What the Truth in Lending Act Does

Jan 6, 2016 by admin

By Phineas Upham

If this were 1965, and you were trying to buy a car you might run into some trouble if you tried to buy a car the way consumers do it today. First and foremost, there is no Internet so pricing a car is very different. If you got talked into a loan you couldn’t pay, banks could garnish your wages with the burden being placed squarely on your shoulders.

Truth in Lending changed some of that.

The Act was designed as a safeguard for consumers, and it helped give prospective buyers options to shop around. It didn’t just apply to the automotive landscape, but the effects were felt most prominently there.

If you’re old enough to remember the beginning of 0% APR financing, you might not be aware that this is an indirect effect of Truth in Lending. Failure to properly differentiate between a finance charge, and the amount financed, meant that a potential lender could just roll the extra interest from a loan into the loan itself. They could package the loan as a 0% APR loan, leading consumers to believe they would save thousands, and reap the rewards.

APR was mandated by Truth in Lending, and it was meant to help consumers gauge how favorable a loan’s terms were to their particular circumstance. However, deals like “0% APR financing or $1,000 cash back” masked what the consumer could potentially get. Which is the better deal?

The Act was passed in 1968, and has helped a great deal in standardizing the costs of lending.

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Phineas Upham is an investor from NYC and SF. You may contact Phin on his Phineas Upham website or Twitter page.

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If Merchant Accounts Confuse You, Read This

Sep 17, 2015 by admin

Merchant accounts are not an easy business decision to make, and they can be overwhelming for those who are just starting out in business. After all, you’re in business to make something. You’re not a bank and shouldn’t be expected to operate like one. Fortunately, there are some questions you can ask yourself that might help you determine which merchant account is best for your needs.

Are Loyalty Programs Important to You?

As businesses scale, they tend to find customer loyalty an important quality to maintain and nourish. Smaller businesses might be more reliant on the quality of their craft. Whatever stage your business is in, you need to determine whether loyalty programs are an important part of that growth. If so, you need to pay attention to the second tier in you pricing structure.

What About Volume of Transactions?

If you don’t expect to make many transactions every day, which is common with big-ticket establishments, then you might have some flexibility in taking a higher transaction rate for lower monthly minimums or lower batch fees. Pay attention to the variables offered by each solution, and don’t be afraid to negotiate a bit in order to find a plan that better suits your needs.

What About Termination Fees?

Some accounts come with a contracted term. It’s common to find merchant account contracts that extend one to three years, with some going as high as five. It’s also common to see those types of accounts include a one-year termination clause. You’ll also see annual fees as well. Be sure you carefully project the future of your business before you make this decision.

Bio: Firoz Patel directed and oversaw operations for AlertPay Inc., a company he founded in 2005. Currently, Firoz Patel oversees operations for the Payza platform and resides in Montreal, Quebec.

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