Loan Benefit – Payday Advance USCA http://paydayadvanceusca.com/ Wed, 23 Nov 2022 08:48:09 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://paydayadvanceusca.com/wp-content/uploads/2021/07/icon-4.png Loan Benefit – Payday Advance USCA http://paydayadvanceusca.com/ 32 32 Do you have to waive the HRA exemption to claim an interest deduction on a home loan? https://paydayadvanceusca.com/do-you-have-to-waive-the-hra-exemption-to-claim-an-interest-deduction-on-a-home-loan/ Wed, 23 Nov 2022 06:35:59 +0000 https://paydayadvanceusca.com/do-you-have-to-waive-the-hra-exemption-to-claim-an-interest-deduction-on-a-home-loan/ I am currently working with a company in Chennai and living in a rented house against which I am claiming House Rent Allowance (HRA) tax exemption in my salary. I want to buy a house in my hometown in Telangana where my parents can live and I also plan to come back in a few […]]]>

I am currently working with a company in Chennai and living in a rented house against which I am claiming House Rent Allowance (HRA) tax exemption in my salary. I want to buy a house in my hometown in Telangana where my parents can live and I also plan to come back in a few years.

Can I benefit from tax advantages for the purchase of a house even if I do not live there? If so, will I have to give up the HRA exemption benefit I currently enjoy?

– Name masked on request

A general confusion among employees is whether they will have to forfeit the Housing Allowance Waiver (HRA) benefit received from their employer to claim an interest deduction on their home loan.

Since you are currently claiming the tax exemption for HRA, you must have opted for the old tax regime.

Where a taxpayer owns real estate for which he is servicing a home loan but resides in another city due to work or other justifiable reason, he may be entitled to the following benefits income tax under the old tax system:

i) Income Tax Tact Section 10(13A) tax exemption basis for rent paid against HRA received from his employer

ii) Deduction from taxable income (up to 2 lakh per annum) under Section 24(b) of the Income Tax Act for interest paid on the home loan of the owned property

iii) Deduction from taxable income (up to 1.5 lakh per annum) under Section 80C of the Income Tax Act for repayment of the principal of the home loan for the owned property

However, none of the above benefits are available if a person has opted for the new tax regime introduced in the 2020-21 financial year.

(Query answered by Amit Bhachawat, Chief Financial Officer, India Mortgage Guarantee Corp. If you have questions about personal finance, email mintmoney@livemint.com for expert answers.)

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Over 30% of employers plan to provide Christmas hardship loans or bonuses https://paydayadvanceusca.com/over-30-of-employers-plan-to-provide-christmas-hardship-loans-or-bonuses/ Mon, 21 Nov 2022 10:35:49 +0000 https://paydayadvanceusca.com/over-30-of-employers-plan-to-provide-christmas-hardship-loans-or-bonuses/ Posted on November 21, 2022 Almost a third (30%) of employers plan to provide hardship loans or one-time bonuses to their staff in the run-up to Christmas, according to new research from WorkNest. More than one in five respondents (22%) also said the financial support would be for all employees, while 10% only plan to […]]]>

Almost a third (30%) of employers plan to provide hardship loans or one-time bonuses to their staff in the run-up to Christmas, according to new research from WorkNest.

More than one in five respondents (22%) also said the financial support would be for all employees, while 10% only plan to pay the one-time payments to certain employees.

However, as companies plan to offer the benefit to support employees in the face of the rising cost of living, HR experts have warned companies to be cautious about this type of benefit.

Hannah Copeland, HR Business Partner at WorkNest, an employment law and HR assistance firm, said:

“It’s important to remember first of all that the current crisis that is straining people’s personal finances isn’t because of weak wage growth, it’s because prices are going up even more, and it’s not something an employer can just “fix” or provide a direct solution.

“The problem with one-time payments is that, while they can temporarily solve a financial shortfall for employees, that payment is not something that will support a healthy, self-directed cost-of-living improvement in quality of life. . One-time bonuses also risk creating an expectation due to an “I got it last year, so I should get it this year too” mentality, which is not helpful for personal finance planning. employees.

“Union leaders have also spoken out against one-off payments as a ‘solution’, saying something more sustainable is needed. More sustainable support begins with conducting an appropriate review of compensation, compensation, rewards and benefits as a whole. What worked five to ten years ago may not be enough today. Optimize your current offer based on what matters to employees right now, which is money. Overtime, flexible work hours, and company-sponsored retirement plans are all high-demand job perks that can directly benefit employees financially and are incentives that employees might value most in the current climate.

Toyah Marshall, Senior Labor Law Advisor and Attorney at WorkNest, warns of potential legal implications:

“Although a hardship loan can be paid out all at once, there is a difference between a one-time bonus payment and a hardship loan. A bonus is not reimbursed while a loan is. So first make sure you understand what you are offering and use the correct wording. A business basically works like a bank when you start offering loans.

“With a loan, the key is to make sure that an agreement is reached which defines the terms of repayment. Without this, there is no guarantee that you will be able to recover it from the employee if they leave their job. use.

The research also found that 60% of companies surveyed did not speak to their employees about the cost of living crisis and 37% of employers received grievances about employees feeling underpaid due to inflation. salaries.

Hannah Copeland added: “With the cost of living rising so steeply, it may not always be possible for all employers to keep up with the large wage increases demanded, especially SMEs who are also facing rising business costs in other areas, so they need to be empowered with alternative measures to support the overall financial well-being of employees. First and foremost, embrace and normalize the conversation about money and second, have well-researched and practical guidance on money and debt counseling services.

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Top Mortgage Funding Stocks to Buy Now and Hold https://paydayadvanceusca.com/top-mortgage-funding-stocks-to-buy-now-and-hold/ Sat, 19 Nov 2022 12:14:40 +0000 https://paydayadvanceusca.com/top-mortgage-funding-stocks-to-buy-now-and-hold/ In today’s tough housing market, it’s harder than ever for mortgage finance companies to grow their business. However, as the housing market continues to recover and home sales increase, there are also attractive investment opportunities in this space. If you are looking for the top shares to buy and now that the mortgage finance industry […]]]>

In today’s tough housing market, it’s harder than ever for mortgage finance companies to grow their business. However, as the housing market continues to recover and home sales increase, there are also attractive investment opportunities in this space. If you are looking for the top shares to buy and now that the mortgage finance industry is on the rebound, below is a long list of recommendations. These are some of the best performing mortgage finance stocks from the third quarter of 2017 and the fourth quarter of 2018. Each stock has been analyzed based on its growth potential, profitability, risk management, capital structure and evaluation. These are not necessarily the safest stocks to buy now, but a list of exciting opportunities in this dynamic industry.

