Archive for November 30, 2015

Odisha tightens noose around private money lenders

Odisha tightens noose around private money lenders

Odisha Sun Times Bureau
Angul, Nov 22:

Against the backdrop of unabated farmer suicides in the state mostly due to alleged failed crops and pressure to repay debts, the police have launched a major offensive against illegal money lending business in Odisha’s Angul district and have arrested seven persons.

While seven persons have been arrested for illegal money lending business in the district, 18 cases have been registered against 19 persons in different police stations of the district, informed Swarnaprava Pradhan, ASP Angul at a press conference here today.

These persons had allegedly lent money to farmers at very high interest rates and were pressurizing them to repay loans despite drought situation, Pradhan said.

These money lenders were active in Bantala, Colliery, Pallahara, Jarapada and Banspal areas, police officials said.

“Eighteen cases have been registered against 19 accused persons in this connection at different police stations in the district. Out of them seven have been arrested. Investigations are on. The remaining will be arrested very soon. They had no license to do money lending business. These people had lent amounts by keeping gold on mortgage. ¬†They were operating illegally,” said Pradhan.

More student loan borrowers taken to court

Among those who have been sued are Cohens clients Brett and Jennifer Rinehart, of Manchester, Conn. EduCap Inc., a major lender and loan administrator, took them to court in August on behalf of HSBC Bank, saying they owe nearly $59,000 on a student loan taken out by Jennifer Rinehart, a teacher who earned a masters in education.

The two sides have yet to come to terms on a repayment plan.

I was angry, said Brett Rinehart, who with his wife is raising two children. We had been willing to work with them the whole time. They wanted to play hardball. Its been very stressful. Its a big question mark looming over our heads.

EduCap officials didnt return messages seeking comment. A lawyer representing EduCap in the case against the Rineharts declined to comment.

The lawsuits come as the student loan industry finds itself under government scrutiny over complaints about such things as paperwork errors and deceptive collection tactics.

One explanation for the apparent rise in lawsuits is that many loan holders are now able to sue because bankruptcy cases filed by borrowers around the recession have been resolved, said N. James Turner, a lawyer in Orlando, Fla. Student loan debt cannot be collected when someone is in bankruptcy.

Also, the sheer amount of money at stake — billions of dollars in delinquent loans — might be contributing to the more aggressive tack, lawyers say.

Student loans from private lenders total an estimated $91 billion, or about 7 percent, of the $1.2 trillion student loan market, with federal government loans making up the lions share, according to MeasureOne, a student loan analysis firm.

Close to 5 percent of private student loans were delinquent in the first quarter of this year, MeasureOne said. That is down dramatically from early 2009, during the recession, when the rate was nearly 12 percent.

Private student loans generally have higher interest rates and less flexible repayment options than federal loans.

Lenders getting tougher on delinquent student loan borrowers

The number of lawsuits filed over delinquent student loans that were made by private lenders has increased significantly in the past two years, lawyers told The Associated Press, even though borrowers are missing payments much less often than they did during the height of the recession.

While no one tracks exactly how many such lawsuits are brought, an AP review of court websites in several states found several thousand, an overwhelming number of them filed since 2013.

Im seeing it steadily getting worse, said Joshua RI Cohen, a lawyer representing people in student loan cases in Connecticut and Vermont. Theyre going to court more often. Theyre pushing for harder settlement terms.

Loan industry officials did not return calls or would not comment on the apparent uptick in lawsuits.

Among those who have been sued are Cohens clients Brett and Jennifer Rinehart, of Manchester, Connecticut. EduCap Inc., a major lender and loan administrator, took them to court in August on behalf of HSBC Bank, saying they owe nearly $59,000 on a student loan taken out by Jennifer, a teacher who earned a masters in education.

The two sides have yet to come to terms on a repayment plan.

I was angry, said Brett Rinehart, who with his wife is raising two children. We had been willing to work with them the whole time. They wanted to play hardball. Its been very stressful. Its a big question mark looming over our heads.

