Tuesday, 26 March 2013

Debt Settlement Companies to be Regulated in Ontario

After regulating industries like the collection industry and payday loans industry, Ontario is making a responsible move and will also be regulating debt settlement companies.

Ontario made this announcement in January 2013. This regulation comes on the heels of an explosion of ‘debt reduction’ companies that charge up-front fees and will even collect money from consumers with the promise of settling debts in the future.
The Ontario Government’s new regulations will include:

1.Not allowing debt settlement companies to charge up-front fees when negotiating debt settlements.

2.Limiting the amount that a debt settlement company can charge.
3.Requiring that debt settlement companies are transparent and provide their clients with clear written agreements.
4.Allowing a consumer to have a 10 day cooling off period in the event that the individual changes his/her mind.
The Ontario Government has put out requests for consultation from the public, including from debt settlement companies themselves. We have long advocated for this kind of regulation. As a financial consulting firm committed to helping those Canadians struggling with debt, we have never charged up-front fees or made exaggerated claims to our customers.

Debt continues to be a rampant problem in Canada with many consumers turning to credit to balance the shortfalls with the ever rising cost of living and transportation in major city centres.

The idea of regulating debt settlement companies is not restricted to Ontario. It is an idea that is spreading across the country. Stated in the press release issued by the Ontario Government was the fact that Alberta, Manitoba and Nova Scotia have also introduced regulations with respect to debt settlement companies.

Here are some other sobering facts that the Ontario Government included in their press release:

1.Average consumer debt in Ontario is up to $25,447 in the second quarter of 2012, compared to $24,721 in the second quarter of 2011.
2.For every dollar Canadians earn, they have $1.64 in unsecured debt (Statistics Canada).
These figures substantiate why there are more than 20 debt settlement companies already operating in Ontario. Perhaps while the Ontario Government looks at regulating these 20 debt companies, they should also take a look at reducing the fees and interest rates that credit card, loan and payday loan companies are allowed to charge which often results in consumers needing financial help.

There are systemic problems in this country and unfortunately the ones who always seem to get the short end of the stick are consumers.

It is the consumers who are drowning in debt and then finding themselves in the offices of debt settlement companies looking for relief. These are the same consumers who (depending on their choice of debt settlement company) may also end up in a debt reduction program that doesn’t make sense or whose fees are sky high.

So regulate, regulate, regulate we say! We support any effort on the part of the Ontario Government to see Canadian consumers get fair treatment.

For more information about debt settlement companies or if you have a debt problem and need help, please call 416-907-2582 or visit www.debtcare.ca.

Monday, 18 March 2013

How to Deal With a CRA Tax Debt Before The CRA Catches Up With You

Tax debt can be terrifying; terrifying because owing the CRA money when you can’t pay will most certainly result in collection action. Tax debt is one of the main reasons people get behind filing income tax returns. Individuals get behind filing because the money to pay isn’t there and they fear that once the returns are filed the CRA is going to come looking for the money. 

If you have a tax debt or know that you will once you file late returns, don’t wait until the CRA catches up with you. You can beat them to the punch and get a plan together that will effectively deal with your tax debt.

You see, you have more options to deal with a tax debt when the CRA has not begun enforcement action. A great example is homeowners who have tax debt. If you own a home, have a tax debt and the CRA puts a lien on your home, this will greatly reduce your options if you really cannot repay them monthly because the CRA will become a secured creditor.

There are many financial options to effectively deal with tax debt. Look at a consumer proposal for example. By leveraging a consumer proposal you can freeze the interest accruing on your tax debt, potentially reduce the size of your tax debt and stop collection action such as a wage garnishment.

The challenge is that your chances of being able to make a consumer proposal are greatly reduced once the CRA has taken enforcement action, secured through a lien on your home for example.

The same is true for bankruptcy. If you were holding the bankruptcy card in your back pocket or hoping that filing for bankruptcy might seem like a way to get out of the tax debt, this too would no longer be a viable option once the CRA becomes secured on an asset like real-estate.

The faster you deal with a tax debt the better. Never mind issues like enforcement action and financial planning; the existence of a tax debt and CRA collection action against you can result in damage to your relationships with your family or with lenders like your bank or mortgage holder, embarrassment at work and even health problems if you become stressed and have difficulty coping with your stress.

You don’t have to put yourself through this. There are companies that can help you with your financial tax debt problem. Choosing the right solution for you can be easier said than done, but not if you know your options. Working with a financial consultant hired by you to represent your best interests is one excellent way to review your options and formulate your plan.