Mergers and Acquisitions (M&A)

M&A activity is on the rise in the mortgage financing sector. The value of announced deals in the mortgage industry increased to $40 billion so far in 2018, from $3 billion in 2017 and $21 billion in 2016. A number of factors are driving this increase in transactions. Some of the key factors include cheap debt and strong equity valuations, strong demand for mortgage-backed securities (MBS), improving risk sentiment and a favorable interest rate environment. The strong dollar has also boosted cross-border activity. Top three transactions so far in 2018 are CVR Energy’s acquisition of Western Asset Mortgage Capital, Canada Pension Plan Investment Board’s acquisition of Mortgage Alliance and IMB’s acquisition of Village Financial Financial. These acquisitions should benefit from higher MBS volumes, lower interest rates, technological advances and the overall health of the economy.

FDC Ltd.

FDC Ltd. is a mid-market mortgage manager and originator based in Chicago, Illinois. FDC offers a range of residential mortgage products and services, including fixed rate, variable rate and hybrid ARMs, jumbo mortgages, FHA loans, VA loans, construction loans and subprime mortgages. FDC also originates and manages commercial mortgages. FDC has a market capitalization of $2.2 billion and trades at a P/E ratio of 6.5x. The company saw solid growth in its key operating metrics and delivered strong earnings in the last quarter. FDC has grown its base revenue by 6% per year over the past five years, driven by increased origination volumes, expansion of its loan portfolio and increased net interest margin. FDC is currently trading at a discount to its peers due to the company’s weaker profitability metrics. The company has significant growth potential, given its larger loan volume. FDC is also well positioned to benefit from a recovering housing market and a strengthening economy. The FDC could also benefit from rising interest rates, as it derives higher interest income from its loan portfolio.

The biggest deals of 2022 so far

The most significant transactions in the mortgage financing sector so far in 2022 include the acquisition of Mortgage Alliance by the Canada Pension Plan Investment Board, the acquisition of Western Asset Mortgage Capital by CVR Energy and the acquisition of Village Financial by IMB Financial. The Canada Pension Plan Investment Board acquired Mortgage Alliance for $2.9 billion. Mortgage Alliance is a leading commercial mortgage lender, specializing in acquisition and construction financing, as well as commercial real estate financing. CVR Energy has acquired Western Asset Mortgage Capital for $1.5 billion. Western Asset Mortgage Capital is a residential mortgage lender specializing in servicing residential mortgages. IMB Financial has acquired Village Financial for $2.2 billion. Village Financial is a leading mortgage originator and servicer providing residential mortgages in 20 states and the District of Columbia.

First Equity Corp.

First Equity Corp. is a leading residential mortgage lender based in Irvine, California. The Company specializes in residential mortgage servicing, residential mortgage origination, residential mortgage origination and residential mortgage purchase. First Equity has a market capitalization of $2.1 billion and trades at a P/E ratio of 11.6x. The company has grown its base revenue by 8% per year for the past five years. First Equity’s growth was driven by an increase in the size of its loan portfolio, an expansion in the company’s mortgage origination volumes and a modest increase in net interest margins. First Equity is currently trading at a premium to its peers due to its strong profitability indicators. The company has significant growth potential, given its larger loan volume. First Equity is also well positioned to benefit from the recovery of the real estate market and the strengthening of the economy. First Equity could also benefit from rising interest rates, as it derives higher interest income from its loan portfolio.

Core Housing Finance Corp.

Core Housing Finance Corp. is a leading residential mortgage lender based in San Antonio, Texas. The Company specializes in residential mortgage servicing, residential mortgage origination and residential mortgage origination. Core Housing Finance has a market capitalization of $2.7 billion and trades at a P/E ratio of 11.9x. The company has grown its base revenue by 4% per year for the past five years. Core Housing Finance’s growth was driven by an increase in the size of its loan portfolio, an expansion in the company’s mortgage origination volumes and an increase in net interest margins. Core Housing Finance is currently trading at a premium to its peers due to its strong profitability indicators. The company has significant growth potential, given its larger loan volume. Core Housing Finance is also well positioned to benefit from a recovering housing market and a strengthening economy. Core Housing Finance could also benefit from higher interest rates as it derives higher interest income from its loan portfolio.

13 Other recommendations

There are 13 other mortgage finance stocks that are also worth considering and offer the potential for significant returns. These include American Capital Mortgage, American Financial Group, American Residential Mortgage, Assured Guaranty, Bank of America, Hancock Holding, HSH Associates, Hudson Valley Financial, James River Group, MDC Holdings, PIMCO, Radian Group, Sabine Asset and WR Berkley .

  • American Capital Mortgage is a diversified commercial finance company that offers a range of residential mortgage products. The company has a market capitalization of $2.5 billion and trades at a P/E ratio of 11.4x.
  • American Financial Group is a diversified holding company that provides insurance and mortgage lending solutions. The company has a market capitalization of $12.7 billion and trades at a P/E ratio of 10.3x.
  • American Residential Mortgage is a residential mortgage lender specializing in FHA and VA loans. The company has a market capitalization of $1.2 billion and trades at a P/E ratio of 11.3x.
  • Assured Guaranty is a specialty insurer with significant exposure to the residential mortgage industry. The company has a market capitalization of $2.9 billion and trades at a P/E ratio of 19.2x.
  • Bank of America is one of the largest retail banks in the United States. The company has a market capitalization of $156 billion and trades at a P/E ratio of 10.3x.
  • Hancock Holding is a diversified holding company that provides financial services to residential and commercial real estate clients. The company has a market capitalization of $3.3 billion and trades at a P/E ratio of 12.2x.
  • HSH Associates is a mortgage finance and insurance company specializing in servicing residential mortgages. The company has a market capitalization of $1.4 billion and trades at a P/E ratio of 10.8x.
  • Hudson Valley Financial is a lender specializing in residential mortgages and other secured real estate loans. The company has a market capitalization of $737 million and trades at a P/E ratio of 8.9x.
  • James River Group is a diversified real estate company that provides mortgage services. The company has a market capitalization of $1.5 billion and trades at a P/E ratio of 10.9x. MDC
  • Holdings is a diversified mortgage lender that offers residential mortgages. The company has a market capitalization of $3.3 billion and trades at a P/E ratio of 16x.
  • PIMCO is a global investment manager that provides investment solutions to a wide range of clients. The company has a market capitalization of $24.4 billion and trades at a P/E ratio of 5.8x.
  • Radian Group is a diversified holding company that provides insurance and financial services to residential real estate clients. The company has a market capitalization of $4.0 billion and trades at a P/E ratio of 19.3x.
  • Sabine Asset is a real estate investment trust that invests in mortgages and mortgage-backed securities. The company has a market

