Category Archives: consumer proposals

Home Capital Group Inc stock sinks ahead of key earnings call, surprise director resignation

Analysts are buzzing about what is set to be one of the most closely followed investor calls this year.

Home Capital, one of Canada’s largest alternative lenders, will release earnings on Wednesday and host a conference call with analysts and investors Thursday. The stock sunk more than six per cent on Tuesday as the market is pricing in bad news.

The company recently announced a sharp drop in new mortgages and that it had split with a number of brokers. Sources familiar with Home Capital said that the split occurred after an internal audit discovered improperly documented mortgages.

One of the investors that will be listening Thursday is Marc Cohodes, an American short seller who has been positioned against Home Capital since November. Cohodes formerly worked for U.S. hedge fund Copper River Management and was involved in a number of high profile shorts during his career.

“I’m not short Canada’s banks, I’m not short the housing market, I’m short Home Capital Group and I have been for a while,” he said. “There are a lot of questions around what happened with their brokers and I think they handled disclosing that information poorly.”

Because Home Capital has a large exposure to a portfolio of subprime mortgage loans in Canada, it is seen as a canary in the coal mine to the broader health of the Canadian housing market, which has been on a tear for the past decade. Home prices have risen 79 per cent across the nation since 2005, according to data from the Canadian Real Estate Association. Home prices in the country’s hottest markets, such as Toronto and Vancouver, are up more than 100 per cent.

Home Capital’s stock fell 6.35 per cent Tuesday, or $1.85, to $27.30 on the TSX and has now plunged more than 36 per cent in the past month.

The company’s shares leaped ahead of Quebecor Inc. this week to become the second-most shorted in Canada, with 28.4 per cent of its stock on loan for short selling, according to Markit. That is significantly up from the roughly 18 per cent of shares shorted on July 10, when the company first revealed issues with brokers. Short positions are near the historic peak of just under 33 per cent seen in June 2013, when veteran investor Steve Eisman, who correctly called and shorted the U.S. subprime mortgage crisis in 2007, predicted a Canadian housing correction that year.

Shubha Khan, an equity analyst for National Bank Financial, said that investors want answers about just what happened and how deep any potential problems with Home Capital might be.

“They want to know specifically what the issue was with the broker relationships that were terminated and whether they feel this is a broader industry issue or just an issue with HCG,” he said. “I think investors will also want to know whether further red flags have gone up because the strategic review that uncovered the original issue is still ongoing.”

The scrutiny around Home Capital was made clear Tuesday morning, when another mortgage lender, First National Financial, held its second-quarter call. Many of the analyst questions on that call focused on whether Home Capital’s troubles are part of a deeper, industry-wide issue.

One analyst who agreed to speak only on background said the big question for Home Capital will the extent of the problems with the mortgages.

“The best case scenario is it was just oversight. The worst case scenario? They (may have) uncovered fraudulent mortgages,” the analyst said by phone.

In what was a bit of awkward timing, Home Capital announced late Monday night that veteran director James Baillie, a former chairman of the Ontario Securities Commission, will be resigning. The company said in a statement that Baillie informed the board he wished to resign several months ago, but postponed his retirement until a new director was found to replace him. The statement said his resignation was for “a variety of personal reasons.”

Home Capital, which operates through its brand Home Trust, has seen some recent high profile changes at the senior level. In November, chief financial officer and executive vice-president Robert Blowes announced he was retiring at the end of 2014. In January, chief risk officer David Novak stepped down. More recently, Marissa Lauder, who headed Home Capital’s risk teams, left the company.

Source: Financial Post John Shmuel | July 29, 2015 12:35 AM ET

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RBC threatens ‘fast foreclosure’ to seize Port Coquitlam home

Port Coquitlam condo owner Ron Philbrook's 'bad luck streak' continued when the Royal Bank threatened fast foreclosure.

If it weren’t for bad luck, Ron Philbrook wouldn’t have any luck at all.

And the Port Coquitlam, B.C., man believes his plight should serve as a cautionary tale for Canadians carrying record levels of household debt.

“I think they’re going to be thinking about, ‘Wow, if this can happen to this fellow, it could very well happen to us,'” warns Philbrook.

‘Fast foreclosure’

The 58-year-old is facing a “fast foreclosure” by the Royal Bank of Canada on his home of 36 years, after he fell on hard times. This is a procedure in which a bank requests authorization to foreclose in 24 hours rather than several months.

The bank’s move is taking place even though Philbrook now has a stable job and has made various offers to start paying off his debt.

“I made several repayment proposals to take care of the arrears, and the bank is basically playing hardball, and said, ‘Sorry, we’re carefully declining your offer.'”

After CBC asked questions, the bank initially agreed to delay its foreclosure application until later this month. The bank is now delaying it indefinitely, pending a resolution with Philbrook.

If the foreclosure happens, it will be the latest blow for Philbrook after being pounded by bad luck.

58 year old Ron Philbrook could soon lose his modest Port Coquitlam condo to foreclosure

Philbrook, 58, has lived in his modest Port Coquitlam condo for 36 years. (CBC News)

Bad luck begins

By the 1990s, Philbrook had paid off his Port Coquitlam condo and was planning for his retirement.

He decided to remortgage to buy a recreational property with relatives on Pavilion Lake, between Lillooet and Cache Creek, 300 kilometres northeast of Vancouver.

But in 2011, Philbrook was laid off from his job of 23 years. He burned through $40,000 from his RRSP to keep paying his condo mortgage, but then fell behind and into debt.

That’s when disaster struck.

