Residents of low-income neighborhoods on Baltimore's east side now have an alternative to the payday loans and cash advances that charge super-high interest rates of as much as 26 percent.

As Eileen Ambrose wrote last week, the Borrow and Save Loan Program will allow residents of certain eastern Baltimore zip codes who have some source of income (from a job, unemployment, disabilty checks, etc.) to borrow anywhere from $300 to $1,000.

Those debts, subject to a 7.99 percent interest rate, will have to be paid back over one year. The program is a pilot by the Baltimore Alliance for Economic Inclusion, a partnership between several banking institutions and community groups.

However, loan recipients will also agree to ...

Continue reading "Cash advance/payday loan alternative comes to East Baltimore" »

Posted by Liz Kay at 1:01 PM | Permalink | Comments (1)
Categories: Loans
        

So did you check out Excellent Eileen's column Sunday about Prosper.com, a peer-to-peer lending site that, under SEC scrutiny, has ceased making loans amid concerns that they've essentially been selling unregulated investments?

As Eileen explained:

Continue reading "Consumer Sundays: peer-to-peer lending and dead trees" »

Posted by Liz Kay at 7:03 AM | Permalink | Comments (2)
Categories: Consumer protection, Loans, Watchdog
        

If you want to keep your friends, don't lend them money --- at least, not money you need or are expecting to get back.

It's bad news, okay? Say you go out for drinks with friend who forgets wallet and you're like, no worries, I got this. But then if s/he doesn't pick up the tab next time ... it's not worth getting heated. Just don't do it again.

When it comes to big-ticket items like money for cars or trips together, however, forget it. It's definitely not worth the hassle, the heartache, the stress. You don't want to be in that position.

But what if there was a way to avoid all that bad feeling? The concept of peer-to-peer lending --- where regular folks like you and me fund loans to people who need it, and get paid back with interest --- sounds fascinating. Here's a way to earn money with your money and to help out a neighbor (one with Internet access and an entrepreneurial spirit), PLUS a system to manage the payments.

However, as Excellent Eileen will point out in her column this Sunday, peer-to-peer lending has hit an obstacle --- regulators. The biggest company, Prosper.com, has been sidelined while it gets regulatory approval. 

Prosper.com has already promised (in principle, anyway) to give $1 million to 20 states where it has been accused of selling unregistered securities.

Check out Eileen's piece to find out what impact regulation might have on the industry.

So what else are you doing this weekend if you're not bankrolling your friends --- perhaps putting up a Christmas tree, or a holiday bush?

Instead, in this week's Watchdog, a woman in Ridgely's Delight is arguing that a tree should come down ...

Continue reading "Consumer Sundays: Peer-to-peer lending and not-so-festive trees" »

Posted by Liz Kay at 4:20 PM | Permalink | Comments (1)
Categories: Loans, Watchdog
        

Prosper Marketplace may need to borrow $1 million.

That’s the amount that the popular peer-to-peer lending service has agreed in principle to pay to 20 states, including Maryland, to settle complaints that it was selling unregistered securities. The settlement was announced today.

The lending site matches people in need of a loan with regular folks willing to bid on the opportunity to lend them $50, $100 or so.

According to the North American Securities Administrators Association, a group made up of state securities regulators:

“Prosper conducts an electronic auction to fund unsecured promissory notes. The Web site features a list of potential loans and investors bid against each other to finance the loans. Funds from the lowest bidders are pooled together to fund the loans. Prosper issues notes to those lenders funding the loans and services that note.”

Those notes are securities, regulators say, and haven’t been registered with the states.

The states still need to sign off on the settlement. If they do, they also will be agreeing to ending their investigation of Prosper’s securities sales prior to Nov. 24th.

This settlement comes a week after the SEC filed a cease and desist order against Prosper for selling unregistered securities.

Prosper spokeswoman Tiffany Fox said, "We have agreed to settle this matter with the NASAA members, and we are moving ahead with our registration."

Prosper recently announced it would stop making new loans and accepting new investors while it sought to register with the Securities and Exchange Commission.

On its Web site, Prosper said:

“If you're an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you'll be able to track and monitor your loans; and you'll be able to withdraw funds from your Prosper account.

"If you're a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you're a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources....A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. 

Posted by Eileen Ambrose at 5:21 PM | Permalink | Comments (1)
Categories: Loans
        

I'm convinced instant gratification is behind our economic downfall.