EduCap officials didnt return messages seeking comment. A lawyer representing EduCap in the case against the Rineharts declined to comment.

The lawsuits come as the student loan industry finds itself under government scrutiny over complaints about such things as paperwork errors and deceptive collection tactics.

One explanation for the apparent rise in lawsuits is that many loan holders are now able to sue because bankruptcy cases filed by borrowers around the recession have been resolved, said N. James Turner, a lawyer in Orlando. Student loan debt cannot be collected when someone is in bankruptcy.

Also, the sheer amount of money at stake billions of dollars in delinquent loans might be contributing to the more aggressive tack, lawyers say.

Student loans from private lenders total an estimated $91 billion, or about 7 percent, of the $1.2 trillionstudent loan market, with federal government loans making up the lions share, according to MeasureOne, astudent loan analysis firm.

Close to 5 percent of private student loans were delinquent in the first quarter of this year, MeasureOne said. That is down dramatically from early 2009, during the recession, when the rate was nearly 12 percent.

Private student loans generally have higher interest rates and less flexible repayment options than federal loans.

Another possible reason for the rise in lawsuits: Loan companies are getting better at producing the more thorough documentation some judges are now demanding.

Loans are often bought and sold after they are made. Many student loan lawsuits filed a few years ago were dismissed because the companies didnt have the paperwork saying they actually owned the loans or had authority to sue.

Christopher Koegel, assistant director of the Division of Financial Practices at the Federal Trade Commission, said the number of lawsuits dropped at the time, but they are on the rise again.

Four to five years ago, collectors employed the usual repeated phone calls and warning letters to get people to pay, and the efforts usually stopped there, said Dallas lawyer Tom Thomas II.

But litigation is now an accepted collection effort, he said. In the past, it was rare. Were certainly seeing lawsuits we didnt see five to six years ago.

Lenders typically go to court to try to garnish the borrowers wages or force the person to make a certain payment every month. Student loans backed by the federal government come with rules that allow the lender to take such action without going to court, while holders of private loans must get a judge to sign off on such steps.

Borrowers can still be sued for defaulting on federal loans, but the Education Department had no immediate figures on how often that happens, and attorneys said such cases are not common.

Some of the companies that are suing, such as the National Collegiate Student Loan Trusts and Navient Corp., have bundled thousands upon thousands of student loans into trusts worth billions of dollars investment products that are then sold to investors.

Lawyers and consumer activists said they do not know whether this line of business helps explain why loan companies seem to be playing hardball more often.

National Collegiate has filed more than 3,000 lawsuits in New York, nearly 1,900 in Missouri, more than 400 in Connecticut and hundreds more in other states, the vast majority of them since 2013. Similar trusts run by Navient the SLM Private Credit Student Loan Trusts also have brought hundreds of lawsuits around the country in the past two years.

Editorial: Payday lenders continue to gouge borrowers

Our View: State lawmakers shouldnt wait on CFPB to act

State lawmakers intent in 2008 was to severely curtail the predatory lending practices of payday lenders, if not put them out of business altogether. There was little if any impact, however. Payday lenders and those of their ilk slipped through a loophole in Ohios lending laws. Instead of comply with a law that capped interest rates at 28 percent, they continued offering short-term, triple-digit interest rate loans by switching their licenses to credit-service organizations or mortgage lenders.

Canton and Stark County remains a hotbed for payday lending. As the holidays approach, hundreds if not thousands of residents may lean on these lenders to pay for Christmas gifts.

The new ruse in recent years has been the car-title loan, which uses a persons vehicle as collateral and, if a loan isnt paid back on time, allows the lender to repossess the vehicle even if its value far exceeds the loan itself.