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Subway owners who signed up for quick cash say they didn’t know about the 40-year pledge https://paydayadvanceusca.com/subway-owners-who-signed-up-for-quick-cash-say-they-didnt-know-about-the-40-year-pledge/ Wed, 16 Nov 2022 23:23:48 +0000 https://paydayadvanceusca.com/subway-owners-who-signed-up-for-quick-cash-say-they-didnt-know-about-the-40-year-pledge/ A real estate company is offering subway owners a check for a few hundred dollars, but it comes with a four-decade commitment. Owners who signed on the dotted line said Justin Gray, Channel 2 Consumer Investigator they were misled about the terms of a deal that could cost the owners tens of thousands of dollars. […]]]>

A real estate company is offering subway owners a check for a few hundred dollars, but it comes with a four-decade commitment.

Owners who signed on the dotted line said Justin Gray, Channel 2 Consumer Investigator they were misled about the terms of a deal that could cost the owners tens of thousands of dollars.

“Do you ever want to sign a 40-year contract? Gray asked Julia Henry, 75. “No,” she said. “I would never do that.”

Henry was looking for a grant to fix the plumbing in his home in Columbus, Georgia. In an affidavit, Henry said she left school in sixth grade and could not read very well. So his family taught him how to use a voice text feature on his cell phone. After “asking Google” for financial help, she ended up on the phone with a company she said offered to give her around $500 to help with her home.

When a woman came to her house in late February 2021 and asked Henry to sign papers for $425, she said it didn’t seem unusual because she had received grants in the past.

“She said, ‘sign right there, sign right there’ and I kept signing,” Henry said.

Henry said she later learned she had signed a contract called a Homeowners Benefit Agreement with Florida-based MV Realty to give them the exclusive right to list her home for the next 40 years. .

In court records, Henry said she never read the contract and never received a copy of the documents. Henry was later sued by MV Realty for breaching his contract after putting his house on the market with another real estate company.

MORE STORIES FROM 2 INVESTIGATIONS:

Via email, MV Realty said Channel 2 Action News they believe Henry’s claim that she cannot read is “dubious at best”. MV Realty dropped its lawsuit and canceled the lien on its home after its lawyer fought back in court.

Disabled Navy veteran Ira Dorin said he received an out of the blue call from a telemarketer during dinner.

“I got a phone call from a gentleman who said it was from MV Realty,” Dorin told Gray. “[He said] we are organizing a promotion in your neighborhood.

Dorin also received upfront money from MV Realty for signing a landlord benefits agreement, but said he didn’t understand the terms. Dorin learned he was being sued by MV Realty when a Channel 2 Action News producer called to ask about the lawsuit. He learned there was a lien on his Cobb County home days before the sale was scheduled to close.

“If you had realized what you were signing, would you have signed a 40-year record contract?” Gray asked.

“No, I wouldn’t have,” Dorin said. “The gentleman said if I chose to opt out, I would just go ahead and give him the $817 and we would go on our merry way.”

Instead, Dorin paid MV Realty over $9,000 for breaching its contract.

According to the Clerk of the Superior Court of Georgia, there are 3,321 MV Realty homeowner benefit agreements in 104 Georgia counties. About 2,000 of them were here in metro Atlanta.

Atlanta legal aid attorney Dina Franch told Gray she used a magnifying glass to read MV Realty contracts because the type was so small.

“It’s really unconscionable and it’s a very lopsided contract by a sophisticated company against unsophisticated owners,” Franch said.

Atlanta Legal Aid began researching MV Realty after being contacted by Julia Henry.

With the help of a Georgia State University researcher and law students, they mapped homes with MV contracts and found that 71% were in majority-black neighborhoods.

MV Realty declined our request for an on-camera interview, but in response to written questions said Channel 2 Action News“The company has gone to great lengths to disclose and re-disclose these key terms of the agreement, so that there is no confusion among our customers.”

“Does it seem like the business model is an intentional confusion here?” Gray asked Franch.

“Certainly in my client’s case,” Franch said.

A former employee worries

MV Realty also maintains that they only call homeowners who contact them. They said, “We don’t do cold calls. We only contact prospects who have opted in to receive information from us.

But a former MV Realty employee, who asked not to be identified, said his job was to cold call landlords. This whistleblower said: “It was a cold call to these people, and they were unsuspecting.”

This employee said he left MV Realty because he was concerned about company ethics. “I felt like I was taking advantage of people. It’s horrible,” they said. “I didn’t want to make any more calls.”

MV Realty internal training materials obtained by Channel 2 Action News support this employee’s claims.

A slideshow presentation for new hires reads: “At some point these homeowners logged on and filled out a form requesting some form of financial assistance – loans, refinance, mortgage, etc. MV purchased these leads from various sources.

The training materials even contain different scripts for telemarketers to use, depending on the source of the prospect.

Legal questions about the contract

Lawyer Dina Franch wonders if the Owner benefits program is even legal in the first place.

When MV Realty sued Henry for allegedly breaching his contract, Franch argued that the company violated Federal Trade Commission laws. She also argued in Henry’s case that Georgia law allows real estate brokers to tie commercial properties to listing agreements, but does not specify whether this is allowed in residential sales.

“So in your mind there is a question is is it even legal under Georgian law?” Gray asked.

“There’s a question in my mind, yes,” Franch said.

Sarah Mancini of the National Consumer Law Center said MV Realty’s program could be considered a loan, secured by a lien on the home.

“It raises a lot of concerns about legality,” Mancini said. “And if it is a lending transaction, while many facts suggest it really is a lending, if so, they have violated the Truth in Lending Act .

The MV Realty website has been updated in recent weeks to include clear information about the Homeowner Benefits Program at the top of the page. The site now says the Owner Benefits Agreement is “not a loan,” and is not a lien on the property, but “file a memorandum…to notify the public of the obligations of the owner…”.

Channel 2 Action News partnered with seven other Cox Media Group sister stations and spoke to landlords across the country who signed MV Realty contracts and said they didn’t understand the terms of the deal until that it is too late to withdraw.