Allright, it's not the entire reason why, but I'm thinking it's got to play a significant role in the current credit crisis? Let me explain.

In the old days when you saw something you really liked but couldn't afford, you didn't just charge it and take that sucker home. You put it on layaway. Over a period of some weeks or months, you could make payments in installments -- which was a little easier than forking out all the dough all at once. This meant you couldn't take what you wanted home right away, but it was yours once you paid in full. It was a great concept that went the way of the dinosaur once credit started getting handed out like so much candy corn on Halloween.

Continue reading "The Return of the Layaway" »

Posted by Dan Thanh Dang at 7:00 AM | Permalink | Comments (0)
Categories: Budgeting, Debt, Economy, Loans, Shopping
        

Seriously. How many complaints from consumers need to be filed before the authorities shut down a troubled business?

We told you in February that the Federal Trade Commission reached a settlement with BlueHippo over allegations that it took consumers' money without providing the electronics purchased. BlueHippo didn’t admit to doing anything wrong, but agreed to pay $3.5 million to possibly $5 million to burned consumers. Then in May, I told you that complaints are still pouring in to Better Business Bureaus and AG Offices around the country about BlueHippo.

Continue reading "Tennessee AG Sues BlueHippo" »

Posted by Dan Thanh Dang at 4:50 PM | Permalink | Comments (2)
Categories: Complaints, Computers, Consumer protection, Consumer safety, Loans, Naughty businesses/NBotW
        

If you've been angry about this whole $700 billion bailout and how it doesn't really help you much personally, maybe this little bit of news may make you feel better.

Treasury Secretary Henry M. Paulson, Jr. and Department of Education Secretary Margaret Spellings announced today that the Administration is going to take a number of steps to support the student loan market.

As we all know, the credit crunch isn't just affecting mortgages, auto loans and credit cards. It's also hurt student loans. 

Here's part of the text of what Paulson and Spellings released, explaining that they recognize that education is the foundation of a strong American workforce: 

Earlier this week, President George W. Bush signed H.R. 6889, the extension of the Ensuring Continued Access to Student Loans Act. We appreciate Congress providing the Department of Education, in coordination with the Treasury Department and the Office of Management and Budget, renewed temporary powers to use federal funds to ensure students and families continue to have access to student loans

Continue reading "Rescue Part II: Feds Announce More Help for Student Loans" »

Posted by Dan Thanh Dang at 3:45 PM | Permalink | Comments (0)
Categories: College/Financial aid, Economy, Loans
        

Did you catch Wonk-esse Jamie and her blog post today? It's about people who are angry that "all the housing-related bailouts are handing a bill to taxpayers who played by the rules and are paying their mortgages or their rent."

I've been watching the housing meltdown and the political reaction to it, and I have to agree with the readers on Jamie's site and the people quoted in the AP story. I'm angry, too, that we seem to be rewarding the reckless.

As the story says about the government bailout of Fannie Mae and Freddie Mac:

Meanwhile, tens of millions of people pay their mortgages on time, don't max out their credit cards and put money into retirement funds. They may even save a little extra on the side.

In return, they get rates on their savings that don't even keep up with inflation. They also are witnessing the horror of their nest eggs shrinking as the value of their homes plummets and the stock market tumbles.

Washington policymakers seem more focused on rescuing those who behave badly by putting at risk taxpayers who have played by the rules.

Continue reading "Rewarding the reckless" »

Posted by Dan Thanh Dang at 6:14 PM | Permalink | Comments (1)
Categories: College/Financial aid, Complaints, Debt, Economy, Loans
        

As if Countrywide Financial Corp. doesn't have enough trouble on its hands, now comes a report from Conde Nast's Portfolio magazine investigation, which revealed that two U.S. senators, two former Cabinet members, and a former ambassador to the United Nations received loans from Countrywide through a select and fairly secret program that waived points, lender fees, and company borrowing rules for prominent people.

Yea, yea. I'm thinking the same thing. Why do prominent, wealthy, famous people get all the freebies and deals? They're the only ones who can afford the stuff that companies throw at them, right?

Anyhow, you've probably heard Sen. Christopher Dodd, a Democrat from Connecticut and chairman of the banking committee over there to your right, telling everyone this month that the special favor would not influence his decision-making in banking matters.