Last August, Ron Philbrook's vacation home on Pavilion Lake was hit by a mudslide

Last August, Philbrook’s vacation property on Pavilion Lake, 300 kilometres northeast of Vancouver, was hit by a devastating mudslide. (Courtesy: Ron Philbrook)

Dream ‘wiped out’

Last August, torrential rains sparked massive mudslides around Pavilion Lake.

One buried his recreational property beneath tonnes of rock — and filled his cabin with debris.

The property value went from an assessed $156,000 to just $26,000.

His insurance company refused to pay out, declaring the mudslide an act of God — and the province wouldn’t pay disaster relief because it was a recreational property, not a primary residence.

“I was absolutely shocked,” recounted Philbrook. “I was saying, ‘Oh brother, this is another blow to the gut I definitely don’t need.”

“I was going to sell my place, for whatever money I could get, and I was going to move up and live [there].”

Royal Bank foreclosure

Philbrook owes $114,000 on his Port Coquitlam condo that’s valued at just $95,000.

The Royal Bank has decided to foreclose on his home of 36 years.


Royal Bank of Canada has given Philbrook a two-week reprieve, delaying a foreclosure application that had been scheduled for June 4.

Normally, the bank would give a homeowner six months to find funds before foreclosing.

RBC has instead applied to B.C. Supreme Court to request Philbrook be given just 24 hours to pay up before the condo can be listed by a real estate agent. Philbrook would be kicked out upon sale of the home.

The bank took this action even though Philbrook found a stable, full-time job last November and has pledged to pay back approximately $500 a month.

“Devastated, I feel devastated,” he says. “I’ve been a very, very loyal customer with them for over three decades. And this is the way they’re treating me.”

Philbrook’s lawyer agrees.

‘Hard-nosed approach”

Priyan Samarakoone, a lawyer with the Access Pro-Bono Society BC, says Philbrook is “a hard-working, everyday Joe Canadian,” who “deserves a break.”

Priyan Samarakoone, lawyer with Access Pro Bono BC, is fighting on behalf of Philbrook

Priyan Samarakoone, lawyer with Access Pro Bono BC, is fighting on behalf of Philbrook. (CBC News)

“I’d like a little wiggle room, I’d like a little flexibility” he says, calling the bank’s 24-hour redemption period “a hard-nosed approach.”

“What I would like to see is in circumstances when we have an opportunity to save the home, that they work with us … and not just kind of roll over that person if it’s just dollars and cents,” he said. “It’s that human approach.”

Temporary reprieve

After being contacted by CBC News, the Royal Bank of Canada initially agreed to soften its position, but still demanded Philbrook come up with a lump sum payment of $11,000.

It gave him a two-week reprieve, delaying a court application that had been scheduled for June 4.

In an email to CBC, bank spokesman Ian Colvin wrote:

“We are working closely with the client to find a resolution and have taken steps to provide both parties with more time and to review carefully the options available.‎”

The statement did not say whether RBC would stick to its 24-hour foreclosure application when the case returns to court.

However, Colvin later told the CBC in another statement the bank is having “ongoing and productive discussions” with Philbrook, in hopes of coming up with a settlement.

He said the bank’s application to B.C. Supreme Court to foreclose on Philbrook within a 24-hour period is being put on hold indefinitely, “pending some resolution” with Philbrook.

Philbrook said he’s thankful for how things have turned out.

“I’m touched, very, very touched and … I’m very happy with how the situation is progressing with RBC.

“I hope we can reach a resolution soon, and that pretty well says it all, right there.”

Source: By Eric Rankin, CBC News Posted: Jun 04, 2015 6:34 AM PT

Payday loans: Predatory loan sharks or crucial fix in a pinch?

The Globe and Mail

This is part of a Globe series that explores our growing dependence on credit – from the average household to massive institutions – and the looming risks for a nation addicted to cheap money. Join the conversation on Twitter with the hashtag #DebtBinge

It all began with a pair of jeans.

Robbie McCall wanted to give his daughter a new pair for Christmas. But he was short of cash. Mr. McCall, 47, lives on a fixed disability payment of $1,350 a month and he just didn’t have the money to buy them.

So he went into a nearby cash store in Ottawa to get a quick loan. This is how his debt trap began: When he returned in January to pay back the first $200 loan, plus $20 in fees (a promotional rate as a first-time borrower), he was encouraged to take out another, bigger loan – $300. But the second time, his bill, which included other fees, came to $86.

He couldn’t pay, so he took out another loan. By the next loan, at $400, the fees had grown to more than $100.

“I just about had an aneurysm,” he says. “I was beside myself. Now I couldn’t afford to pay my rent, or I’d have to forgo my hydro. I’m on a fixed income, so every penny counts.”

He dug himself out of his first payday-debt hole, only to fall down another the following year.

Like many in his situation, he borrowed from one payday lender to pay off another. He says his credit rating is shot. He figures he spent thousands on fees in recent years. Lack of cash meant having to go to food banks. “I was in a terrible loop I didn’t know how to get out of.”

Payday lenders, such as National Money Mart Co., Cash Money and Cash 4 You Corp., have proliferated in Canada since the industry – which offers short-term, small-sum loans – began in the mid-1990s.

Today, the sector has more storefronts and online lenders in the country than Royal Bank of Canada or McDonald’s locations. Nearly two million Canadians a year use payday-lending services, the industry association says.

Canadian law prohibits lenders from charging more than 60-per-cent annual interest on loans. But the federal government introduced legislation in 2006 allowing provinces to exempt payday lenders from that limit if they created a regulatory system to govern the industry.

