If your car breaks down or you are short for this month’s rent payment and you have no emergency funds set aside, going to a payday lender or a pawnbroker may seem like your only options. However, the loans that they offer can be outrageously expensive and targeted at people who are clearly in a tight spot to begin with, which makes those businesses prime examples of predatory lending.

Before jumping at that fast-cash offer, take a moment to educate yourself about predatory lending. Then breathe, understand that you have alternatives, and make an action plan.

What is predatory lending?

According to Debt.org, predatory lending is any lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn’t need, doesn’t want or can’t afford. By definition, predatory lending benefits the lender, and ignores or hinders the borrower’s ability to repay the debt. These lending tactics often try to take advantage of a borrower’s lack of understanding about loans, terms or finances.

Predatory lenders typically target minorities, the poor, the elderly and the less educated. They also prey on people who need immediate cash for emergencies such as paying medical bills, covering a home repair or making a car payment. These lenders also target borrowers with credit problems or people who have recently lost their jobs. While the practices of predatory lenders may not always be illegal, they can leave victims with ruined credit, burdened with unmanageable debt, or homeless.

Predatory lenders go by a number of names

  • Pawnbrokers are individuals or businesses that offer secured loans to people, with items of personal property used as collateral. The word pawn is likely derived from the 15th century French word pan, meaning pledge or security, and the items pawned to the broker are themselves called pledges or pawns, or simply the collateral.
  • Payday lenders offer payday loans (also called payday advances, salary loans, payroll loans, small dollar loans, short-term loans or cash advance loans). These are small short-term unsecured loans, regardless of whether repayment is linked to a borrower’s payday.
  • Prepaid debit cards are typically not considered predatory; however, some of these cards have been criticized for their higher-than-average fees (such as a flat fee added onto every purchase made with the card).
  • Loan sharks are individuals or groups who offer loans at extremely high interest rates. The term usually refers to illegal activity, but may also refer to predatory lending activities like payday or title loans. Loan sharks sometimes enforce repayment by blackmail or threats of violence.

Predatory lending can also take the form of car loans, sub-prime loans, home equity loans, tax refund anticipation loans or any type of consumer debt. Common predatory lending practices include a failure to disclose information, disclosing false information, risk-based pricing, and inflated charges and fees. These practices, either individually or when combined, create a cycle of debt that causes severe financial hardship for families and individuals.

You have alternatives

If you are facing debt problems, you may feel that these types of lenders are your only option. Not true—you have a number of alternatives to taking out a high-cost loan:

  • Payment plan with creditors—The best alternative to payday loans is to deal directly with your debt. Working out an extended payment plan with your creditors may allow you to pay off your unpaid bills over a longer period of time.
  • Advance from your employer—Your employer may be able to grant you a paycheque advance in an emergency situation. Because this is a true advance and not a loan, there will be no interest.
  • Credit union loan—Credit unions typically offer affordable small short-term loans to members. Unlike payday loans, these loans give you a real chance to repay with longer payback periods, lower interest rates, and instalment payments.
  • Consumer credit counselling—There are numerous consumer credit counselling agencies throughout Canada that can help you work out a debt repayment plan with creditors and develop a budget. These services are available at little or no cost. Credit Counselling Canada (creditcounsellingcanada.ca) is a nonprofit organization that can help you find a reputable certified consumer credit counsellor in your area.
  • Emergency Assistance Programs—Many community organizations and faith-based groups provide emergency assistance, either directly or through social services programs for weather-related emergencies.
  • Cash advance on your credit card—Credit card cash advances, which are usually offered at an annual percentage rate (APR) of 30% or less, are much cheaper than getting a payday loan. Some credit card companies specialize in consumers with financial problems or poor credit histories. You should shop around, and don’t assume that you do not qualify for a credit card.

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Ultimately, you should know that you are in control, even if you find yourself in financial difficulties. There are plenty of alternatives to avoid high-cost borrowing from predatory lenders. Take time to explore your options. If you’re in a tough spot or facing debt, call your local branch to make an appointment with a First Credit Union lender for financial advice on your individual situation!

http://www.firstcu.ca

10 Years of Giving Back to Bowen Island

My how time flies! Friday June 9th will mark the 10 year anniversary of the Bowen Branch of First Credit Union. I have been working for this branch since the beginning, and what still impresses me to this day is the credit union mandate of channeling profits back into the community. Though it took some time for our little branch to become profitable, First Credit Union still gave so much over the years—sponsoring local events, awarding local youth and donating to local non-profits. I believed in this credit union difference, knowing it would gain the support of our island community. Although we opened nearly 600 accounts in that first year we only had a few million in loans, but that began to change steadily. The people of Bowen got behind us and through their incredible support our ability to give back grew.

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I am so proud of all we have achieved and our continued presence as a top corporate citizen, community supporter and champion of our island culture and economic progress. Because of the wonderful support we receive from the community, we are able to give back each year in more and more meaningful and impactful ways. Today we have nearly 1800 accounts, 45 million in loans and 35 million in deposits. Our financial planner also has a significant book of investments on the markets. We have been able to improve the financial well-being of countless individuals and businesses on Bowen. As our support from the island grows, so does our contribution to the community – a wonderful formula!