The industry claims its offering a service needed by low- and middle-income people with no access to traditional credit. They rely on the loans to fix vehicles they need to get to and from a job or school, or to avoid a utility disconnection, the industry claims. The loans, however, are often made with little consideration for a borrowers ability to repay. As consumer protection groups say, the payday lending industry creates a cycle of debt that can be extremely difficult to escape. And the industry does little for borrowers in need of some financial discipline.

The US Consumer Financial Protection Bureau reported earlier this year that half of borrowers of these types of loans will take out 10 loans in a row. Many of them pay more in fees than the original loan amount. Only 15 percent are able to repay on time.

The damning impact the industry has on poor Ohioans is underscored by a new study by the Center for Responsible Lending. As The Columbus Dispatch reported recently, payday and car title loans cost Ohioans more than $500 million a year, which is double the amount from 10 years ago.

As we have recommended before and as the Center for Responsible Lending urges state lawmakers must close loopholes in the 2008 law.

Theyve dragged their feet.

Worse, the Consumer Financial Protection Bureau, which was created in 2010 and has authority to crack down on the industry, is the target of immense lobbying efforts. The federal agency is crafting new rules that would require lenders to determine a persons ability to repay, limit the number of loans a person can receive at a time and cap interest rates. These rules could have widespread benefits for people nationwide. Yet, some members of Congress and presidential candidates would rather see the bureau, which does exactly what its name implies, shuttered.

Message From Australia’s Largest Mortgage Lenders: Don’t Worry

Australia’s largest mortgage lenders have a message for those fretting about a potential property-market implosion: Don’t worry.

Commonwealth Bank of Australia’s Chief Financial Officer David Craig said Wednesday that his bank’s home borrowers are well placed to weather rising interest rates. And in a separate interview on Tuesday, National Australia Bank Ltd. CFO Craig Drummond downplayed the risk of a sharp downturn in property prices. Both executives highlighted the country’s strong employment levels as a key support for home borrowers and thus the wider property market.

The two banks are well placed to comment on Australian property market trends as together they control some 40 percent of the nation’s A$1.49 trillion ($1.1 trillion) mortgage market. Both lenders raised home-loan rates last month to meet higher capital requirements for their mortgage books, adding to the concern among some economists that the country’s home prices are due for a tumble over the next two years due to the higher borrowing costs and increased supply.

GOP cuts federal mass-transit funding

WASHINGTON — Lawmakers from Connecticut are up in arms against a little-noticed highway funding amendment approved by the House that diverts mass-transit funds away from the busy Northeastern corridor.

“An amendment that eliminates funding for states that provide up to 50 percDanent of all transit riders in this country is irresponsible and can in no way be considered to be in the best interests of the people we serve,” said a letter signed by 58 House members from both parties, including Democratic Reps. Elizabeth Esty, Jim Himes and Rosa DeLauro of Connecticut.

At issue is a secretive voice vote after dark last week, in which the GOP-dominated House agreed to an amendment that stripped funding from the High-Density States program, which is intended to bolster mass transit in the Northeast corridor between Boston and Washington.

The amendment moved the money to a nationwide program aimed at bus transport, with the US Department of Transportation doling it out. If the amendment becomes law, Connecticut stands to lose up to $25 million annually, according to Connecticut DOT calculations cited by Esty’s office.

The cuts are not in the Senate-passed highway bill so the high-density amendment may not survive upcoming negotiations between House and Senate over the legislation’s final form.

“We can hope that wiser minds prevail in the Senate version,” said Jim Cameron of Darien, a veteran Metro-North rider and founder of the Commuter Action Group. “A $25 million annual loss in mass transit funding in Connecticut would be substantial and should be stopped.”

The letter from Esty, Himes, DeLauro and the others was addressed to fellow lawmakers designated to negotiate over differences between the two versions.

