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.

________________

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

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.

While bank and banking are universally understood and accepted terms, the term credit union is still largely misunderstood and unknown to many. Credit union is an unusual term, isn’t it? Is it just another name for a bank? Is it a credit card company? Do I have to be in a union to join?

But, just like Jackson or Smith, Credit Union is our last name and we’re proud of it. It does beg the question, though—where did the name come from? We need to go way back to find the answer to that question and to understand the origins of credit unions.

The first working credit union models sprang up in Germany in the 1850s and 1860s and, by the end of the 19th century, credit unions had taken root across Europe. These upstart financial institutions, which drew inspiration from co-operative successes in other sectors, including retail and agriculture, went by a variety of names, including people’s banks, co-operative banks and credit associations. Some notable brand 
names from the time: the People’s Bank of Belgium, the People’s Bank of Milan, the 
Co-operative Bank in England, Crédit Mutuel in France, Casse Rurali Loreggia in Italy and the Anyonya Co-operative Bank Limited in India.

While these early credit unions had slightly different names, they were all best identified by their adherence to co-operative principles, especially those related to membership and control. Essentially, a co-operative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. These enterprises are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.

The first credit union in North America, the Caisse populaire de Lévis in Quebec, began operations in 1901 with a 10¢ deposit. Founder Alphonse Desjardins, a former journalist and the French-language stenographer for the House of Commons,, was moved to take up his mission in 1897 when he learned of a Montrealer who had been ordered to pay nearly $5,000 in interest on a loan of $150 from a moneylender. Drawing extensively on European precedents, Desjardins developed a distinctive parish-based model for Quebec: the caisse populaire. The literal translation of caisse populaire is “popular cash register”, which speaks to providing access to cash and credit to people with limited income. These people were considered as less desirable customers by the established banks, who were in business to turn a healthy profit.

Did you know that St. Mary’s Bank of Manchester, New Hampshire, which now uses the term bank instead of credit union, was actually the first credit union in the United States? Assisted by a personal visit from Desjardins, the then-named St. Mary’s Cooperative Credit Association was founded in 1908 by French-speaking immigrants to Manchester from Canada’s Maritime provinces.

Unlike the credit unions of Germany or Quebec, quite a few credit unions in the English-speaking provinces, as well as most credit unions in the U.S., emerged from an employer-based bond of association. In addition to the advantages of access, information and enforcement that resulted from members sharing the same workplace, the employer-based bond permitted credit unions to use future paycheques as collateral.

Although the word ‘credit’ might make you think that the earliest credit unions offered only credit services, they usually also offered savings services, and often payment and insurance services as well. The word ‘union’ can also be confusing. At first blush, you may think that members of a credit union need to be member of a labour union, but that’s not the case. Members are simply united together because they share a similar situation. This affiliation can be where they live, where they work or what they believe in.

While ‘credit union’ may be a bit harder than ‘bank’ to grasp, it’s our name and we’re sticking with it! To paraphrase Shakespeare’s Romeo and Juliet, “A rose by any other name would smell as sweet”.