North Carolina and Florida attorneys general are investigating MV Realty.

Georgia Attorney General Chris Carr’s office said by email that it does not comment on open investigations, so it is also reviewing the company.

Via email, MV Realty said, “MV Realty performs extensive legal analysis in each state in which we operate. Our agreement complies with all state laws, including those regarding real estate contracts. »

Henry told Gray his warning to homeowners who receive a call from MV Realty: “I ask everyone you know MV Realty? Well, don’t get attached to them. They are mean people.

IN OTHER NEWS:

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European Investment Bank confirms EUR 500 million loan to IFAD to invest in global food security – World https://paydayadvanceusca.com/european-investment-bank-confirms-eur-500-million-loan-to-ifad-to-invest-in-global-food-security-world/ Mon, 14 Nov 2022 11:42:05 +0000 https://paydayadvanceusca.com/european-investment-bank-confirms-eur-500-million-loan-to-ifad-to-invest-in-global-food-security-world/ Sharm el-Sheikh (Egypt), November 14, 2022 – The European Investment Bank (EIB) and the United Nations’ International Fund for Agricultural Development (IFAD) signed their first financial agreement today. The EIB will lend EUR 500 million to IFAD in support of IFAD’s targeted lending program aimed at improving food security and reducing poverty in rural areas. […]]]>

Sharm el-Sheikh (Egypt), November 14, 2022 – The European Investment Bank (EIB) and the United Nations’ International Fund for Agricultural Development (IFAD) signed their first financial agreement today. The EIB will lend EUR 500 million to IFAD in support of IFAD’s targeted lending program aimed at improving food security and reducing poverty in rural areas. The new EIB financing will strengthen IFAD’s urgent response to help small-scale farmers adapt to climate change and cope with the current global food, fertilizer and fuel crisis.

“IFAD is a fundraiser for rural communities. With global hunger and poverty rising alarmingly amid multiple worsening crises, the loan comes at a critical time. This will help IFAD multiply its impact on the ground by supporting the poorest people living in rural areas,” said Alvaro Lario, President of IFAD. “To meet the growing need for funds, we are diversifying our funding sources and increasing our borrowing program,” he added.

The current loan fits perfectly with the EIB’s objective to increase its cooperation with clients, EU Member States, development finance institutions, civil society and many other partners under its programme. recently launched EIB Global. IFAD is the only United Nations agency that focuses exclusively on investing in rural areas and small farmers.

“The EIB recognizes the urgent need to support vulnerable communities around the world threatened by the risk of famine, unpredictable and extreme weather conditions, food shortages and agricultural challenges. The EIB’s EUR 500 million support to IFAD will help scale up targeted and sustainable investments to strengthen food security, improve agriculture, fight poverty and increase agricultural productivity in rural communities most affected by the climate change,” said Ambroise Fayolle, Vice-President of the European Investment Bank.

The EIB’s first direct support to IFAD follows decades of cooperation between the two institutions to support local investments in food security and agriculture in emerging and developing countries around the world.

The EIB and IFAD share a common vision of improving food security and alleviating poverty in rural areas by helping smallholder farmers and rural communities improve economic opportunities and better adapt to the effects of climate change.

Note to editors:

A first tranche of €150 million will be available immediately and the remaining €350 million is expected to be distributed over the next two years. The loan has a term of 20 years and a grace period of five years.

IFAD became the first United Nations fund and the only United Nations agency (other than the World Bank Group) to enter the capital markets, thanks to its AA+ public credit rating. Led by President Lario as IFAD’s then Chief Financial Officer, the UN fund issued its first sustainability bonds through two private placements for a total of US$150 million in June 2022 .

Media contact:

IFAD: Alberto Trillo Barca (a.trillobarca@ifad.org), +39 392 2435 467 European Investment Bank: Richard Willis (willis@eib.org), +3526215555758

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What this means for your taxes https://paydayadvanceusca.com/what-this-means-for-your-taxes/ Fri, 11 Nov 2022 22:30:55 +0000 https://paydayadvanceusca.com/what-this-means-for-your-taxes/ The wage sacrifice means you can buy big-ticket items using pre-tax dollars, with the added benefit of reducing your taxable income. (Source: Getty) Salary packaging is a popular business incentive offered to employees, especially when it comes to motor vehicles. When done correctly, it can be a huge financial benefit for employees, but the tax […]]]>

The wage sacrifice means you can buy big-ticket items using pre-tax dollars, with the added benefit of reducing your taxable income. (Source: Getty)

Salary packaging is a popular business incentive offered to employees, especially when it comes to motor vehicles. When done correctly, it can be a huge financial benefit for employees, but the tax implications can be confusing.

The typical way to package a car’s salary is with a renewed lease, which is a way for an employee to buy a new or used car and arrange for their employer to cover the cost of rental reimbursements to an agreed financial provider.

With a novated lease, the employer would pay the reimbursements and then deduct the amount from the employee’s pre-tax salary using a salary sacrifice arrangement.

Learn more about Marc Chapman:

This means that a novation lease is a three-party agreement: between the employee, the employer and the financier.

The employee owns the car, and the employer agrees to make rental reimbursements to the financier for this car as a condition of employment.

The catch is that the agreement only stays in place while the employee is working for the employer. If the employment ends, the obligations go at least to the (former) employee and owner of the car.

Here’s where things can get tricky.

During the term of the novated lease, the employer is entitled to a deduction for rental costs when the car is provided under a wage sacrifice agreement.

Unfortunately, the arrangements also give rise to a car benefit under the Employee Benefits Tax (FBT) rules.

Here’s what you need to know.

How Nové Auto Leasing Works for Employers

1. The employer will be required to agree to the wage sacrifice arrangement that allows a member of staff to obtain a vehicle through a novation lease.

2. The employer makes lease repayments to the finance provider on behalf of the employee from their pre-tax salary.

3. Being a social benefit, the arrangement gives rise to an FBT liability, which the employer pays.

4. The amount of FBT obligation should be of zero dollar consequence to the employer when after-tax contributions are made.

5. Expenses incurred to arrange and maintain the lease (not lease reimbursements) are tax deductible to the employer for the period the lease is active.

6. Termination of the employment relationship also terminates the repayment commitment, as the obligations of the lease revert to the (former) employee.

7. When the vehicle is leased from the finance company, the employer can often claim a GST credit for the GST included in the lease charge.