The amendment “will create a crisis in the states that provide half of all public transportation in the United States at a time when demand for transit has never been higher,” the letter said.

dan@hearstdc.com

Ex-controller might fight loan deal aimed at averting a Luzerne County shutdown

Luzerne County building and grounds employee Mark Krakowski decorates the courthouse Christmas tree this week as he and other employees await their fate. The county doesnt have enough money to cover payroll, a debt repayment and other bills through the end of the year, and the council may revisit the possibility of seeking a loan next week.
Aimee Dilger | Times Leader

EDITORIAL: Payday lenders provide service to those who need it

Neither the president nor most of his chief advisers have experience in the world where the rest of us live. Theyre mostly ideology-driven academics, reformers and dreamers who walk two inches off the ground. Few of them have ever missed a meal, come up short on pay day, watched as a repo man repossessed their car, felt the pain when the heat was shut off in midwinter because they didnt have the money to pay the gas bill, or faced eviction when they didnt have the rent.

You dont have to be a whale to review Moby Dick, as the saying goes, but it helps if youve ever put a big toe in the water. If they had put in time in that real world, the presidents friends might not be trying to destroy the payday loan. The newspaper reported last week that the Obama administration, through the new Consumer Financial Protection Bureau, proposes rules that would effectively abolish such loans. The administration calls them payday death traps because payday lenders charge higher interest rates than the banks that generally lend to those who dont actually need a loan.

Lending to a hard-working man or woman with no savings and few assets is considerably riskier than lending to a Harvard-trained CEO, or even a skilled welder or newspaper reporter, but Mr. Obamas minions think lenders should be willing to take the risk. Eliminating what they call payday debt traps sounds like good intentions, but will make life more difficult for millions of Americans who run into a stretch of hard times. The alternatives, since banks wont lend to them, is often to run to the mercy of loan sharks who charge much higher interest and impose harsh penalties, sometimes physical penalties, on those who cant pay up.

A bipartisan group of House members, representing districts that are part of the real world, want to prevent the governments indulging good intentions and making the innocent pay the price of those intentions. Before Mr. Obama and his good intentions arrived in Washington the payday lenders were regulated by the several states. Some states do a better job of regulating than others, but Florida, for example, regards the lenders as providing an essential service. The entire Florida delegation, including Democrats like Reps. Alcee Hastings and Debbie Wasserman-Schultz are on record against a federal takeover. Florida is an example for the other states. Its not necessary to fix what aint broke.