Seven provinces have legislation, but the approaches differ. Manitoba has the most stringent rules, capping payday loan fees at $17 per $100 borrowed, while Prince Edward Island allows lenders to charge up to $25 per $100.

The knock on the industry is the fees, which often end up hitting those who can least afford them. For example, a $300 two-week payday loan can carry a fee of $63, compared with just $5.81 for borrowing from a line of credit or $7.42 for a cash advance on a credit card, both of which include a $5 administration fee, according to the Financial Consumer Agency of Canada (FCAC).

In Ontario, a two-week payday loan costs up to $21 per $100 borrowed. That translates into an annual rate of 546 per cent. In Alberta, B.C. and Saskatchewan, the annual rate is 600 per cent.

Despite the high costs, the share of Canadians using payday loans has grown rapidly. The portion of people who say they or a family member have used payday loan services in the past year has more than doubled, to 4.3 per cent last year from 1.9 per cent in 2009, an FCAC survey shows.

The two-decade rise of the payday lending business has coincided with a record run-up in borrowing. Canadians have never been more indebted – total household credit topped $1.8-trillion as of March and the debt-to-disposable income ratio is at an all-time high of 163.3 per cent. A growing number of people are living paycheque to paycheque.

Most payday borrowers tend to have low to moderate incomes. Some – those without a credit history or low credit scores – don’t have access to other, more affordable types of credit. They may not feel comfortable using a bank or have a branch in their neighbourhood.

For those in urgent need of cash – for a car repair, to pay a phone bill or to make ends meet until the next paycheque arrives – payday lenders offer extended hours and quick, friendly service.

The prevalence of the sector has deepened a rift between consumer advocates and the industry, which says there is clear demand for credit and that high fees reflect a higher cost of doing business. Community groups and some municipalities argue that the loans are predatory, and lead some – particularly those with low incomes – into a debt spiral.

Credit crackdown

Rising tensions over the sector can be seen in other countries. The U.S. is exploring tighter federal rules for payday lenders. And the U.K. capped fees this year, while what was once its biggest payday lenders, Wonga, has scaled back lending after a regulatory crackdown.

In Canada, some communities are clamping down – hard.

Last month, Maple Ridge, B.C., banned all new payday lenders from setting up shop. Surrey, B.C., amended its bylaw to require at least 400 metres separation between payday storefronts, while Burnaby, B.C., is considering limitations on locations and new outlets. “They’re legalized loan sharks,” says Burnaby city Councillor Nick Volkow.

Meanwhile, Nova Scotia tightened fees last month, to $22 per $100 loan from $25, as a study showed that more than half – and growing – of such loans issued were repeat loans. New Brunswick and Ontario are reviewing regulations for the sector. And now Calgary is weighing new rules.

Calgary’s tussle with the issue comes as the city is planning to implement a poverty-reduction initiative, which has identified a payday lending bylaw as one possible solution.

“They do target low-income people in low-income neighbourhoods. … They know who their target market is – people who can’t afford to pay the high fees and interest that payday lenders charge,” says Mike Brown, who works on public policy at Momentum, which runs community economic development programs in the city.

He says lower oil prices are adding urgency to the city’s efforts as “people get laid off – many Canadians don’t have an emergency fund, so they run into a problem of needing credit right away, and if they can’t get it from their banks, they’re more likely to go to a payday lender.”

Momentum has mapped 86 payday locations in Calgary and found 73 of them are located in areas with above-average incidences of poverty.

In Toronto, St. Michael’s Hospital this year released a study showing the density of cheque cashers and payday lenders is a proxy for poverty and self-harm, and says there is growing evidence that their presence has a negative impact on health and longevity.

In Winnipeg, Toronto and Saint John, research has found payday outlets are often located in lower-income neighbourhoods.

Calgary’s city council is looking to pass rules that will limit the distance between future locations so they’re not as clustered, which has given people the impression that this is the only opportunity for those in need. This has already been done in Winnipeg and 100 U.S. cities, Mr. Brown notes.

One province in Canada has effectively barred payday loans. Instead of exempting payday lenders from the 60-per-cent annual interest-rate limit, Quebec has instead lowered its interest-rate cap to 35 per cent a year, making it unprofitable for the payday loan industry to provide its conventional services in the province.

Newfoundland has no payday legislation, which means the federal loan rate of 60 per cent is in place, while New Brunswick has developed legislation that has not been enacted, so the federal loan rate continues.

Payday loans are becoming a growing issue for those with severe debt problems. They are the fastest-growing category of debt among clients of Credit Canada Debt Solutions, a not-for-profit agency that operates 17 centres in Ontario to provide free counselling for people with financial problems.

A third of new clients who came to Credit Canada last year had payday loans, an increase from 18 per cent just five years ago, says chief executive Laurie Campbell. For seniors, the growth is even more dramatic, with 45 per cent of Credit Canada’s clients over age 60 holding payday loans in 2014 – a steep increase from 20 per cent in 2010.

In Vancouver, bankruptcy trustee Blair Mantin of Sands & Associates Inc. says he’s seeing more people in the province in hot water with payday loans. He refers to them as the “crack cocaine” of the debt world because it’s hard to stop with just one.

“I never see just a single payday loan on a list of debts,” he says, adding that he has seen people with loans from as many as 10 different outlets.

In British Columbia, the number of payday borrowers climbed 35 per cent from a year earlier to nearly 200,000 last year, while the average loan amount grew to $449 from $441, according to Consumer Protection BC. A quarter of these loans initially defaulted.

