Tag Archives: banking

Deferred Mortgage Payments: A Credit Score Gamble?

Last week, the President of the Canadian Bankers Association announced that all six major banks would offer deferral payments on their mortgages and other credit products. Just like many public announcements over the last couple of months, many were left with more questions than answers.

One question that still has yet to be answered is, how deferred mortgage payments might affect your credit score? Equifax recently announced, “In the event that a [lender] makes a credit relief or payment deferral program available to its consumers to opt out of making monthly payments during the pandemic, Equifax’s expectation is that the [lender] would take actions on its system to ensure that it does not report any derogatory/missed payment information to the credit bureaus that is misaligned with the program it has implemented.”

millennials in debtScott Hannah, B.C.-based CEO of the non-profit Credit Counselling Society, was quoted in the Globe and Mail as saying, “I don’t see creditors punishing consumers for being as responsible as they can under circumstances beyond their control.”

Many financial professionals have been posting messages online and sending emails to reassure the public and their clients that a deferral payment will not affect their credit score.

I agree that Canadians should not have their credit affected by deferred payments, although I predict a much different reality for consumers starting April 1. Lenders update the payment history of each credit account electronically to Equifax and TransUnion.

In order for these deferred payments to not be reported to the credit reporting agencies as late, as Equifax alluded too, the lender would need to “take actions on its system to ensure that it does not report any derogatory/missed payment information to the credit bureaus.”

Lenders big and small have been bombarded with phone calls that have put pressure on their personal and electronic systems. Are you willing to gamble your credit score and assume that every lender has updated its reporting system?

Millions of Canadians have found errors in their credit reports. For over a decade, I personally have received thousands of calls from consumers stating that a customer service rep told them one thing, only to find out that it was reported incorrect on their credit report.

In reality, it doesn’t matter what the customer service rep, the government, or what the industry experts tell you. If the lender’s internal system sees it as a late payment, that is how it will report. No one will know for sure if all these deferred payments will report correctly or not.

might a mortgage payment deferral affect your credit scoreWe can all agree that the amount of deferred payments over the coming months is unprecedented. For this reason, I expect an increase in the amount of mortgage, loan and credit card payments reporting incorrectly on Canadian credit reports.

Even with the chance that a deferred payment will show up as a late payment, many Canadians will still need to take advantage of such programs being offered by banks.

For those that don’t really need to defer their payments this month, I suggest you wait until it is necessary. A deferred payment is not free money. You will have to pay the lender back with interest.

Any delay is just going to increase the amount on future required payments. My hope is that, going forward, underwriters or those reviewing credit applications will be lenient on any late payments during the COVID-19 pandemic.

However, I am positive that the credit scoring system will not show much sympathy. On average, one late payment will drop your score 20 to 40 points.

A low credit score, regardless if it was caused by an error or not, will make it much more difficult to qualify for best-rate financing, renting, some employment opportunities and discounted insurance premiums. This is not to say your life will be over, but it will take at least 6 to 12 months for your credit to recover.

For those who have no choice but to request a deferred payment, here are some ways to protect your credit.

  1. Request electronic or written confirmation that the payment is being deferred.
  2. Ask for the employee number or service rep’s name that confirmed your deferred payment.
  3. Write down the day and time you talked to the customer service rep.
  4. Place all supporting documentation and record keeping in a safe place where you will actually remember where to find it.
  5. Track both your Equifax and TransUnion credit reports for at least the next few months
  6. If you do see an error, reach out to your lender and the credit reporting agencies to open up a dispute.

mortgage payment relief announcedI’m sure the thought of making another call might be overwhelming for the hundreds of thousands of Canadians who have already spent hours on the phone to request the deferred payment.

For anyone who has something better to do than to spend hours listening to the annoying automated voice and elevator music, I suggest you start with suggestion number three.

I don’t want to create panic or be like Chicken Little saying the sky is falling. The point I sincerely want to get across is that reporting errors are common and always have been.

It is unrealistic to think there won’t be any errors as a result of the increased demand for deferred payments. Regardless of what happens, now is the perfect time to monitor and learn how to better protect your credit.

Source: Mortgage Broker New
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Black groups seek to launch credit union

Adaoma Patterson, president of the Jamaican Canadian Association, one of three entities behind the new bid to bring back a Black-owned financial institution.