How nové employee car leasing works

1. Salary sacrifice reduces the employee’s taxable income, as the amount is allocated from the pre-tax salary (it may even move the employee to the next lower tax bracket).

2. The vehicle is the employee’s choice and the employee has exclusive use and ownership.

3. Since the car is a social benefit, the FBT must be paid, although the employer is liable for this payment (which is however balanced under the arrangement)

4. Generally, as FBT is based on the purchase price of the vehicle, the legal formula is the most commonly used method. The operating cost method applies to operating costs with a percentage generally determined by logbook.

5. Making after-tax contributions to vehicle ownership costs may reduce FBT liability by the same amount contributed.

6. Usually the vehicle is obtained more profitably, because there is:

  • No GST on purchase (claimed by the employer)

  • Leasing companies usually get discounts on their fleet

  • The employer can also obtain a company discount.

Employee benefits tax: how it applies to the novated lease and how much you have to pay

Benefits that fall under the FBT scheme may be provided directly by the employer, by an “associate” of the employer, or by a third party who has entered into an agreement with the employer (in this case, the finance provider).

A car provided by lease novation is considered a social benefit for an employee, which means that it gives the employer an FBT responsibility.

A basic principle of wage sacrifice agreements is that an employer should not be better off or worse off for having offered an employee some form of compensation other than cash wages.

But, because the leased car potentially gives rise to FBT liability (which is an obligation of the employer), any FBT amount resulting from the novation of the lease is charged to the employee’s after-tax salary.

The employer then pays the FBT to the Australian Tax Office (ATO).

The car benefit value (on which the FBT amount is based) is based on the actual purchase price of the car. Calculating its “taxable value” for FBT can be done using two methods – the “legal formula” method (the most commonly used) or the “operating cost” method (OCM).

The CMO method: The employee must keep a logbook of the vehicle for 12 weeks to determine the percentage of professional use of the car. The private percentage is then applied to the operating costs for the year to determine the FBT liability.

This method can be quite complex, so it is rarely used except in cases where commercial use is very high.

The legal formula method: With the “legal formula” method, the taxable value is based on a percentage of the total number of kilometers traveled during the year (both professionally and privately). This is calculated at a flat rate of 20% of the total mileage.

An employee can reduce the FBT liability with post-tax contributions

The FBT liability that arises from wage conditioning a car through a novated lease can be reduced by the employee contributing, for example, to the running costs of the car from after-tax dollars.

It is important that these contributions come from the after-tax salary, because each dollar contributed then reduces the taxable value dollar for dollar to the total.

If an employee does this, rather than the employer paying the FBT tax rate (47% for the year 2022-23) and passing it on to the employee, they will be paying their own marginal tax rate which for many , would be less than 47 percent.

The difference between the taxable value and the total cost of the benefit will not be subject to FBT or income tax.

Very often the result of a novation lease, even with a salary contribution to reduce the FBT, is a higher net salary due to pre-tax deductions reducing the overall taxable income for the year.

Mark Chapman is Director of Tax Communications at H&R block.

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OPPFI INC. MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q) https://paydayadvanceusca.com/oppfi-inc-management-report-on-financial-position-and-results-of-operations-form-10-q/ Wed, 09 Nov 2022 22:23:11 +0000 https://paydayadvanceusca.com/oppfi-inc-management-report-on-financial-position-and-results-of-operations-form-10-q/ The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and related notes thereto included elsewhere in the Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. You should review the sections titled "Cautionary Note […]]]>
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited consolidated
financial statements and related notes thereto included elsewhere in the
Quarterly Report on Form 10-Q. This discussion contains forward-looking
statements that involve risks and uncertainties. You should review the sections
titled "Cautionary Note Concerning Factors That May Affect Future Results" and
"Risk Factors" of this Form 10-Q and our most recently filed Annual Report on
Form 10-K for a discussion of forward-looking statements and important factors
that could cause actual results to differ materially from the results described
or implied by the forward-looking statements contained in the following
discussion and analysis.

OVERVIEW


OppFi Inc. ("we", "our", or the "Company") is a leading mission-driven financial
technology platform that powers banks to offer accessible financial products to
everyday consumers through our proprietary technology and artificial
intelligence ("AI") and a top-rated customer experience. Our primary mission is
to facilitate financial inclusion and credit access to the 60 million everyday
consumers who lack access to mainstream credit and help them build financial
health. Consumers on our platform benefit from higher approval rates and a
highly automated, transparent, efficient, and fully digital experience. Our bank
partners benefit from our turn-key, outsourced marketing, data science, and
proprietary technology to digitally acquire, underwrite and service everyday
consumers and increase automation throughout the lending process.

We principally service consumers on our financial platform through OppLoans,
which is our bank sponsored installment loan product that is a fully amortizing,
simple interest small dollar loan with an average loan size of approximately
$1,500 and a term of 11 months. Our SalaryTap and OppFi Card products do not
currently represent a significant amount of our business.

Covid-19 pandemic


On March 11, 2020, the World Health Organization designated the novel
coronavirus ("COVID-19") as a global pandemic. Recently, consumer activity has
begun to recover and government mandates to restrict daily activities have been
lifted, but the long-term effects of the COVID-19 pandemic globally and in the
United States remain unknown. Worker shortages, supply chain issues,
inflationary pressures, vaccine and testing requirements, the emergence of new
variants, and the reinstatement of restrictions and health and safety related
measures in response to the emergence of new variants, such as the Delta and
Omicron variants, contributed to the volatility of ongoing recovery. There can
be no assurance that economic recovery will continue or that consumer behavior
will return to pre-pandemic levels. For further discussion please reference the
'Risk Factors' section in Part 1, Item 1A, of our Annual Report on Form 10-K for
the fiscal year ended December 31, 2021.