Bankruptcy trustee Doug Hoyes, in Kitchener, Ont., is witnessing a similar shift. He has seen an increase in payday loan use by seniors, who often take out the loans to make payments on other debts such as credit cards.

His firm’s recent review of 6,000 insolvency files of Ontario clients in 2013 and 2014 shows the highest-risk groups for insolvency are seniors, single parents and people with large student loans who do not qualify for traditional low-cost borrowing options such as lines of credit.

“If you’ve got a fantastic job and lots of equity in your house, the fact you can get a mortgage at 2 per cent is fantastic. But that’s not everybody,” says Mr. Hoyes, of Hoyes Michalos & Associates Inc.

“If I’m a senior on a fixed income or a low-income single parent, I don’t have access to lines of credit and second mortgages and everything. I’ve got to resort to things like payday loans and fast-cash loans. Those are the people who are much more vulnerable.”

He says 18 per cent of people filing for insolvency in 2013 and 2014 had payday loans, up from 12 per cent over the prior two-year period.

The average insolvent person with payday loans had 3.5 loans outstanding – but one client had 35 payday loans when he filed for insolvency.

“Once you’re on the hamster wheel, you can’t get off,” Mr. Hoyes says. “We tend to get into habits, and payday loans are a habit. But you can’t break out of it, that’s the problem.”

Ontario regulations do not allow payday lenders to provide a new loan until the first is paid off, so people should never have more than one loan at a time.

But Credit Canada says its clients with payday loans typically have three to five loans when they arrive for counselling, skirting the rules by going to rival lenders for new loans. It is often as simple as crossing the street.

Paying higher fees may seem irrational – but research has shown the impact that desperate financial straits has on decision-making.

“Things like a payday loan become attractive – because you just need the money right now. So you’re willing to borrow to fix a problem right now,” says Nicole Robitaille, assistant professor at the Queen’s School of Business.

“I’m going to spend way more than I should to fix this urgent problem. You become so short-sighted that you lose any long-term thinking.

“The more you need the money, or the more you need your time, the more likely you are to use it poorly.”

In Toronto, Shayan Khan says his payday loans became a trap, spiralling out of control in a matter of months.

The 40-year-old got his first $100 payday loan two years ago, and paid it back after two weeks. But he immediately borrowed more to cover living expenses.

Within a few months, he was borrowing $900 every two weeks, and paying another $189 in fees to cover the cost of the loans. The bi-weekly repayments were consuming his entire paycheque.

“They do make it pretty easy,” he says. “They don’t check any credit or anything. As long as you have a job, you get the loan. It’s kind of too easy, compared to if you take any other credit. … It looks easy, but it’s a trap, that’s all I can say. For me, it was a trap.”

The rise of an industry

For those in the business of payday loans, the situation isn’t quite so simple. High fees, they say, reflect the higher costs of the service they offer – a service for which there is clear demand. New and proposed regulations, they say, go too far.

The danger, the industry argues, is that if regulations become too strict, companies will go out of business. Canada’s largest player recently did – Edmonton-based Cash Store Financial Services Inc. ran out of cash, declaring bankruptcy last year, which it blamed in part on Ontario regulatory issues.

As a result, the industry can no longer be considered growing in Canada, notes Stan Keyes, spokesman for the Canadian Payday Loan Association, which represents most licensed payday lenders in the country.

He pegs the current total number of outlets at 1,459, which includes licensed storefronts and online lenders. He says the rapid growth occurred between 2000 and 2010. Since then, “growth in the industry has been flat or declined in provinces partly because of regulation.”

Onerous regulations could hurt businesses and competition, which could result in far worse options for those in urgent need of a short-term loan, Mr. Keyes says.

Even if the industry is regulated to a point that it can no longer offer these services, demand for small-sum loans won’t vanish, he says – and most banks and credit unions don’t offer them. As a result, borrowers will be forced to “what, take their television off their wall and go to a pawnshop? What alternative does the borrower have if the industry is regulated to the point that they just throw up their arms?”

Increasingly, he says, people will turn to unlicensed, unregulated online lenders that charge even higher rates. And “where is this unlicensed lender operating from? Belize, or the Cayman Islands? Is there protection against the borrowers’ bank again from being drained from an unscrupulous lender? What rate are they paying? Ninety-nine-per-cent chance that that rate is going to be far more than what the regulated licensed lender can offer. So be careful what you ask for.”

It’s difficult to pinpoint the size and growth of online lending, but dozens of firms such as My Canada Payday, 310-LOAN, Zippy Cash Inc. and CNU DollarsDirect Inc. are offering online loans. Some experts have suggested that online loans in Ontario account for 10 per cent of the market.

Mr. Keyes says the industry is not making exorbitant profits, noting that the cost of doing business is higher due to the cost of operations – wages, glass and security for each storefront, cost of credit and higher default rates from riskier loans.

The biggest player in the country is now Money Mart, which started in Edmonton in 1982 and was sold to U.S.-based Dollar Financial Group Inc. in 1996. Dollar Financial operates more than 1,500 locations in 10 countries including the U.S., Canada and the U.K., along with, more recently, Poland, Spain and Romania.

Canada appears to be a profitable market. Dollar Financial’s operating margin in this country is 49 per cent, compared with 24 per cent in Europe and 25 per cent in the U.S., according to the company’s financial statements.

Some say the rise of payday lending is at least partly the fault of the banks, arguing that traditional lenders have allowed the payday lending sector to flourish by not providing credit to low-income people. Terry Campbell, president of the Canadian Bankers Association (CBA), disputes such claims. He says banks offer small, short-term loan and credit options such as overdraft protection and credit-card advances, but some people don’t know they exist or try to access them.