Continue reading "V.I.P.s get mortgage breaks from Countrywide" »

Posted by Dan Thanh Dang at 7:00 AM | Permalink | Comments (3)
Categories: Loans, Naughty businesses/NBotW
        

Maybe you’ve thought about lending your niece money for college. Imagine her excitement – and how good you will feel - when she doesn’t have to grovel to some bank for a loan, which might reject her any way because she doesn’t have much of a credit history. (ed note: These are Eileen's sage words. I'm just posting this for her. -- DD)

Maybe then it crosses your mind: “What if she doesn’t pay me back?” How will you ask her for your money? Or, what if you do ask, and she still doesn’t pay and stops taking your calls? Will every Thanksgiving family gathering be spoiled forever?

Maybe you conclude you all would be better off if you didn’t even broach the idea of a loan.

But it doesn’t have to be that way. Enter GreenNote, the latest peer-to-peer lending site and one that deals strictly with student loans.

Peer-to-peer sites match people who need money with friends or strangers who are willing to lend small amounts, usually at least $50, in return for interest income. I wrote last month about how such sites are beginning to focus more on student loans, besides the usual borrowing to pay off credit cards or open a business. The story is posted below.

Continue reading "Moola for College" »

Posted by Dan Thanh Dang at 6:45 AM | Permalink | Comments (0)
Categories: College/Financial aid, Loans
        

Bank of America said yesterday it would stop peddling risky mortgages, including subprime and other non-traditional loans, after it completes the $4 billion purchase of Countrywide Financial Corp.

In our sister paper, the Chicago Tribune, BofA's global consumer credit executive Bruce Hammonds said, "We recognize this tightening restricts the availability of credit to some borrowers, but this will help ensure that those who get loans can afford to repay them."

Among other things, BofA announced in public testimony on its proposed purchase of Countrywide that the combined company will halt making option adjustable-rate mortgages, drastically cut back on low-documentation loans and limit prepayment penalties.

It won't solve the subprime mortgage mess we've got on our hands right now, but it's a step in the right direction. This goes back to my Sunday column where I said we're all for people getting credit limits they can afford on their credit cards... or at least curbing the ease of credit for people who can't afford it in the first place.

Posted by Dan Thanh Dang at 11:51 AM | Permalink | Comments (2)
Categories: Consumer protection, Debt, Loans
        

Anyone out there wondering how we got into this mess? By mess, I mean the slowing economy, which might or might not be in recession. Officially, we're not in a recession, as the msnbc story says. But, and this is a big BUT, things are definitely not rosy.

I read a great story in the WPost yesterday about why we've got this mortgage mess on our hands. We're leverage addicts. Writer Michael S. Rosenwald sums it up quite well:

The simple answer, according to personal finance experts, is that we want more -- more money, more house, more car, just more, more, more. We often think we deserve more. Leverage gets us more. With historically low interest rates, leverage is the easiest and quickest tool to get more stuff.

The problem is that too much leverage has a downside that is easy to overlook. When everyone else is using leverage so successfully to get more, do we wonder what will happen if interest rates go up? Not so much.

Continue reading "Borrowing 'til it hurts" »

Posted by Dan Thanh Dang at 11:22 AM | Permalink | Comments (3)
Categories: Budgeting, Debt, Investments, Loans, Personal finance
        

Computer retailer Blue Hippo is not the only company that offers credit to people with poor or no credit histories.   

BH, which settled with the Federal Trade Commission after accusations of taking consumers' money for computers and plasma TVs and not delivering the goods, was featured in a BusinessWeek story last year about businesses that target the poor.

It discusses several companies, including BlueHippo, that extend credit and thus a wider range of consumer goods to poor people. But as the story puts it:

"... this remaking of the marketplace for low-income consumers has a dark side: Innovative and zealous firms have lured unsophisticated shoppers by the hundreds of thousands into a thicket of debt from which many never emerge."

Contrast this with the story of Adam Shepard, a college graduate who takes $25 and a gym bag with him on a poverty experiment, a la Barbara Ehrenreich's "Nickeled and Dimed" ...

Continue reading "Perpetually poor" »

Posted by Liz Kay at 8:02 AM | Permalink | Comments (1)
Categories: Budgeting, Consumer protection, Debt, Loans, Naughty businesses/NBotW, Shopping
        

People who earn little money often pay more for financial services because they lack access to low-interest, short-term sources of credit and to banks themselves, according to a report by the Maryland Consumer Rights Coalition. They're also not informed of the high fees they often pay to consolidate debt and for tax refund anticipation loans or payday loans.