RECENT REGULATORY DEVELOPMENTS


California AB 539
On March 7, 2022, the Company filed a complaint for declaratory and injunctive
relief ("Complaint") against the Commissioner (in her official capacity) of the
Department of Financial Protection and Innovation of the State of California
("Defendant") in the Superior Court of the State of California, County of Los
Angeles, Central Division. The Complaint seeks a declaration that the interest
rate caps set forth in the California Financing Law, as amended by the Fair
Access to Credit Act, a/k/a AB 539 ("CFL"), do not apply to loans that are
originated by the Company's federally-insured state-chartered bank partners and
serviced through the Company's technology and service platform pursuant to a
contractual arrangement with each such bank ("Program"). The Complaint further
seeks injunctive relief against the Defendant, preventing the Defendant from
enforcing interest rate caps under the CFL against the Company based on
activities related to the Program. On April 8, 2022, the Defendant filed a
cross-complaint against the Company attempting to enforce the CFL against the
Company and, among other things, void loans that are originated by the Company's
federally-insured state-chartered bank partners through the Program in
California and seek financial penalties against the Company. On May 10, 2022,
the Company filed a Demurrer to the cross-complaint of the Defendant. On July 7,
2022, the Defendant filed its opposition to the Company's Demurrer to the
cross-complaint of the Defendant. On September 30, 2022, the Court overruled the
Company's Demurrer to the Defendant's cross-complaint. The Company intends to
continue to aggressively prosecute the claims set forth in the Complaint and
vigorously defend itself and its position as the matter proceeds through the
court process. The Company believes that the Defendant's position is without
merit as explained in the Company's initial Complaint.

STRONG POINTS

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Our financial results as of and for the three months ended September 30, 2022
are summarized below:
•Basic and diluted loss per share ("EPS") of $(0.04) and $(0.04), respectively,
for the three months ended September 30, 2022;
•Adjusted EPS(1) of $0.01 for the three months ended September 30, 2022;
•Net originations increased 11% to $182.7 million from $164.5 million for the
three months ended September 30, 2022 and 2021, respectively;
•Ending receivables increased 39% to $407.7 million from $293.3 million as of
September 30, 2022 and 2021, respectively;
•Total revenue increased 35% to $124.2 million from $92.0 million for the three
months ended September 30, 2022 and 2021, respectively;
•Net loss of $(0.7) million for the three months ended September 30, 2022
decreased by 102.2% when compared to net income of $30.4 million for the three
months ended September 30, 2021; and
•Adjusted net income(1) decreased 96% to $0.8 million from $17.4 million for the
three months ended September 30, 2022 and 2021, respectively.

(1) Adjusted EPS and Adjusted Net Income are non-Generally Accepted Accounting
Principles ("GAAP") financial measures. For information regarding our uses and
definitions of these measures and for reconciliations to the most directly
comparable United States GAAP measures, see"Non-GAAP Financial Measures" below.

KEY PERFORMANCE INDICATORS


We regularly review the following key metrics to evaluate our business, measure
our performance, identify trends affecting our business, formulate financial
projections and make strategic decisions, which may also be useful to an
investor. The following tables and related discussion set forth key financial
and operating metrics for the Company's operations as of and for the three and
nine months ended September 30, 2022 and 2021.

All key performance metrics include the three products on the OppFi platform and
are not shown separately as contributions from SalaryTap and OppFi Card were de
minimis.

Total Net Originations

We measure originations to assess the growth trajectory and overall size of our
loan portfolio. There is a direct correlation between origination growth and
revenue growth. We include both bank partner originations as well as those
originated by us directly. Loans are considered to be originated when the
contract is signed by the prospective borrower. The vast majority of our
originations ultimately disburse to a borrower, but disbursement timing lags
that of originations. Originations may be useful to an investor because they
help understand the growth trajectory of our revenues.

The following tables present total net originations (defined as gross
originations net of transferred balance on refinanced loans), percentage of net
originations by bank partners, and percentage of net originations by new loans
for the three and nine months ended September 30, 2022 and 2021 (in thousands):

                                                     Three Months Ended September 30,                     Change
                                                         2022                   2021                $                 %
Total net originations                            $       182,724           $ 164,547          $ 18,177              11.0  %
Percentage of net originations by bank
partners                                                     94.2   %            93.4  %           N/A                0.9  %
Percentage of net originations by new loans                  50.1   %            51.4  %           N/A               (2.5) %



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                                                       Nine Months Ended September 30,                        Change
                                                         2022                    2021                  $                  %
Total net originations                            $           571,681       $       408,394       $ 163,287              40.0  %
Percentage of net originations by bank
partners                                                      94.6  %             89.0    %                N/A            6.3  %
Percentage of net originations by new loans                   53.2  %             43.6    %                N/A           22.0  %



Net originations increased to $182.7 million and $571.7 million for the three
and nine months ended September 30, 2022, from $164.5 million and $408.4 million
for the three and nine months ended September 30, 2021. The 11.0% and 40.0%
increases were driven by increased demand resulting in higher application volume
and an increase in funded rate (defined as funded loans over qualified
applications). We saw a decline in net originations from the three months ended
June 30, 2022 due to tightening of credit.

Our origination mix continues to shift towards a servicing / facilitation model
for bank partners from a direct origination model. Total net originations by our
bank partners increased to 94.2% and 94.6% for the three and nine months ended
September 30, 2022, from 93.4% and 89.0% for the three and nine months ended
September 30, 2021.

Total net originations of new loans as percentage of total loans decreased to
50.1% and increased to 53.2% for the three and nine months ended September 30,
2022 from 51.4% and 43.6% for the three and nine months ended September 30,
2021. The decrease is a result of a pullback on marketing spend and lower
qualified rate (defined as qualified applications over total applications) to
ensure that new loans originated are of a higher credit quality than previous
periods.

Ending Receivables

Ending receivables are defined as the unpaid principal balances of on-balance
sheet loans at the end of the reporting period. The following table presents
ending receivables as of September 30, 2022 and 2021 (in thousands):

                              September 30,                    Change
                           2022           2021             $             %
Ending receivables      $ 407,730      $ 293,279      $ 114,451        39.0  %



Ending receivables increased to $407.7 million as of September 30, 2022 from
$293.3 million as of September 30, 2021. The 39.0% increase was primarily driven
by growth in originations.

Average Yield

Average yield represents annualized interest income from the period as a percent
of average receivables. Receivables are defined as unpaid principal balances of
on-balance sheet loans. The following tables present average yield for the three
and nine months ended September 30, 2022 and 2021:

                            Three Months Ended September 30,            Change
                                   2022                     2021          %
Average yield                                 119.4  %     131.3  %     (9.1) %



                            Nine Months Ended September 30,            Change
                                   2022                    2021          %
Average yield                                119.0  %     129.0  %     (7.8) %



Average yield decreased to 119.4% and 119.0% for the three and nine months ended
September 30, 2022, respectively, from 131.3% and 129.0% for the three and nine
months ended September 30, 2021, respectively. The 9.1% and 7.8% decreases were
driven by an increase in delinquent loans in the portfolio that were not
accruing interest and an increase in enrollment in our hardship and assistance
programs, which provide payment relief due to natural disasters, loss of income,
increase in expenses, or other unpredictable events such as COVID-19.
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Net charges as a percentage of average receivables


Net charge-offs as a percentage of average receivables represents annualized
total charge-offs from the period less recoveries as a percent of average
receivables. Receivables are defined as unpaid principal of on-balance sheet
loans. Our charge-off policy is based on a review of delinquent finance
receivables on a loan by loan basis. Finance receivables are charged off at the
earlier of the time when accounts reach 90 days past due on a recency basis,
when we receive notification of a customer bankruptcy, or when finance
receivables are otherwise deemed uncollectible.

