Concern at number of Scots resorting to payday loans
The number of people turning to expensive payday loans in a desperate attempt to ease the pressure on their finances more than doubled last year, alarming new figures show. People are also increasingly likely to take out more than two payday loans and are getting into deeper debts with the firms, according to research by the Consumer Credit Counselling Service (CCCS). Thousands of people have resorted to payday loans in recent years after being denied credit by mainstream lenders and demand continues to grow as unemployment creeps up and pressure intensifies on household incomes. Payday loans are designed for short-term repayment, but those unable to clear their debt on time face annual interest charges of up to 3,600 per cent, sending them spiralling deeper into debt. Almost 9 per cent of people going to the CCCS for help with their debts last year had a payday loan, up from just 3.6 per cent a year earlier, it reveals today. The number of loans taken out by CCCS clients averages out at 2.37, while the typical amount owed has jumped from £919 two years ago to £1,199. Una Farrell, spokeswoman for the CCCS, a free debt advice charity, said: “The dramatic rise of people in Scotland seeking our help with their payday loans is very worrying. Not only is this very expensive credit with exorbitant interest rates, it becomes even more so if you struggling to repay it and end up paying sky-high charges. “It is crucial that anyone who finds themselves using payday loans more than three times a year or repeatedly rolling the loans over should seek help with their debts. Otherwise, they will find themselves falling into a debt hole very quickly.” The increased use of payday loans comes as many people are making a concerted effort to pay down their debts. The average Scot going to the CCCS for advice last year had outstanding debts of £16,183, compared with £18,276 the previous year and £19,617 in 2009. Yet the number of people going bust north of the Border continues to rise. The latest report from the Scottish Government’s Accountant in Bankruptcy showed that 75 people in Scotland are going bankrupt every working day, a rate almost double that in England and Wales. There were 4,856 personal insolvencies in Scotland in the first three months of this year alone, up nearly 14 per cent from the same period in 2011. John Hall, Scottish council member at insolvency trade body R3, said: “It is not surprising that many more people are struggling with their finances and taking out payday loans that subsequently trigger financial problems. “Many of these individuals will be unable to access mainstream credit sources and resort to payday loans to deal with short-term cash flow problems. However, whilst such loans may appear to fulfil a short-term need they can, and often do, cause the individual’s debt situation to become much worse.” One in three people admits to anxiety over their debt levels, recent R3 research found, with twice as many people north of the Border as elsewhere in the UK worried about their payday loans. “It should be remembered that those with payday loan debts will also have probably maxed out on mainstream loans, overdrafts, credit cards and other forms of credit before they get to the payday loan company.”
Why you should always contest a credit-card lawsuit
There are very serious questions about the reliability with which debtors are actually served by the collection agencies who buy credit-card debts from the big banks for as little as $0.018 on the dollar. All too often, the debtor doesn’t even know that they’ve been “served”, and therefore default judgments get filed against them even when the underlying documentation is weak or nonexistent. But if you do find out that a collections agency is suing you for unpaid credit-card debt, then you should absolutely turn up in court and ask for documentation. By that point, of course, any hit to your credit will already have happened, so you can’t damage your credit score by fighting the suit and refusing to pay. And the simple act of asking the plaintiff to prove that you owe what they say you owe will very often make the whole suit disappear. So get the word out: if you, or anybody you know, gets sued for unpaid credit-card debt, the first thing you should do is simply ask the person suing you to prove that you owe what they say that you owe. The onus is not on you to provide documentation that you paid off the debt, or anything like that. The onus is on them to prove that the debt exists. Borrowers should not shy away from asking for this proof out the moralistic feeling that they should pay back what they owe. And it turns out that much of the time, the debt will have been sold to them by a bank refusing to make “any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever” about the accuracy or completeness of the debts’ records. If that kind of language is in the transfer documents, it’s very unlikely that the collections agency will be able to win a contested lawsuit. If people start contesting these suits en masse, then that will surely reduce the attractiveness, to the banks, of selling written-off debt to sleazy collections agencies en masse. If banks want to sue borrowers for money those borrowers owe, let the banks do so themselves. At least it’s more honest that way.
Why filing your taxes on extension is a good idea
If you need more time to get your taxes done right, then file a Form 4868, Application for Automatic Extension for Time to File U.S. Individual Income Tax Returns. If you don’t file a tax return or at least an extension by the April 17 deadline, then you’ll owe IRS penalties and interest. The penalty for not filing your tax return or an extension on time is a stiff 5 percent per month up to a maximum of 25 percent of the amount of tax due on the late-filed return. Filing an extension gives you an automatic extension to file your final 2011 tax return until Oct. 17, 2012. But filing an extension does not give you an extension to pay the taxes you owe. You’ll need to also make a reasonable estimate of taxes you owe and submit a payment with the Form 4868. To avoid a late payment penalty, you have to have paid (from withholding, estimated tax payments and what you pay with the extension) at least 90 percent of what you owe, or have paid 100 percent of your 2010 tax liability. If you want to avoid paying any additional interest for paying late, you have to pay the full amount of the tax liability owed. The current IRS interest rate for late payments is 4%, so it’s not that big a deal. It’s a good idea to file an extension if you need more time to do a thorough job preparing a tax return. Especially if in 2011 you had to deal with a lot of new tax issues. Here are a few reasons why filing an extension is a good idea:
- With so many new tax credits available, you’ll want more time to do your research and make sure you are taking advantage of every credit you qualify for.
- If you had income from special situations – sale of property, exercise of stock options or cancellation of debt income, etc. – and you need more time to gather your records and get advice as to how to report.
- If your tax preparer is really bogged down, ask him to file an extension now. This will give him more time to finish your return later when he can give it his full attention and do a more thorough job.
- Many financial institutions are still sending corrected forms 1099 with revised amounts for qualified dividends and foreign taxes. Taxpayers with investment income may want to file an extension if they typically receive a corrected form 1099.
- Filing an extension is free. For your federal income tax return, you can log onto the IRS Free File site and use the service on that site. Also, most states will have this feature available on their web sites.
And if you do file your federal tax returns on extension, then you’ll also need to file an extension for your state tax return as well. And don’t worry – filing for an extension does not make your return any more likely to be selected for an IRS audit.