The Maryland Consumer Rights Coalition is urging elected officials and government regulators to take more steps to protect the rights of poor consumers and to enforce the laws already on the books.

Interesting to note --- part of the remedy in the 2003 Maryland Debt Management Services Act involves making sure that the print is not-so-fine:

"The consumer must enter into a debt management services agreement
and must receive a copy of the agreement that is in at least 12
point type and sets out the schedule of payments, maintenance
fees and a list of which creditors will receive payments, and a
notice of the right to rescind the agreement by giving written
notice."

Continue reading "Poor? Pay more." »

Posted by Liz Kay at 2:03 PM | Permalink | Comments (1)
Categories: College/Financial aid, Consumer protection, Debt, Loans, Personal finance
        

Here's the answer in Biz Writer Extraordinaire Tricia Bishop's really good story today.

As Tricia says, a wave of consumers wondering that very question rang up mortgage companies everywhere because: "Rates for 30-year fixed mortgages hovered around 5.5 percent Wednesday, with some dipping into the 5.25 percent range early in the day, according to area brokers. That's just a hair above the record lows recorded in June 2003, when the housing market was flourishing."

But before you rush to refinance, be warned that the rules are pretty different now. Let's just say that you better make sure your credit is pretty good. So if you owe more than your house is worth, have little to no equity in your home or can't prove how much you earn every year, this refi-rush will likely pass you by.

Posted by Dan Thanh Dang at 8:00 AM | Permalink | Comments (0)
Categories: Home/Real Estate, Loans, Personal finance
        

If you haven't already read Eileen's very helpful story on how the Fed's three-quarters of a percentage point cut affects you, check it out here.

If you're too lazy to read it, I'll sum up for you.

Credit Cards: Don't count on seeing a lower interest rate.

Home Equity Lines: Expect to see a decrease as early as next month.

Mortgages: No change for fixed-rate mortgages, but maybe for adjustable rate mortgages.

Continue reading "How the Fed interest rate cut affects you" »

Posted by Dan Thanh Dang at 1:30 PM | Permalink | Comments (0)
Categories: Credit cards, Debt, Home/Real Estate, Investments, Loans, Personal finance
        

Two advanced fee loan Web sites have been shut down thanks to some super-sleuthing y the Better Business Bureau of Greater Maryland.

The BBB says that Interline Financial, which claimed a Baltimore address of 7 St. Paul St., and Calstone Financial, which used the Web address of calstonefinancial.com, were stealing money from consumers by requiring advanced fees be wired to Canada before they were eligible to receive their loans.

The BBB said it found that testimonials used on both Web sites from past customers "were in fact copied directly from the Web site of a BBB Accredited business based in Nebraska called Credit Advisors. Real bright thieves, the scam artists failed to replace Credit Advisors company name with their own in the testimonials.

The BBB contacted the fraud department at 1&1 Internet, the Web-hosting service company for Interline and Calstone, and both Web sites were shut down.

It's too late for one consumer, a U.S. soldier who recently returned home from Iraq, the BBB said. He lost over $6,000 in advanced fees sent to Interline. Eager to appease the "application process" in order to buy a ring for his fiance, he sent three separate payments to Canada before suspecting foul play. When he requested a refund, he never heard from the company again.

Continue reading "Advanced fee loan scam shut down" »

Posted by Dan Thanh Dang at 7:30 AM | Permalink | Comments (1)
Categories: Consumer protection, Loans, Naughty businesses/NBotW
        

This wasn't what I was teasing about earlier. Consider it a bonus on naughty businesses Marylanders have to avoid.

The The Department of Labor, Licensing and Regulation said today that two out-of-state lending companies have been ordered to cease and desist offering payday loans in Maryland, an illegal practice in the State.

Arrowhead Investments Inc. of Missouri, and FFD Resources LLC of New Mexico, were ordered on Dec. 6 to "stop offering payday lending services over the Internet to Marylanders after both companies failed to respond to earlier letters alerting them that the practice is illegal. Neither company is licensed to operate in Maryland, and both offered a type of consumer loan that violated state law."

Financial Regulation Commissioner Sarah Bloom Raskin said, "These companies broke the law not only by lending in the state without a license, but also by charging usurious interest rates for loans made to Maryland residents."

Continue reading "Naughty businesses extra" »

Posted by Dan Thanh Dang at 3:30 PM | Permalink | Comments (0)
Categories: Consumer protection, Loans, Naughty businesses/NBotW