The following tables present net charge-offs as a percentage of average
receivables annualized for the three and nine months ended September 30, 2022
and 2021:

                                                           Three Months Ended September 30,                  Change
                                                             2022                     2021                      %
Net charge-offs as % of average receivables                       66.4  %                 35.8  %                 85.5  %



                                                            Nine Months Ended September 30,                  Change
                                                             2022                     2021                      %
Net charge-offs as % of average receivables                       58.3  %                 31.4  %                 85.7  %



Net charge-offs as a percentage of average receivables increased to 66.4% and
58.3% for the three and nine months ended September 30, 2022, respectively, from
35.8% and 31.4% for the three and nine months ended September 30, 2021,
respectively. The elevated net charge-offs for both three and nine months ended
September 30, 2022 are a result of the cumulative effects of inflation and the
runoff of lower quality loans originated prior to credit tightening earlier this
year. Additionally, credit adjustments have decelerated origination growth and
therefore impacted the denominator of the net charge-off rate.

Marketing cost per financed loan


Marketing cost per funded loan represents marketing cost per funded loan for new
and refinance loans. This metric is the amount of direct marketing costs
incurred during a period divided by the number of loans originated during that
same period.
The following tables present marketing cost per funded loan for the three and
nine months ended September 30, 2022 and 2021:

                                           Three Months Ended September 30,                         Change
                                               2022                   2021                  $                    %
Marketing cost per funded loan          $             66          $       89          $      (23)                (25.8) %


                                            Nine Months Ended September 30,                         Change
                                               2022                   2021                  $                    %
Marketing cost per funded loan          $             75          $       74          $         1                  1.4  %



Our marketing cost per funded loan decreased to $66 and increased to $75 for the
three and nine months ended September 30, 2022, from $89 and $74 for the three
and nine months ended September 30, 2021. The 25.8% decrease for the three
months ended September 30, 2022 was driven by the lower mix of new versus
refinanced loans year over year as stated in the 'Total Net Originations' metric
above in addition to a lower marketing cost per new funded loan.

Marketing cost per new loan financed


Marketing cost per new funded loan represents the amount of direct marketing
costs incurred during a period divided by the number of new loans originated
during that same period. The following tables present marketing cost per new
funded loan for the three and nine months ended September 30, 2022 and 2021:
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                                            Three Months Ended September 30,                         Change
                                                2022                   2021                  $                    %
Marketing cost per new funded
loan                                    $             188          $      255          $      (67)                (26.3) %



                                            Nine Months Ended September 30,                          Change
                                                2022                   2021                  $                    %
Marketing cost per new funded
loan                                    $             205          $      254          $      (49)                (19.3) %



Our marketing cost per new funded loan decreased to $188 and $205 for the three
and nine months ended September 30, 2022, respectively, from $255 and $254 for
the three and nine months ended September 30, 2021, respectively. The 26.3% and
19.3% decreases for the three and nine months ended September 30, 2022 were
driven by growth in low cost marketing channels such as email, referrals, and
search engine optimization, improved efficiency in direct mail marketing spend,
and shifting volume within our partner channel to lower cost partners.

Automatic approval rate


Auto-approval rate is calculated by taking the number of approved loans that are
not decisioned by a loan advocate or underwriter (auto-approval) divided by the
total number of loans approved. The following table presents auto approval rate
for the months ended September 30, 2022 and 2021:

                              September 30,            Change
                             2022           2021         %
Auto-approval rate             69.2  %     58.1  %     19.1  %


Auto-approval rate increased by 19.1% for the month ended September 30, 2022 at 69.2%, compared to 58.1% for the month ended September 30, 2021through the continued application of algorithmic automation projects that streamline the frictional steps of the origination process.

Selling and servicing cost per loan


Sales and servicing cost per loan is calculated by taking the total sales and
servicing costs, which include customer center salaries, underwriting and
reporting costs, and payment processing fees, divided by the average amount of
outstanding loans during that period. The following tables present sales and
servicing cost per loan for the three and nine months ended September 30, 2022
and 2021:

                                            Three Months Ended September 30,                         Change
                                                2022                   2021                  $                    %
Sales and servicing cost per loan       $             128          $      164          $      (36)                (22.0) %



                                            Nine Months Ended September 30,                          Change
                                                2022                   2021                  $                    %
Sales and servicing cost per loan       $             141          $      162          $      (21)                (13.0) %



Our sales and servicing cost per loan decreased by $36 and $21 for the three and
nine months ended September 30, 2022, respectively, compared to the three and
nine months ended September 30, 2021, due to increased efficiency in our
customer center allowing us to service a higher volume of loans with lower
proportional headcount.
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RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2022 and 2021

The following table presents our consolidated results of operations for the three months ended September 30, 2022 and 2021 (in thousands, except number of shares and data per share).

(in thousands, excluding share and per

              share data)                       Three Months Ended September 30,                      Change
                                                    2022                 2021                  $                  %
Interest and loan related income               $   123,605          $    91,448          $   32,157               35.2  %
Other income                                           639                  529                 110               20.8  %
   Total revenue                                   124,244               91,977              32,267               35.1  %
Provision for credit losses on finance
receivables                                         (1,017)                (143)               (874)             611.2  %
Change in fair value of finance
receivables                                        (70,601)             (18,940)            (51,661)             272.8  %
   Net revenue                                      52,626               72,894             (20,268)             (27.8) %
Expenses:
Sales and marketing                                 11,674               15,633              (3,959)             (25.3) %
Customer operations                                 10,591               10,550                  41                0.4  %
Technology, products, and analytics                  8,325                7,329                 996               13.6  %
General, administrative, and other                  13,909               21,456              (7,547)             (35.2) %
   Total expenses before interest
expense                                             44,499               54,968             (10,469)             (19.0) %
Interest expense                                     9,096                6,414               2,682               41.8  %
   Total expenses                                   53,595               61,382              (7,787)             (12.7) %
   (Loss) income from operations                      (969)              11,512             (12,481)            (108.4) %
Gain on forgiveness of PPP loan                          -                6,444              (6,444)                 -  %
Change in fair value of warrant
liability                                            1,323               13,139             (11,816)             (89.9) %
  Income before income taxes                           354               31,095             (30,741)             (98.9) %
Provision for income taxes                           1,015                  703                 312               44.4  %
   Net (loss) income                                  (661)              30,392             (31,053)            (102.2) %
Less: net (loss) income attributable to
noncontrolling interest                                (90)              16,267             (16,357)            (100.6) %
   Net (loss) income attributable to
OppFi Inc.                                     $      (571)         $    14,125          $  (14,696)            (104.0) %