Many people, he says, turn to payday lenders when they are in financial distress without talking to their banks to see if there are better and cheaper alternatives. (The CBA’s website says payday loans “aren’t the answer” for small, short-term borrowing and “are extremely expensive.”)

“We always encourage customers, if you are getting into difficulty, if you are getting into problems, don’t suffer in silence. Come and talk with your bank,” Mr. Campbell says.

His association’s research shows people have many motivations for using payday lenders, and some simply prefer the relative anonymity because payday lenders do not require information about what the money will be used for, don’t report loans to credit agencies and don’t require notification of spouses or business partners. They also provide loans “late, late at night” for those who want spur-of-the-moment cash.

For those with more extreme debt problems, Mr. Campbell says banks feel it is “irresponsible” to keep lending to people who have no hope of repaying their loans, arguing they instead need debt-management advice.

What’s next?

Regulating the industry is a complicated and delicate balancing act.

Jerry Buckland, dean of Menno Simons College at the University of Winnipeg, says regulators need more independent research to assess which regulations being adopted in various states and provinces are the most effective.

Mr. Buckland, who has extensively studied the sector, is convinced that one reform is critical – requiring payday lenders to publicly post their fees in the form of an annual interest rate. In some regions, lenders display their charges only in the form of a fee per $100 borrowed over a two-week period.

Payday lenders argue that their loans are only outstanding for two weeks and not for a full year, so annualized costs are misleading.

But Mr. Buckland says many other types of loans are not always outstanding for a full year – including credit-card payments, or in-store loans for new furniture. He says those costs are still displayed using an annualized interest rate, allowing borrowing options to be easily compared.

“That’s the way we think about loans – we think of the price in the form of an interest rate,” he says. “I think regardless of the product, if it’s a loan, it should be in a standardized form.”

Others agree that more data are needed. Payday loans can have “pernicious consequences” but it’s difficult to know with certainty what proportion of people use the loans occasionally as a valuable service, and how many are caught in a borrowing spiral, says Ken Whitehurst, executive director of the Consumers Council of Canada.

Mr. Whitehurst, who was a member of the Ontario panel that reviewed the province’s payday-loan legislation in 2014, says the payday industry lobbied for licensing on the basis that it was providing a convenience service for people with infrequent cash-flow problems. He says regulators need to know if many people are instead constantly taking out new loans as soon as they repay the old ones.

“Everyone would be concerned if renewal rates were commonplace, because that would be counter to one of the policy objectives in establishing these things,” he says.

Credit Canada’s Ms. Campbell believes the best solution is a centralized industry computer system to track who already has outstanding loans with any lender, preventing people from loading up on multiple loans at the same time.

“I’m convinced you’ve got to have a database that shows how many loans are outstanding,” she says.

It’s an idea that Mr. Keyes of the Canadian Payday Loan Association rejects over costs and privacy concerns. But 14 U.S. states now have centralized payday-loan tracking systems, which started with Florida in 2001, according to a report last year by an Ontario panel studying payday-lending regulations. The computer systems are funded by lenders based on a fee-per-transaction cost.

Centralized loan tracking opens other regulatory options. Many U.S. states also have limits on the number of times people can borrow from payday lenders in a year, or have introduced waiting periods between the time a borrower pays off a loan and can take out a new one. The hope is that people will change their borrowing habits or develop new financial plans if they cannot become reliant on payday loans to cover their living costs each month.

The Ontario panel studying regulatory reforms – which included representatives from both consumer groups and the payday loan industry – could not reach a consensus to make recommendations about centralized tracking or new loan restrictions. But it did call on the industry to provide more data to help understand the extent of risky borrowing habits, such as constant repeat borrowing.

Bankruptcy trustee Mr. Hoyes, however, is skeptical that more government regulation of the payday-loan sector will help, saying loan restrictions can be easily skirted, especially when many people get payday loans through Internet lenders. Rules that require waiting periods between loans, for example, could drive more people to borrow online from offshore lenders who are not bound by any Canadian regulations, he says.

Some think banks should step up. Until there is a real alternatives to payday loans, “these high-cost loans will continue to harm our communities, our families and, ultimately, the entire economy,” says Marva Burnett, national president of Acorn Canada, which advocates for low-income families.

“Banks and credit unions need to step in and provide low-cost, short-term loans.”

Mr. McCall, in Ottawa, would like to see more regulations on the industry, including lower fees and restrictions on lending to people who are living on social assistance and disability payments.

He saw his fees spiral to a point where he simply couldn’t pay his payday loan costs on his disability income. Cheques were bouncing and NSF fees from bad cheques added more fees. Eventually, his bank stepped in and closed down his account, something he’s grateful for.

“These Cash Money stores are popping up and it seems to me like they’re only preying on welfare recipients, social-assistant recipients, [Ontario Disability Support Program recipients], people on pensions,” says Mr. McCall, who volunteers with Acorn.

He would also like to see clearer annualized rates posted on storefronts.

“I was paying $1,300-plus in interest over the course of a year. That’s insane. That equals one cheque for a whole month of what I have to live on.

“It’s stressful on every level.”

With files from reporter David Parkinson

DECODING THE MORTGAGE MARKET: Ottawa should clear up obscure mortgage rules

Special to The Globe and Mail

Most Canadian home owners don’t know how much it would cost them to break their mortgage before the maturity date. But with penalties potentially in the thousands of dollars, they should.