Dealing with your tax debt before the CRA catches up with you will enable you to breathe a sigh of relief and move forward on a fresh footing.

For more information about how to deal with a tax debt or if you have a tax debt and need help, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.

Tuesday, 12 March 2013

The Truth About Canadian Payday Loans

Canadian payday loans are a controversial topic and while they are now regulated in Ontario they still continue to be the reason that many consumers run into severe financial problems.

Canadian payday loans are a type of credit product that is very easy to get. Whether you have good credit or bad credit, if you are employed with a paystub you can get a payday loan. Canadian payday loan companies will not pull your credit report and the loan is granted based on your income. Payday loans are short term loans that have to be repaid in full from the first paycheque that the client receives after receiving the payday loan.

Here is how Canadian payday loans work:

1.     The Canadian payday loan company will give you a loan based on your income. Some Canadian payday loan companies will lend you up to 100% of your income on a given pay period. For example, if you earn $1000 bi-weekly you can borrow up to $1000.

2.     The payday loan company will charge you to borrow the money until your next paycheque – the charge is usually large and a $1000 payday loan for 2 weeks could bear a charge of $100-$250.

3.     On your next paycheque (still following the $1000 example) you would owe $1100-$1250 even though your paycheque is only $1000. 

Many, many people find that when a payday loan comes due the loan cannot be paid in full, resulting in a default, rolling over the payday loan, or taking out another payday loan.

If you default on Canadian payday loans, the situation can get very embarrassing very fast. The Canadian payday loan company will not hesitate to call your employer, may fax notice to your employer, may send you to collections, or worse, sue you.

If you roll over a $1000 payday loan that costs you $150 bi-weekly to borrow, at the end of 6 months you will have paid $1300 in fees on a $1000 loan, which is more than the amount of the original loan.

If you take out multiple payday loans you could end up owing more in fees on payday loans than you earn.

This is a dangerous cycle, and if you are drowning in Canadian payday loans you have to break the cycle. You can get rid of Canadian payday loans but the method you use to do so will greatly depend on your personal financial situation, how many you have, whether or not you are in default and more.

Speaking to a consultant who knows how to deal with payday loans is a sound way to get both good advice and put plan together. Once you deal with your Canadian payday loans the key is to never take them out again!

For more information about Canadian payday loans or if you need help to get rid of Canadian payday loans please visit www.debtcare.ca or call 416-907-2582.

Monday, 4 March 2013

When to Use Online Financial Calculators

Technology has brought us so many online tools for financial planning; there are online financial calculators for literally everything. Mortgage financing/refinancing, debt reduction, car payments, interest, and budgeting are all things that online financial calculators can help manage.

Online financial calculators are very useful when planning anything from a new mortgage to calculating the interest that you are paying on credit cards. Of all the online financial calculators, mortgage calculators can be used for the most diverse range of financial calculations.

What’s really cool about mortgage calculators is that you can use them to not only calculate monthly payments on a mortgage but also on loans.

If you have a lot of debt for example, here is how you can use a mortgage calculator to create different financial scenarios if you were to consolidate:

1.     Input your total debt into the mortgage calculator.

2.     Set the term and amortization to 5 years – this will give you an idea of what it would take to get you out of debt within 5 years.

3.     Calculate your payment based on an approx. interest rate that you believe best reflects the average interest rate that you would pay if the bank gave you a loan to consolidate your debt. A general rule of thumb would be to use 10%-15% if your calculation is based on a bank's loan rate.

4.     Now do the same calculations with the interest rate set to zero.

Completing the above steps will enable you to see how much you would have to pay monthly if you were to consolidate debt at zero percent interest vs. full interest.

One risk though when it comes to using online financial calculators is that calculations may not be accurate once the time comes to seek out a credit product or debt solution that fits with the estimates that you have calculated. For example, what if you have made a calculation based on being out of debt in 5 years but then your bank offers you a line of credit? A line of credit may leave you with a low minimum monthly payment, but may take much longer than your estimate to pay off because it is like having one giant credit card.

If you are using online financial calculators to try to come up with financial solutions because you are in debt, sometimes it makes sense to use them with the guidance of a financial professional/consultant.

Hiring your own financial consultant can enable you to have a professional review your budget, credit and finances, and then work with you to use online financial calculators to build some viable debt consolidation scenarios. A financial consultant will likely have the resources to help you put your plan into motion.

For more information about online financial calculators or if you need help dealing with your debt, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.