Subprime Lending News 8/10/17:
Drama in the Mississippi payday lending industry, why subprime auto bonds are so hot right now, and the financial crisis, 10 years on.
By Caroline Thompson
Investment advisor offers payday loan tips for Mississippi residents.
Dorian Black, an investment advisor in Mississippi, is warning potential borrowers that payday loans should be used only as a last resort. Talking with reporters on Tuesday, Black said while there are some responsible payday lenders out there, many of them are actually predatory lenders. “People can get in trouble,” Black said. “Some of these places prey on vulnerable people who have bad credit and low incomes. These people borrow money, and they don’t really have a way to pay it back.” Black says if you need to borrow money, you should look into other options, as payday loans often have sky-high interest rates and can be difficult for the average person to pay back on time.
Investors are clambering for subprime auto bonds.
The risk premiums on subprime auto debt are shrinking to near-record lows, and despite high delinquencies on these loans, investors are still rushing to buy them. Last week, Westlake Financial Services made a $800 million subprime auto bond sale, which was originally planned at $700 million. According to a report from BloombergMarkets, “Insatiable demand for investment-grade and junk bonds has sent investors searching for better deals in the market for asset-backed securities. The newfound interest means risk premiums for structured bonds are plummeting too.”
Federal agency pushes judge to fine Mississippi payday lender.
The Consumer Financial protection Bureau is asking a federal judge to order All American Check Cashing, a Mississippi payday lender, to pay $8.3 million for allegedly hiding check cashing fee schedules, misleading people into taking out bigger loans than they could afford, and keeping customer overpayments. This is yet another financial blow to All American Check Cashing, which lost its lending licenses in June, fined almost $900,000 by Mississippi officials, and then ordered to pay $135,000 in refunds to 700 former customers.
It’s the ten-year anniversary of the beginning of the financial crisis, and French recovery is lagging.
On August 9, 2007, French bank BNP Paribas SA froze funds exposed to U.S. subprime mortgages, and set off a chain reaction of bank failures, stock market crashes and eventual government bailouts. While most financial markets have more than recovered from the turmoil, now a decade past, French equities have yet to get back to pre-crisis levels. According to Bloomberg, “Equities in France remain in the doldrums a decade on, with the benchmark CAC 40 Index 7.4 percent lower since Aug. 9, 2007, compared with gains of more than 17 percent in the U.K., Germany and Japan, and a 71 percent climb for the S&P 500 index.”