To celebrate 10 years of giving back we are going to have a party at the branch on June 9th. On top of free food, beverages, balloons and entertainment, we will also be holding a fun contest to win one of ten $100 gift certificates to the Bowen Island business of the winner’s choice (open only to members)!

Come by on Friday, June 9th from noon until 2:30 pm for free lunch, listen to our very own Estella Woo perform, try and win $100  towards one of our many fabulous businesses, and celebrate 10 great years of giving back to the community of Bowen Island with us.

See you there!

Kevin Manning, Branch Manager
First Credit Union  |  Bowen Branch

First Credit Union & Insurance and Westview Agencies close early to enable staff to volunteer in the community.

orca busOn Thursday, June 22nd we will celebrate our 3rd annual Community Impact Day by closing at 2PM to enable all 140 employees to volunteer in the communities that they serve. This is an opportunity for us to lend a hand and show our gratitude to some of the remarkable non-profit organizations who work every day for the benefit of others.

Credit unions exist to serve their members, not to make a profit. Our ‘people-first’ philosophy inspires us to get involved in our community and support worthwhile causes. Every year we give back thousands of dollars to our communities through scholarships, donations and sponsorships – Community Impact Day is a way for us to give back by volunteering our time.

Join First Credit Union, First Insurance, and Westview Agencies for Community Impact Day on June 22nd by  volunteering for a cause you care about. Looking for volunteer opportunities in your community? Check out Volinspire, an online community engagement platform that connects volunteers with community organizations. http://www.volinspire.com

Are Cheques Obsolete?

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Cheques hold an odd place in our personal finances. In many ways, cheques seem like relics from a previous era. We maybe write one or two cheques a month (usually for rent or similar bill-paying situations where electronic payment simply isn’t an option). This is vastly different from only a few decades ago, when cheques represented more than
85% of all non-cash retail payments. (Can you imagine whipping out a chequebook in line at the grocery store? Times have certainly changed!)

However, despite their gradual decline in use, cheques haven’t become completely extinct. We still keep our money in chequing accounts, we still balance our chequebooks, and new banking technologies (mobile cheque imaging is one example) are being introduced to improve the process of paying by cheque. Writing cheques continues to walk the line between permanence and obsolescence.

Whether or not cheques are on their way out, there are still a couple of cheque-related best practices that you need to be aware of in order to stay on top of your finances.

Holding periods exist, and you need to keep track of them

Cheques often get a bad rap for the amount of time they take to clear. This is referred to as a holding period, and it can vary anywhere from a day to over a week, depending on your financial institution.

The clearing process itself is made up of several steps. First, the financial institution that receives the cheque for deposit encodes its dollar amount into the machine-readable numbers along the bottom of the cheque. Then the physical cheque is fed through a machine that scans its data. That data is then sent to a clearinghouse, which forwards the information to the financial institution that issued the cheque. The financial institution makes sure the cheque-writer’s account has sufficient funds to make the payment—if it does, the transaction goes through, but if the account has insufficient funds to complete the transaction, the cheque bounces.

Cheque clearing might sound like a long and overly complicated process, but it has come a long way. In 18th century England, the cheque clearing process was considerably less efficient. It involved clerks from each London bank meeting up at a tavern on Lombard Street to exchange cheques and settle account differences—not the most scalable process!

The introduction of mobile cheque imaging (also known as remote deposit capture) and other technologies is helping to shorten the holding period; however, to avoid fees, bad cheques and other sticky situations, it’s still important for you to understand what the holding period is at your credit union or bank.

If you’re the cheque writer: the holding period, combined with some absentmindedness, can create a situation where you’re spending money in your account that you don’t actually have. For this reason, when you write a cheque, it’s best to pretend that the related amount of money is already gone from your account.

If you’re the cheque receiver: keep in mind that when you deposit a cheque and the money shows up in your account, the cheque may not have cleared yet. Your financial institution may allow you to spend a portion or all of that deposited cheque, but if it bounces, you would be the one responsible for repaying any funds you used before the cheque bounced. It’s a good practice to confirm that a cheque has cleared before spending it. When in doubt, you can always give your financial institution a call to verify the status of a cheque.

Balancing a chequebook is still an important skill

The best way to avoid tricky scenarios created by holding periods is to keep track of your transactions with a chequebook register. Traditionally, chequebook registers are those lined notebooks that come with your cheques, but you can use any system that works for you, whether that’s a printable form, a digital spreadsheet or even an app on your phone.

Recording your transactions as you go will give you a more accurate idea of your account balance and help you avoid unnecessary fees or overdraft charges. It also takes the guesswork out of writing a cheque or making an ATM withdrawal—you will know whether or not you have the money in your account to cover it. Comparing your chequebook register to your monthly statements also makes it easier for you to spot any errors or fraudulent charges.

Start by recording all your chequing account transactions in your chequebook register— debit card payments, cheques written and received, and ATM withdrawals. Include online bill payments and direct deposits too—since those are sometimes automated, it can be easy to forget them. When you get your monthly statement, compare each transaction to your chequebook register and put a checkmark next to each transaction that matches your statement. If items in your statement do not match your chequebook register, figure out what’s at cause. Sometimes it’s an entry error or a slip-up in your math, but it could be an error by your financial institution.

Since we are not yet a totally digital society, understanding how to use paper cheques as well as keeping track of all of your transactions will keep your chequing account in the black and your financial matters running smoothly.