Bad Credit Loan Industry Defends Itself Against New Attacks

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Business CompetitionCanadian officials are going after the payday loan industry, and the industry is now fighting back.

Last week, Thunder Bay City Councillor Shelby Ch’ng confirmed that she intends to introduce legislation that would require payday loan businesses to post signs about its interest rates and where the stores can be established. This, she says, would protect the vulnerable and increase financial literacy. (

The Thunder Bay official present a resolution on October 31 and request a report from city administration. She conceded that this is the responsibility of senior governments, but noted that municipalities across the Great White North can do their part as well to defend consumers.

One industry representative says that companies like Landmark Cash bad credit loans already offer their customers financial education pertaining to the cost of borrowing short-term, high-interest funds.

Tony Irwin, president of the Canadian Payday Loan Association (CPLA), referred to recent Ontario government legislation that mandate member agencies to pay an annual licensing fee. The same regulations make payday loan stores post signs that highlight the cost of such loans.

In other words, Irwin says the industry follows a “robust” set of regulations.

“Our members are required to post signs that show the cost of the loan, equated both in terms of cost per $100, as well as show a comparison of the cost of the payday loan versus the cost of a credit card,” he said. “The province requires our members pay a $990 annual licensing fee per location, and the province has inspectors who come out to our member locations and make sure they’re compliant with the regulations.”

Irwin noted that payday loan businesses work closely with the Ministry of Government and Consumer Services.

He further stated that payday loans are expensive products to offer to consumers, but averred that they are “very much in need.” The reason why is because these stores allow money to be available to consumers who have very few other borrowing options since they lack access to traditional forms of credit and banking options.

“In terms of the cost to run the stores, certainly the cost of capital is higher than it would be for other industries. The nature of the loans themselves end up being perhaps higher risk than some others and there are some loans that go into default. All those costs go into what’s required to provide this product,” he said.

In Ontario, payday loan businesses charge $18 per $100. This is one of the lowest in the entire country. British Columbia, Manitoba and Alberta currently maintain the lowest charges for payday loan products.

According to Statistics Canada, the payday loan industry is a $2 billion industry. On average, Canadian consumers borrow roughly $300 until their next payday. The number of Canadians taking out a payday loan surged from just under two percent in 2009 to nearly five percent last year.

As the cost of living goes up, the economy stagnates, paychecks shrink and debt levels rise, a growing number of Canadian households are taking out payday loans just to keep their heads above water.

BAT Offers to Buy Out Reynolds for $47 Billion

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British American TobaccoBritish American Tobacco has made an unsolicited offer to rival Reynolds American Inc. to enable it buy out the remaining stake in the U.S. tobacco company.

The British multinational cigarette giant, which already has a 42.2 percent stake in Reynolds, said it has made a direct offer of $47 billion to the board of its American partner to enable it take over the remaining stake in the company. It disclosed there were no prior discussions with Reynolds management before making the offer.

BAT is offering both cash and stock for a price of $56.50 per share to buy out Reynolds, representing a premium of around 20 percent on the American company’s closing price on Thursday. The deal includes $20 billion in cash and $27 billion in stock and would put the value of the FTSE 100 firm at $81.3 billion.

In the offer, Reynolds’ shareholders will get $24.13 cash and 0.5502 BAT shares valued at $32.37 per share held, as reported by the Wall Street Journal.

The deal, if successful, will result in the world’s biggest listed tobacco company in terms of net sales. It would bring together some of the best-known, global tobacco brands, such as Rothmans, Camel, Lucky Strike and Dunhill.

BAT has been a Reynolds shareholder since 2004, when its American operations under the name Brown & Williamson were merged with RJ Reynolds. It said another merger would be a “logical progression in our relationship.”

The merger will be contrary to claims made by executives of the British tobacco company earlier this year that they didn’t expect to be involved in any major industry consolidation any time soon. It will mark the latest of big consolidations in the industry.

Reynolds has been a major actor in consolidation moves in the American market. It acquired U.S. rival Lorillard in a $25 billion deal last year. But it was forced by regulators to sell a number of its cigarette brands, including Salem, Kool and Winston, for the deal to be approved. Those brands and Lorillard’s Maverick were sold to British company Imperial Tobacco Group for $7.1 billion.

RJ Reynolds, which began operations in 1875, is the second-biggest tobacco maker in the U.S. It is surpassed only by Altria, owner of Philip Morris USA.

With a merger, BAT will gain control of Reynolds’ Tobaccoville, North Carolina production facility among other assets. It hopes to save $400 million in costs from the proposed acquisition.

Shares of the British tobacco giant were trading around 3 percent higher early Friday morning.

On Friday, BAT also released report of performance in the first three quarters of 2016. It said revenue for the period ended Sept. 30 climbed 8.1 percent at constant exchange rates; 6.2 percent on organic basis.

Cigarette volume during the nine-month period gained 2.2 percent.

BAT noted the challenges facing it in some of its top markets, especially as it concerns foreign exchange rate, which has continue to negatively impact on its sales. It said the slump in the value of the sterling against the U.S. dollar would have an impact on its trading.

The takeover deal would be the biggest foreign acquisition by a British company in several years, if it does eventually see the light of day.