Daily Funding Roundup

  • Flexe, provider of on-demand warehousing, today announced that it has raised $4.4 million in seed funding, which added to $1.9 million in previous investments brings the startups total coffers to $6.3 million.This most recent round was led by Fritz Lanman (co-founder of both Doppler Labs and DWNLD), Hank Vigil (former Senior Vice President of Strategy and Partnerships at Microsoft), Second Avenue Partners and SV Angel. Lanman and Vigil are both general partners at Acequia Capital, which has invested in companies large and small, including Pinterest, Square, Everlane, and Getaround.
  • On-demand delivery startupDelivery Republichas raised $2 million in funding led by Lap Man, a serial entrepreneur based in Hong Kong.The company works withindividual outlets and major restaurant chains to deliver food and beverages to consumers under an hour from the time of order.Though the startup is focussed on food deliveries, Delivery Republic doesnt want to be lumped together with other food delivery services crowding the space.Delivery Republic has its ownapp, syncing the companys drivers with merchants so orders can be tracked in real-time.
  • Iceye, an Espoo, Finland-based developer of a satellite-based information service, landed $2.8 million in Series A funding.The round was led by True Ventures, with participation from Lifeline Ventures and Founder.org.In September, the company also secured euro;2.5 million in Ramp;D funding from SME Instrument within EU Horizon 2020.
  • Recardio Inc., a clinical-stage life science company focusing on regenerative therapies for cardiovascular diseases, today announced that it has secured $3 million in a Series A preferred stock offering. The financing includes existing shareholders as well as a number of new undisclosed investors. The proceeds will be used to advance a Phase 2 clinical trial for Recardios lead therapeutic candidate, Dutogliptin, which is being developed for the treatment of acute myocardial infarction (AMI), commonly known as heart attack.
  • DICOM Grid, makers of the leadingcloud-based,medical image managementsuite, today announced two new board members and a new Chief Marketing Officer, all with proven experience in building and scaling high-growthSaaSbusinesses. In addition, it has raised$34 millionin total funding, adding$3 millionin venture debt financing from City National Bank to the Series B equity financing led by Canaan Partners last year. These announcements speak to DICOM Grids impressive momentum as it transforms the diagnostic image management landscape, and reflect the disruptive growth recently seen in the healthcare IT sector overall.
  • Appcast, a pay-per-applicant job ad exchange, today announced that it has received $5 million in new funding to further drive the companys growth in developing technology solutions for the talent acquisition industry.Point Judith Capital, a new investor, led the round, with participation by another new investor,IrishAngels, and existing investorBaird Capital. This investment brings the total funding that Appcast has raised to date to $7.4 million. The new capital will be used to expand the companys sales, marketing and product development efforts as it continues to pioneer the programmatic job ad buying field for talent acquisition.
  • Unitive, an analytics startup that operationalizes best practices in hiring, today announced it has completed a$7.5 millionSeries A round of financing led by Ignition Partners, with additional investments from Kapor Capital, Webb Investment Network, Floodgate and Correlation Ventures. The funding will be used to further develop the technology and amplify customer support and marketing.
  • Eyefluencehas an eye-popping technology straight out of science fiction. The Silicon Valley company is announcing it has raised $14 million for its eye-tracking technology that lets you use the gaze of your eyes to control augmented reality and virtual reality devices.The funding round was led by Motorola Solutions Venture Capital. Other investors include Jazz Venture Partners, NHN Investment,and Dolby Family Ventures.
  • NextVR, a tech company that develops live and on-demand virtual reality experiences, has secured $30.5 million in a Series A funding round led by Formation 8, whose co-founder Brian Koo was an early investor and technical advisor for Oculus prior to its sale to Facebook. Koo will join NextVRs board of directors.Participants in the latest round also include Time Warner Investments, Comcast Ventures, Peter Guber, RSE Ventures, The Madison Square Garden Company and Dick Clark Productions.
  • Secure text messaging app company TigerText of Santa Monica has raised a $50 million Series C round.TigerText has raised $81.1 million, since it was founded in 2010, according to CrunchBase.TigerText said it will use some of its funding infusion to acquire new customers through additional advertising efforts. The funding will also be used to further enhance the companys software.The new round was led by Norwest Venture Partners with participation from Invus Group and Accolade Partners, as well as previous backers Shasta Ventures, OrbiMed and Reed Elsevier.
  • Gainsight, a customer success company, announced today that it has closed a $50 million Series D round led by private equity and venture capital firmInsight Venture Partners.Insight joins a superstar roster of investors including Battery Ventures, Bain Capital Ventures, Bessemer Venture Partners, Salesforce Ventures, Summit Partners, and Lightspeed Venture Partners, all who believe in Customer Success Management as the next great category of enterprise software.

If you are interested in being included in our funding roundup, submit your press release or blog post about your financing round to mitos@vator.tv.

Image source: brookscs.com

Italy Said to Weigh Rescuing Four Lenders With Resolution Funds

Italy is weighing a plan to rescue four lenders under the region’s new resolution rules afterEuropean regulators opposed a bailout that sought to tap the country’s deposit-guarantee fund, according to two people with knowledge of the matter.

Banca delle Marche SpA, Banca Popolare dell’Etruria e del Lazio SC, Cassa di Risparmio di Ferrara SpA and Cassa di Risparmio della Provincia di Chieti SpA may be rescued with financing from the national resolution fund, said the people, who asked not to be identified because the discussions are private.

Italian authorities may split the banks’ bad assets, including non-performing loans, into separate units, with shareholders and subordinated-debt holders incurring some losses, the people said. The bank’s viable units may also receive loans from other lenders, the people said.