Black groups seek to launch credit union

Toronto’s Black population could once again have its own financial institution if a trio of African Canadian organizations can muster enough community support to get the proposed Pan-African Credit Union off the ground.

Although the proposed institution is not exclusive to people of colour, the goal is to provide an alternate banking organization that better serves the Black community in the Greater Toronto Area, and eventually, the rest of the country, said Adaoma Patterson, president of the Jamaican Canadian Association, one of three entities behind the project.

“It’s a lofty goal,” Patterson said. “Well overdue, though.

The group has set an ambitious target for the credit union to open within two years.

“We hope that we can get through all of the stages to launch by the summer of 2021,” she said.

The main aim is to provide financial services to Blacks who have been traditionally under-served or un-banked, she said.

“People have been asking for it for a while,” she said. “This piece was the next logical step.”

While families will be the core of the credit union’s membership, making investments in Black-owned businesses is also key, she said.

 

“The community has always talked about economic empowerment,” Patterson said. “It enables all of the other conversations when you have that economic ownership.”

Running a credit union isn’t unfamiliar turf for the JCA, which operated one, that puttered along before it folded in the mid-1990s.

The Star reported on the demise of the organization in 1995.

Prompted by concerns for members, the Deposit Insurance Corporation of Ontario, which insured individual deposits up to $60,000, assumed control of the Caribbean Canadian African (Ontario) Credit Union on Aug. 31, 1995. Continuing operating losses were cited by the Ministry of Finance, according to Bill Foster, an insurance corporation vice-president, who replaced the board as administrator of the organization.

“This credit union has no reserves and is in a deficit position. Its liabilities exceed its assets,” said Foster at the time.

A lawyer for the former board members said, in early August, 1995, that the only problem was the credit union had spent money anticipating $750,000 in funding from the government and had only received $370,000 of it.

Plans to revive the credit union started to regain some life in 2016, after Patterson assumed the presidency of the JCA.

“We were tackling a lot of other things, but it seemed like the financial institution piece was missing,” she said.

Patterson soon discovered that the JCA wasn’t alone in championing the return of a black-focused financial institution. The Lions Circle African Mens’ Association, also had an interest in establishing a credit union of its own.

It made sense to join forces, she said.

The idea started gaining steam, after the Canadian Black Chamber of Commerce, which launched in 2019, joined the partnership. A steering committee, including people from financial backgrounds, has been meeting weekly, in recent months.

Andria Barrett, president of the Black Chamber of Commerce, said she often fields complaints from small business owners about difficulties in accessing financing from traditional banks.

“I’ve heard countless stories from Black business owners, who have made some money, but can’t get a business credit card or a loan, so we have to create our own,” she said.

Still in its infancy, the group is gathering feedback, via an online survey, to test the community’s appetite for the kind of financial institution they want.

Once the survey closes in March, there will be a clearer indication of whether the concept has enough backing to move forward.

“We have been working towards getting regulatory approval,” Barrett said. The chamber is hosting Rod Phillips, Minister of Finance, next week Thursday, to talk about this and other economic issues.

“We’ve been going to different locations and actually promoting the survey,” she said. “The response has been good overall.”

Patterson said early research revealed a daunting road ahead, as “not many cultural credit unions are being approved in Ontario.”

Provincial regulators must be convinced that a sufficient cohort of people will put their money into such a scheme.

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It’s one of the very reasons the former credit union failed in the 1990s.

“You have to show that people are actually willing to put some money into this as a startup,” she said.

In addition to providing financial services, the new credit union will offer financial education on topics from budgeting to wealth-building, Patterson said.

Entrepreneur and philanthropist, Denham Jolly, is already hailing the potential advent of a credit union as a way to break the financial chains holding back the next wave of entrepreneurs.

“It’s not easy for a Black person to get financing of any nature,” said Jolly, renowned for starting Canada’s first Black-owned radio station FLOW 93.5.

He said Black people have long struggled to walk into a bank and “be taken seriously.”

The former credit union, which went under in the 1990s, had a business plan that required it to hold $5 million in assets by 1997, wrote Cecil Foster, a journalist, author and scholar, in an opinion piece, printed in the Star, in 1995.

Jolly bemoans the missteps that led to the demise of the former credit union, but said that’s water under the bridge.

“I would like to be on the board of governors,” Jolly said about lending a hand on a new credit union.