Yahoo Requests U.S. Intelligence Services for Transparency

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yahooIn a bid to deal with recent secret data-gathering scandal surrounding it, popular email service provider Yahoo Inc has sent a request to the director of U.S. National Intelligence to declassify the nature of information it is gathering for the government.

The Internet company has come under intense scrutiny after news emerged earlier this month that it had cooperated with intelligence agencies in the U.S. to scan through the incoming mails of its users, who were not aware of this activity. The scale of surveillance is considered unprecedented.

Yahoo has now sent a letter to U.S. Director of National Intelligence James Clapper requesting for permission to provide more information to the public on its information-gathering efforts. The company’s general counsel, Ron Bell, wants the U.S. intelligence services head to allow declassification of information gathered in an attempt to placate users over the widespread secret data gathering.

In the letter posted on its website on Wednesday, Yahoo said it was not unusual in a democracy for citizens to want to know how government gains access to their private data.

The Internet company has expressed its disapproval of a report by Reuters earlier in the month that it had built a custom program to secretly scan through incoming mails of its customers for certain information requested by American intelligence agencies. It said the report was false.

Yahoo is not able to describe the nature of data-gathering it does for the government since such information is usually classified or protected by court order. It therefore wants the National Intelligence to disclose if it indeed built a custom-made tool to scan through emails.

Bell said recent reports had “provoked broad speculation” which needed to be dealt with.

“That speculation results in part from lack of transparency and because US laws significantly constrain – and severely punish – companies’ ability to speak for themselves about national security related orders even in ways that do not compromise US government investigations,” the Yahoo general counsel said.

The email service provider is trying to maintain user confidence following recent scandals surrounding its operations, especially handling of users’ private data.

Yahoo announced last month that state-sponsored hackers may have stolen personal information of more than 500 million email accounts. It maintained on Tuesday that its customers have remained loyal to it despite the cyber attack, which took place in 2014.

In the letter to the U.S. director of National Intelligence, Yahoo made specific reference to the Foreign Intelligence Surveillance Act. That law became more popular after former National Security Agency contractor Edward Snowden’s revelation of surveillance activities by the government.

A National Intelligence spokesman failed to mention the particular methods that are used to collect people’s data when asked about those couple of weeks ago.

The large-scale theft of users’ private information in the 2014 hacking incident has threatened to derail the $4.8 billion Yahoo takeover deal Verizon agreed to few months back. It led to reports that the leading American carrier may request for a discount to complete the deal.

Verizon General Counsel Craig Silliman has said that Yahoo needed to prove the cyber attack did not have a material adverse effect on its business for the transaction to be completed.

Saudi Arabia Raises Record $17.5 Billion in Bond Sale

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Mohammed Bin SalmanThe kingdom of Saudi Arabia has successfully raised a record $17.5 billion in bonds for sale on the international market as it works to reduce its considerable dependence on oil.

The oil-rich nation on Wednesday raised the highest amount through a bond sale by any country with an emerging market. It surpassed the previous record held by Argentina, which pulled in $16.5 billion in similar sale back in April.

Analysts had expected the bond sale to raise an amount in the range $10 billion to $16 billion.

An anonymous person who is familiar with the matter said the Saudi government put on sale dollar-denominated bonds which are due in five years and generating 135 basis points more than U.S. Treasuries with similar maturity. It also offered 10-year notes at 165-basis-point spread and 30-year bonds at a spread of 210-basis points.

Sources with knowledge of the bond sale said investors offered about $67 billion in bids.

It was the first sovereign bond sale of a country that has for so long tried to avoid international debt burden until now. The slumping revenue has certainly contributed to the kingdom’s decision to source fund from the international debt market.

The economy of Saudi Arabia, which depends significantly on oil, has been pounded by the decline in prices which some have described as the worst crash in a generation. It recorded huge budget deficits of $98 billion last year, with the figure estimated as being equal to 15 percent of the country’s gross domestic product.

Some analysts have said the kingdom’s economy stands at risk of collapse unless drastic actions are taken to improve the financial situations.

The latest bond sale followed days after kingdom officials made presentations to potential investors in New York, Los Angeles, Boston and London. They emphasized efforts being made by the government to diversify the Saudi economy.

“The program which we have heard in the roadshow over the next five to 10 years is really quite dramatic,” Richard Segal, a senior analyst at London-based Manulife Asset Management, told Bloomberg TV. “They want to really transform the economy because they realize that given how young the population is, they would need to transform away from oil anyway.”

Saudi Arabia has been calling for some oil-producing countries to cut back on oil output to shore up prices. Minister of Energy and Industry Khalid Al-Falih claimed many countries are willing to join OPEC members in reducing output, even though Russia is the only non-OPEC producer to have signified interest so far.

The kingdom is believed to be the architect of its own fiscal challenges, though. This is because it refused to yield to request to cut production when the slump in the oil market was gaining momentum in November 2014. Its decision was thought to have been influenced by its desire to drive American shale oil producers out of the market.

Deputy Crown Prince Mohammed bin Salman leads the drive to make the $650 billion economy more open. There is also plan to make it easier for foreign investors to participate on the $350 billion Tadawul Stock Exchange among other measures aimed at opening up the economy.

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