That’s why Ottawa is pushing lenders to disclose penalties in a way that’s “clear, simple and not misleading.” Last week, the Finance Department saidit’s expanding a voluntary mortgage disclosure program to all lenders in Canada, not just the banks. Kudos to that.

But despite regulators’ efforts and improved disclosures, it’s still difficult to compare lenders by their penalties. The banks’ answer is their online penalty estimators, but those are tedious at best and baffling at worst. What consumers really need is for lenders to lay out their penalties in a standard, easy-to-compare and easy-to-understand format. And it’s up to Ottawa to make that happen.

The problem with today’s breakage fee calculators is that lenders often ask for such vague or inconvenient information, that people just give up on using them. Take this question, found on the site of one of Canada’s big banks: “The discount I received to obtain my rate is ____?”

Few borrowers would remember that without digging through old paperwork, searching online or calling their bank. Lenders, by the way, want you to contact them about your penalty. That way, they can ask you why you want a penalty quote and talk you out of leaving.

The effort it currently takes to estimate mortgage break penalties discourages most people from comparing them at all. And that’s a disservice to consumers. Given how much money people are borrowing to buy homes these days, Canadians deserve more than lengthy disclosures and ambiguous calculators.

One possible solution

In order to better assess which lender is offering them the lowest total cost of borrowing, mortgage shoppers must grasp how big the penalty for breaking their contract early might be. One way to actually help shoppers get this information is for lenders to provide penalties in a standardized way that can easily be compared.

On its website, for example, each bank could display a simple table showing a range of potential penalties for a $100,000 mortgage. A round number mortgage like $100,000 lets you quickly multiply the penalty to correspond to your own mortgage amount.

These hypothetical penalty estimates could be displayed under different assumptions, including:

  • a mortgage that’s broken one, two or three years early (assuming a five-year fixed mortgage)
  • cases where the lender’s current rates rose 1 per cent, fell 1 per cent or stayed the same.

Here’s how it might look:

Penalty per $100,000 of mortgage

Years Until Renewal

1 yr

2 yrs

3 yrs

If rates rise 1 per cent




If rates stay the same




If rates drop 1 per cent




Average for these scenarios


This sort of table would let consumers instantly visualize potential prepayment charges. People could then quickly compare lenders to see which ones stick it to their customers the worst.

Of course, all lenders would need to use the same format. Otherwise it would be too hard to compare apples to apples. But that’s easily achievable once regulators settle on a suitable layout.

The government could go a step further by asking lenders to disclose what percentage of borrowers they charge with penalties. That could give people even more clues on how competitive a lender is.

Only Ottawa can make that happen

Asking mortgage shoppers to run complex hypothetical calculations on multiple lenders is unrealistic and makes today’s penalty disclosures largely irrelevant for comparison shopping. And that’s important because steering clear of high-penalty lenders can sometimes keep thousands of dollars in your pocket.

Canadians need a fast way to measure the penalty magnitude of different lenders without powering up their calculators. Mortgage brokers can be a good resource for these calculations, but not everyone uses brokers. And many lender representatives are less than helpful in estimating their own penalties, let alone another lender’s.

Most banks and “no frills” lenders will certainly not provide this of their own accord. Why would they? Their penalties are among the highest in the country.

Home-Life-Auto: Community Education Session (the East-End Edition)

Home-Life-Auto: Community Education Session (the East-End Edition)

Home-Life-Auto: Community Education Session (the East-End Edition)

Tax Debt Settlement: What CRA Wants

tax debt settlement and cra

Posted in Debt Help
Posted by Ian Martin, CPA, CIRP – TRUSTEE

As a licensed trustee, I meet with a lot of people who owe money to the Canada Revenue Agency (CRA). Though tax debts are included in a consumer proposal or personal bankruptcy, there is an assortment of considerations that are unique when trying a tax debt settlement with the tax man. In this article, I will review the special collection powers that the CRA has, as well as the options for making a settlement arrangement or filing bankruptcy when you have CRA debts.

What Can CRA Do?

The most common collection activity is for the CRA to garnishee your pay cheque or freeze your bank account. Other types of creditors can do this as well, but there is a difference. For other creditors, obtaining a garnishee order from the courts typically takes several months with a variety of notices being sent to you. With the CRA, the authority comes from the Canadian Income Tax Act. All that is required is the review from the proper authorities in your local tax services offices. No court review is required.

If you are self-employed, perhaps you are not worried about a wage garnishee. However, the CRA can send a notice to the company that contracts work to you. Upon receipt of such a notice, the company is required to send to the CRA the money that would be otherwise paid to you for the work you have done.

The final CRA collection tool that I will mention is the statutory lien. Basically, the CRA has the right to register a lien against your house without your consent. It’s kind of like having a second mortgage.

The first option with any debt is to attempt to negotiate repayment terms. The CRA is no different. Expect to receive a questionnaire requesting you to outline your monthly living expenses. This is an attempt to determine how much you can reasonably afford to repay on a monthly basis. Ultimately, you’ll be able to keep up with the required payments or not. Be aware, you will have to pay back all of tax debts and may or may not receive a reprieve from penalties and interest.Tax Settlement Options

Consumer Proposal

If the time for negotiation has run out, you have to seriously consider legal protection of your wages and assets. The legal means to stop CRA collections is to file a consumer proposal or personal bankruptcy. Either of these options requires the assistance of a licensed bankruptcy trustee.

Contrary to popular opinion, income tax debts are included in a consumer proposal or personal bankruptcy. However, each of these forms of debt relief has special considerations with respect to the CRA and the settlement of tax debts.