Foster wrote about efforts by the Black Business and Professional Association and the JCA to to save the old credit union, including a membership drive to get more Black groups and individuals to open accounts.

Barrett said the past will help to guide the current application.

“We see the need and we learn from history,” she said.

Oana Branzei, associate professor at Western University’s Ivey School of Business, said there is a persistent disadvantage minorities, especially those of colour, face, and it holds them back from things such as business startups.

“It is not as severe as the U.K or U.S, but it’s certainly a problem,” she said.

Branzei said specialized credit unions are a catalyst for people of colour to bank in a dignified way.

“When this is a movement from within the community, it feels right,” she said.

Branzei said rejecting a community-driven effort, given the discrimination that has taken place, will be politically hard to do.

Source: Thu., Feb. 20, 2020
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10 reasons why credit unions are worth a look

There are pros and cons to using a credit union.

Credit unions offer a good alternative to the banks, but along with fewer fees are fewer branches and ATMs.

It`s your money, so why does it seem to cost so much every time you touch it, move it or invest it?

Many consumers are asking that question, and transaction fee fatigue is prompting them to join the more than 1.7 million people in the province who use credit union to bank, get loans and mortgages, and other financial services. Credit unions have been serving Canadians for more than 100 years —Ontario’s first one was founded in Ottawa in 1908. Carefully regulated, credit unions combine the attentive service of a  cooperative with the financial safeguards of the Canadian banking system. Credit unions offer fewer branches and ATMS, and overall service that might or might not be better than a big bank’s. But many people are giving them a look; here are some of the reasons.

1. Competitive rates

Credit unions typically have low lending rates and pay higher deposit interest. They are owned by members, not shareholders, so they can shave off costs and pass savings along. For example, Meridian Credit Union, the largest group in Ontario with 44 branches and eight commercial business centres, offers a “better than market rate” against any other financial institution on a five-year fixed-rate mortgage.

2 Fewer fees

While a credit union needs to make a profit to be sustainable, it can afford to give its members a break on such things as transaction fees and other account service charges that can really add up credit card options and chequing or savings accounts. “Some credit unions offer lower fees because their members don’t expect them to make large profits or large investments in infrastructure. Others use these types of subsidies to expand services,” said Kimberley Ney, senior vice-president of marketing and corporate social responsibility for credit union Alterna Savings. “It really depends on what is important to the collective.”

3. On your side

Run by the members through a board of directors, a credit union doesn’t have to answer to corporate shareholders. Members of the credit union (you must buy a share which can cost from $25 to $150 when you open an account) may earn a dividend. Each member can vote and participate in decisions such as charitable donations. In a new Forrester Research study, credit unions had the highest customer advocacy ratings — a belief by customers that their interest is served before profits. Four of the five chartered banks received below-average scores.

4 Keep the profits in your community

Credit unions across Canada donated $37.5 million to charitable causes in their own areas last year. The credit unions make the point that many of the options such as scholarships can directly benefit local families

5. Support business start-up dreams When you have a business idea but no capital to get started, it is almost impossible to get credit from major lenders. Alterna Credit Union’s Community Micro-loan Program has been bridging that gap for more than 10 years. A recent study by Carleton University’s Carleton Centre for Community Innovation pointed out that 60 per cent of the potential entrepreneurs who applied to Alterna had been turned down for loans by at least one other banking institution. But the program has been successful with a repayment rate of more than 90 per cent. The program also has long-lasting benefits for the community. “It goes beyond writing the cheques,” said Susan Henry, manager of corporate social responsibility at Alterna. “We do business development training and life skills as well. There is a lot of support.”

6. Small Business Heroes

Fees and financing costs can make a dent in a small business bottom line. A recent survey by the Canadian Federation of Independent Business (CFIB) gave credit unions top marks in these categories from more than 12,000 small business owners (running companies with less than 50 employees).

7. Convenient locations The big banks still have the most branches, but with close to 500 credit union branches in Ontario credit unions are still a major presence. In smaller towns the credit union sometimes may be the only financial institution. To locate a branch go tohttp://locator.cucentral.com/

Credit Union members have access to free ATM transactions through The Exchange Network, To find a banking machine one near you, go to www.the-exchange.ca .

