In a payday loan merger, LitFunding Corp. announced today that it has finalized the acquisition of Easy Money Express, Inc.

Easy Money Express is a deferred deposit, payday loan business that will continue to specialize in providing short-term cash advances to its base of consumers. The company’s Internet-based business model permits applications to be completed and submitted via the Internet. These faxless payday loan requests are processed immediately through web-based software, resulting in fast, direct deposits of cash to consumers’ checking accounts.

In acquiring Easy Money Express, LitFunding has sought a highly profitable opportunity to leverage its capital at high yields with relative safety. Morton Reed, LitFunding’s CEO, said he believes the merger will launch his company into a lucrative sector of the financial industry. The primary business of LitFunding Corp., through its subsidiary LitFunding USA, is in the funding of plaintiffs’ attorneys, primarily in the areas of personal injury.

When it comes to financial mistakes, California is often trying to look out for its citizens. A few weeks ago, we reported on warnings the state gave out concerning military payday loans.

Now, the state Department of Financial Institutions (DFI) and the state Department of Corporations (DOC) is partnering during this year’s annual California Financial Literacy Month to highlight the month’s theme of “Prepare Now for a Strong Financial Future.”

Efforts to coordinate and expand financial literacy will help to raise awareness of the importance of financial education and consumer protection. Californians’ consumer debt levels and low savings rate underscores the great need for consumers to obtain the necessary skills and financial education to improve their economic futures.

Would this include applying for a payday loan? Many wouldn’t think so.

Californians’ personal income grew 1.6 percent in the fourth quarter of 2005 from the previous quarter, according to estimates released on March 28, 2006, by the U.S. Department of Commerce. Despite the growth in personal income, the total loans to individuals during the past year, including credit card debt, grew by an 18.7 percent annual rate, based on information by Federal Deposit Insurance Corporation’s insured financial institutions in California.

In addition, the U.S. Department of Commerce reported that the personal savings rate nationwide was a negative 0.7 percent in January 2006.

“Financial education not only protects our citizens from fraud, but also empowers them to achieve their dreams,” said acting Corporations Commissioner Wayne Strumpfer. “Serious financial issues can negatively affect consumers economic well-being and prosperity.”

During California Financial Literacy Month, DFI and DOC will be involved in events and activities to highlight such financial literacy themes as savings and investment, fraud and financial abuse, credit and payday loan lending, and financial readiness.

The state has taken action in the past against payday loan stores. This initiative, however, will be focused on educating individuals, not filing any more lawsuits.

The Payday Loan Store of Illinois has seen better days. The payday advance company whose president is industry spokesman Bob Wolfberg, has been accused of improper practices at four of its 40 branches, according to an article in The Chicago Sun-Times.

This isn’t the first controversy to take place within Illinois involving the business of payday loans.

In this case, one charge involves a consumer using a Social Security number belonging to a dead person, according to an order of license revocation filed Friday. The order accuses payday loan stores of falsifying signatures and providing payday loans to people with invalid Social Security numbers.

All four stores discarded disclosure statements that stores must give consumers under the 2005 Payday Loan Reform Act, the Illinois Department of Financial and Professional Regulations alleged.

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Numerous companies in need of financing have turned to a specific group of investors who are both flush with cash to provide whem with assistance: the nation’s hedge funds and their more than $1 trillion in assets. Many of these 8,000 or so funds have been eating their way up the lending food chain and are becoming increasingly powerful forces in U.S. debt markets.

Payday loan lenders have benefitted from these investments.

Hedge funds are providing loans for everything from small outfits, like payday advance companies and start-up technology firms, to large automotive companies, airlines, and retailers. They are snapping up securitized loan bundles tailored to sate their appetite for risk, scooping up higher-risk loans on the open market, and swooping in to provide companies with bailout funds.

“These guys have a ton of cash on their hands, and they are trying desperately to put it to work,” explains Rob Polenberg, an associate director with Standard & Poor’s. He adds that hedge fund participation in the debt markets “has just become huge.”

Some hedge fund companies, like Ritchie Capital Management, have formed new divisions that focus only on direct lending. Bill DeMars, who heads the Ritchie Technology & Life Sciences Finance Division, says that hedge funds are attracted to such loans because they help diversify their investments, have had low default rates, and offer “double digit” yields.

During their lunch hour Friday, nore than a dozen people gathered at a Scarborough Money Mart store to protest high interest rates.
The demonstration at 2377 Eglinton Ave. E. near Kennedy Road was one of more than 30 across North America organized by the Association of Community Organizations for Reform Now (ACORN). The demonstration gradually moved inside, where one protester presented a clerk with a letter, signed by an ACORN member, to the president of the National Money Mart Company.

“We call on you to abandon the [payday loan] lending practices that harm thousands of low-income people who make regular use of your company’s products,” the letter said. “ACORN has been leading the way in Canada in calling for very specific reforms of the payday lending industry as it is now conducted …” (more…)