A consumer proposal is a formal method of tax debt settlement where you can negotiate an agreement to pay less than the full amount owing.

For debts like credit cards and lines of credit, banks will often agree to a accept where repayment terms where you pay 25% to 30% of the debt. With the CRA, it is a little bit more unpredictable. Trying to estimate a certain percentage is folly as the CRA collectors take each proposal on a case by case basis. They will consider factors like your budget, if there has been a prior proposal or bankruptcy, as well as the risk of you incurring tax debts in the future.

Personal Bankruptcy

With bankruptcy, there are two special considerations that I want to highlight.

  • First, if your tax debts are $200,000 or more and represent 75% or more of the total debts, a court hearing will be required to establish the terms of discharge from bankruptcy. The court will consider factors like conduct, prior bankruptcies and ability to make payments. It’s common that the outcome of such a hearing would be a court order to pay a specified percentage of the debt and/or serve a suspension. The court does have the option to refuse the discharge altogether, but that would only be used in very extreme situations.
  • Second, being discharged from bankruptcy does not remove a tax lien from your property. This is referring back to the CRA’s ability to register a lien against your property without your consent. If you think there is a possibility that this has already happened, you should discuss it when you are meeting with the trustee before filing bankruptcy. The trustee can talk to you about how to verify if and for how much a lien is registered. If most or all of the tax debt has been registered against your property, it probably would not make sense to proceed with filing bankruptcy unless you had other significant debts. However, the CRA cannot file a lien after you have filed bankruptcy.

The bottom line is that the CRA has a lot of extraordinary powers to collect debt. Even though they are often slow to react, it does not mean the threat is not real. If you are feeling unsure of how to deal with your tax debts, you should consider talking to a licensed trustee about your options.

Home – Life – Auto Community Education Session

HOMELIFEAUTO new-page-001

Get the facts on:
– Buying and Financing Real Estate
– Repairing Credit & Mortgage Crisis
– Mortgage & Life Insurance
– Auto purchases, loans ad leasing
– Self Employed Individuals and borrowing
– Government Funded Programs
– Other options you may not know about
– Rent-to-Own and other home buying options

This event is sponsored by:
Barrington Lewis – Realtor
Jelani Daniel – Check List Auto
Andrew Stewart – Insurance Advisor
Ray C. McMillan – Mortgage Professional

Seating is limited.
R.S.V.P by email to or by phone to 905-813-4354

Some insights into how Canada’s middle class is really faring

How is Canada’s middle class really faring?

In a new paper, Philip Cross and Munir Sheikh – former chief economic analyst and former chief statistician at Statistics Canada – explore this question.

It’s a topic of fiery political debate. Despite often conflicting approaches to measuring the middle class, “what emerges from a review of the array of definitions and data sources is that the politicians and voters can at least partly justify their angst,” they write in a study released Thursday through the University of Calgary.

“While the middle class has seen its income grow, it has not kept pace with the income growth rate of higher-earning groups.”

Not all members of the middle class, however, “face the same plight,” they say, noting that workers who have lost the most ground are those with lower skills and education, who are at the lower end of the middle-income bracket. Thus part of the writers’ conclusion lies in the study’s title – “Caught in the Middle: Some in Canada’s middle class are doing well; others have good reason to worry.”

Some of the paper’s findings:

Defining the middle class

There are many ways to define middle class, and the authors don’t settle on one definition. One common approach is to tally the median income, and then choose a range around that – though there is no clear consensus of what the upper and lower brackets are of the middle class. (They cite one study with a range of between $14,500 and $43,500 in constant 2005 dollars, and another, for families, with a range of between $40,000 to $125,000).

Another approach is to divide the population into quintiles and see what incomes are doing in the middle. By that measure, one study has found “a squeeze on members of the middle class with below-average incomes” as their after-tax income fell 8.7 per cent between 1980 and 2000.

Some say the definition should include consumption, self-identification and broader measures of lifestyle. Sifting through these different approaches, one overarching conclusion is that middle-class income growth hasn’t kept pace with higher-income growth in the past three decades.


Inequality, as measured by the Gini coefficient for earned income, rose 13.5 per cent between 1976 and 2011. That’s before transfers and taxes, however. Once they are factored in, inequality still grew, but by a lower 4.3 per cent in those years. The income gap peaked in 2004 “and then fell steadily, except for a slight uptick during the recession.”

The trend is clear: All three measures of inequality show increases over time, with much of the widening gap occurring in the 1980s and 1990s.

Job polarization

The authors looked at earnings and occupations to assess whether the labour market is becoming more polarized. Data show there is “some polarization of earnings” with growth among the highest-paid and lowest-paid occupations, though the total increases were relatively small. Their findings coincide with other studies showing a “slight shrinkage” of the middle class – with almost equal numbers of people moving up the income ladder as moving down.


The biggest source of downward pressure on middle-class incomes has been the decline of the country’s manufacturing industry, the authors say.

Factory jobs have long been a key source of employment, particularly for people with lesser education.

The authors refute the notion that these jobs have been a source of above-average pay, saying instead their importance, in the postwar era, was in providing middle-class jobs to large numbers of people with low skills.

Within manufacturing, they find the number of low-paying jobs has plunged in the past decade, while high-paying jobs – ones that pay $30 or more an hour – within the sector have quadrupled. The shift in manufacturing jobs, they say, is from jobs that are plentiful but low-paying to scarce but high-paying.