8. Tailor-made services Credit unions reflect the members’ collective personality. In 2009, the Creative Arts Savings and Credit Union was formed by a group of Canadian actors to provide banking services geared to people in an industry where paycheques are not as regular as for those with a steady office job. Some credit unions offer special language services. The Finnish Credit Union features a Finnish-English website and office staff who are of Finnish heritage. DUCA was started in 1954 by the Dutch community and now has 12 branches with 35,000 members in Southern Ontario.

9. Services. Credit union users are members of the organization. In its best-banking awards study, research firm Synovate ranked credit unions first for branch service and overall excellence. They also tied for first for telephone banking and financial planning.

10. Flexible

Some of the most popular consumer banking services, such as no-fee chequing accounts, ATMs, internet banking, debit cards and cheque imaging, were initiated by credit unions.

Ontario credit unions claim to be more friendly and flexible to small buisiness. “We meet with each small business owner and determine what products and services they most need and create a banking package accordingly,” said Scott Windsor, vice-president of communications at Meridian, one of the largest credit unions in Ontario. “Some small business may have high transactions volume, so we would create a package with free/low transaction fees, but a higher loan rate. It’s about finding the services that are right for them.”

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An alternative to banking with the Big Five: Join a credit union

loonies

CALGARY — Jeremy Bird was fed up with his bank, so he decided to take his business elsewhere.

Tired of the fees and eager to see his financial institution invest more into his community, Bird made the switch to a credit union about a year ago. And he has no regrets.

“I found the credit union is incredibly friendly. They remember my name when I go in there,” he said.

Like many who gravitate toward credit unions, Bird considers himself a community-oriented person. He’s involved in a cycling advisory group in London, Ont., and is active in local politics.

“When I signed up for the credit union, they gave a $50 donation to a local youth charity, right off the hop,” he said. “Their profits go to community organizations, supporting where I live.”

Credit unions offer many of the same products that major banks do: chequing accounts and mortgages, for example. Bank cards can be used at any credit union ATM across the country — not just the one to which a customer belongs — without charges.

What differs is that credit unions are co-operative. Members get involved by buying shares and becoming owners. For example, to join Vancity Credit Union, members must hold at least five shares with a total value of $5. Members also have the opportunity to get a share of profits.

“Their objective is to serve their members. They’re not driven by shareholders and they’re not driven by strictly a profit motive for shareholders. They’re service driven,” said Martha Durdin, president CEO of the trade group Credit Union Central of Canada.

There are some 700 different credit unions — or caisses populaires, in Quebec — across the country.

The democratic element is a big draw for many members, said Ian Glassford, chief financial officer at Edmonton-based Servus Credit Union, which has more than 100 branches across Alberta.

“It is one member, one vote. I don’t care how much money you have with the credit union,” he said.

Those with social issues on their mind may also be drawn to credit unions.

“Each one picks a part of the world where they want to make a difference, and the fun with a credit union is that you can find the one that best aligns with your values as well,” said Glassford.

But credit unions have a lot to offer from a dollars-and-cents standpoint as well, said David McVay, a financial services industry consultant in Toronto.

“Where an increasing number of credit unions are gaining advantage is offering better value. On that dimension, one of the emerging trend is toward free chequing,” he said.

“The other big differentiator on the value side for many, but not all, is very competitive and transparent pricing on mortgages.”

Yet, it’s been a challenge to snatch market share from the big banks, which are more centralized and able to launch big national advertising campaigns.

That’s changing, though. Big players like Vancity in B.C. or Meridian in Ontario are “taking on the big banks head-on, and quite successfully,” McVay said. The trend is toward consolidation among the smaller players, he added.

“If you haven’t heard about credit unions, stay tuned, because as these mergers happen, there will be powerful brands emerging that you’ll hear more and more about.”

Louise Wallace, who has belonged to a credit union for 15 years, said she’s worried the local flavour is being lost as credit unions vie for business with the big banks. She laments that she may have to switch to a different institution when her mortgage comes up for renewal.

Her small marketing firm in Salmon Arm, B.C., used to provide services to her local credit union, but now those functions and others have become centralized, she said.

Wallace says she doesn’t harbour hard feelings toward her former client, noting the 2008 financial crisis was hard on everyone in the financial sector.

“We love them because they’re small. But they can’t compete small,” she said. “My sad realization is, they’re just like everyone else.”

 

Source: Lauren Krugel, The Canadian Press
Published Thursday, October 2, 2014 11:28 AM  

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