The ‘working class’

It might be time to resurrect the traditional distinction between the middle class and the working class, Mr. Cross and Mr. Sheikh say. Those at the upper end of the middle class – such as public-service professionals – are typically better paid and share characteristics with top-earning professionals, such as valuable pension plans. The working class, however, such as support staff, share characteristics with lower-income earners, including “higher job insecurity and the threat of automation.”

The concerns “commonly expressed about the future of the middle class are really concerns about the working class,” they say.

Need more information or advice on #mortgage_qualification, contact the The Ray McMillan Mortgage Team


Protect yourself from real estate fraud

A stack of files labeled 'real estate fraud'

Source: Financial Consumer Agency of Canada
Real estate fraud

In Canada, real estate fraud is not as common as other types of fraud (such as debit or credit card fraud). But for the victims, the financial loss can represent a significant loss—since it can mean, in the worst case scenario, losing their home. It is important to know that real estate fraud exists, how it happens and how you can protect yourself against it.

There are various types of real estate fraud. Two types of real estate fraud that may result in financial loss for consumers include title fraud and foreclosure fraud. Read on for more information on each type.

Title fraud

When you buy a home, you buy the title to the property. The lawyer registers you as the owner of the property in the provincial land registry system.

Title fraud starts with identity theft, which occurs when your personal information is collected and used by someone identifying himself or herself as you. There are many ways criminals can steal your identity without your knowledge, including:

  • dumpster diving
  • mail box theft
  • phishing
  • computer hacking.

They then use your identity to assume the title of the property and sell the home or get a new mortgage. For example, if you already own a home, a criminal could fraudulently discharge your current mortgage, transfer the title, secure a larger mortgage and put the home under his or her own name.

Once the money from the sale or new mortgage is advanced, the criminal can leave with the money. You might not be aware of the fraud taking place until after it has been committed. You may find out once the mortgage lender contacts you about mortgage payments you have not made, or someone knocks at your door claiming to be the new owner of the house.

If you no longer have a mortgage on your home or, if you rent out your home to someone else, you might be a target for title fraud because in these circumstances it may be easier for them to use your property title to get a new mortgage or to sell your home.

Foreclosure fraud

Foreclosure is the legal process where a mortgage lender takes possession of a consumer’s home and sells it to cover the mortgage debt the consumer has incurred but has been unable to pay.

In the scenario where a consumer is having difficulty making mortgage payments and facing the possibility of foreclosure, a criminal will take advantage of the situation by offering the homeowner a loan to cover expenses and consolidate loans, in exchange for up-front fees and an agreement to transfer the property title to the criminal. However, in contrast to real debt consolidation programs, the criminal will keep all the payments made by the owner and ignore bills and taxes.

The criminal could also sell the house or re-mortgage it and leave with the money. In the end, the homeowner will lose the home and still be in debt.

Protect your house from real estate fraud

Because most real estate fraud involves some kind of identity theft, to protect your home from real estate fraud, you should protect yourself against identity fraud first. Read FCAC’s tip sheet, Protect yourself from identity fraud.

You can take other actions specifically to protect yourself against real estate fraud.

  • Contact your mortgage lender first if you are having difficulty making your mortgage payments.
  • Consult your lawyer if you wish to give another person a right to deal with your personal assets, and make sure you cancel this right if you don’t need it anymore.
  • Consult your provincial land registry office to ensure that the title of your home is in your name.
  • Check your credit report regularly to ensure the information is accurate. You can get a credit report for free by mailing your request to one of the two credit reporting agencies, Equifax and TransUnion.
  • Consider getting title insurance. Title insurance covers losses related to title fraud and legal expenses to restore a title. There are two types of title insurance:
    • lender title insurance, which protects the lender until the mortgage has been paid off
    • individual title insurance, which protects the homeowner from losses as long as you he or she owns the home, even if there is no mortgage.
Things to do if you are victim of real estate fraud

As soon as you discover that you might be victim of real estate fraud, you should:

  • contact the Canadian Anti-Fraud Centre (CAFC), a national anti-fraud call centre, at 1-888-495-8501
  • report the situation to the police, and record the police report number
  • report the fraud to the two credit-reporting agencies, Equifax and TransUnion
  • contact your provincial land registry office as soon as possible. Find out what laws may exist in your province to protect you if you are a victim of real estate fraud. Contact your financial institution. Keep all of the documents that provide evidence of the fraud. Record the name of the person you spoke to at the bank, as well as the date and time you called and when you became aware that you are a victim of fraud.
For more information

For more information on real estate fraud:

Need more information or advice on #mortgage_qualification, contact the The Ray McMillan Mortgage Team


THE HOME MORTGAGE ADVANTAGE (…mortgages made simple…)


Home Mortgage Consultants is a mortgage broker agency. We deal with major banks, trust, life insurance, finance companies and private lenders. We are licensed to provide the most competitive mortgage rates and terms available for your real estate financing needs throughout Ontario.



  • First and second mortgages
  • Transfers
  • Condominium/Townhouse purchases
  • Home Improvement Loans
  • Construction Loans
  • Debt Consolidation
  • Commercial and Mixed-Use Properties
  • Refinancing
  • Power of Sale
  • Multi-residential
  • Vacant land
  • Cottages and recreational properties
  • Rural and farm properties


When we arrange a prime residential first mortgage the lender pays us a finder’s fee.This does not affect the rate our terms of the mortgage in any way.

When we arrange any other type of mortgage that does not qualify as a prime residential mortgage then the lender does not pay us. We must then charge a brokerage fee*. The fee is based on the complexity involved to arrange the mortgage.

Need more information or advice on #mortgage_qualification, contact the The Ray McMillan Mortgage Team