(Loss) earnings per share attributable to
OppFi Inc.:
(Loss) earnings per common share:
  Basic                                        $     (0.04)         $      

1.06

  Diluted                                      $     (0.04)         $      

0.29

Weighted average common shares
outstanding:
  Basic                                            13,972,971           13,363,996
  Diluted                                          13,972,971           84,464,783



Total Revenue

Total revenue consists mainly of revenue earned from interest on receivables
from outstanding loans based only on the interest method. We also earn revenue
from referral fees related primarily to our turn-up program, which represented
less than 0.2 % of total revenue for the three months ended September 30, 2022.

Total revenue increased by $32.3 million, or 35.1%, to $124.2 million for the
three months ended September 30, 2022 from $92.0 million for the three months
ended September 30, 2021. The increase was due to higher receivables balances
throughout the quarter, which was driven by both higher beginning balances and
origination growth.

Change in fair value and total provision

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Commencing on January 1, 2021, we elected the fair value option on the OppLoans
installment product. To derive the fair value, we generally utilize discounted
cash flow analyses that factor in estimated losses and prepayments over the
estimated duration of the underlying assets. Loss and prepayment assumptions are
determined using historical loss data and include appropriate consideration of
recent trends and anticipated future performance. Future cash flows are
discounted using a rate of return that we believe a market participant would
require based on the risk characteristics of the loans. We did not elect the
fair value option on our SalaryTap and OppFi Card finance receivables as these
products launched in November 2020 and August 2021, respectively, and inputs for
fair value are not yet determined. Accordingly, the related finance receivables
are carried at amortized cost, net of allowance for credit losses.

Change in fair value consists of gross charge-offs incurred in the period on the
OppLoans installment product, net of recoveries, plus the change in the fair
value on the installment loans portfolio. Change in fair value totaled $70.6
million for the three months ended September 30, 2022, which was comprised of
$67.7 million of net charge-offs and a fair market value adjustment of $2.9
million, up from $18.9 million for the three months ended September 30, 2021,
which was comprised of $24.9 million of net charge-offs and a fair market value
adjustment of $(6.0) million. The fair value adjustment for the three months
ended September 30, 2022 had a negative impact due to a decrease in the fair
value mark, partially offset by an increase in receivables in the period.

For the three months ended September 30, 2022, total provision consists of gross
charge-offs incurred in the period, net of recoveries, plus the change in the
allowance for credit losses for our SalaryTap and OppFi Card products. Total
provision increased for the three months ended September 30, 2022 due to the
increase in gross charge-offs on the SalaryTap and OppFi card products from
their launch in 2021.

Net revenue


Net revenue is equal to total revenue less the change in fair value and total
provision costs. Total net revenue decreased by $20.3 million, or 27.8%, to
$52.6 million for the three months ended September 30, 2022 from $72.9 million
for the three months ended September 30, 2021. This decrease was due to the rise
in gross charge-offs, which offset higher total revenues.

Expenses

Expenses include salary and benefits costs, interest expense and amortized debt issuance costs, sales and marketing, customer operations, technology, products and analytics, as well as other general and administrative expenses.


Expenses decreased by $7.8 million, or 12.7%, to $53.6 million for the three
months ended September 30, 2022, from $61.4 million for the three months ended
September 30, 2021. A large portion of the decrease was driven by lower direct
marketing spend due to a lower marketing cost per new funded loan. Additionally,
professional fees for three months ended September 30, 2021 were elevated as we
were incurring expenses associated with becoming a public company. The decrease
was partially offset by further investment in technology infrastructure, higher
insurance costs associated with being a public company and increased interest
expense as a result of increased debt draws to support higher receivables
balances. Expenses as a percent of revenue decreased year over year from 66.7%
to 43.1% for the three months ended September 30, 2022 compared to the three
months ended September 30, 2021.

(Loss) Operating Income


(Loss) income from operations is the difference between net revenue and
expenses. Total (loss) income from operations decreased by $12.5 million, or
108.4%, to $(1.0) million for the three months ended September 30, 2022, from
$11.5 million for the three months ended September 30, 2021.

Gain on PPP loan forgiveness


Gain on forgiveness of PPP Loan for the three months ended September 30, 2021
included the gain from an unsecured loan of $6.4 million in connection with the
U.S. Small Business Administration's ("SBA") Paycheck Protection Program (the
"PPP Loan").

Change in fair value of warrant liability

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Change in fair value of warrant liability for the three months ended
September 30, 2022 included the change in fair value of the warrant liability in
the amount of $1.3 million. This warrant liability arose with respect to
warrants issued in connection with the initial public offering of FGNA and is
subject to re-measurement at each balance sheet date.

income before taxes


Income before income taxes is the sum of income from operations, the gain on
forgiveness of PPP Loan and the change in fair value of warrant liability.
Income before income taxes decreased by $30.7 million, or 98.9%, to $0.4 million
for the three months ended September 30, 2022, from $31.1 million for the three
months ended September 30, 2021.

Income taxes

Opfi Inc. recorded a provision for income taxes of $1.0 million for the three months ended September 30, 2022 and $0.7 million for the three months ended
September 30, 2021.

Net income (loss)

Net (loss) income decreased by $31.1 millioni.e. 102.2%, at ($0.7) million for the three months ended September 30, 2022 of $30.4 million for the three months ended September 30, 2021.

(Loss) Net income attributable to Opfi Inc.


Net (loss) income attributable to OppFi Inc. was $(0.6) million for the three
months ended September 30, 2022. Net (loss) income attributable to OppFi Inc.
represents the (loss) income solely attributable to stockholders of OppFi Inc.
for the three months ended September 30, 2022. As a result of the Company's Up-C
structure, the underlying income or expense components that are attributable to
OppFi Inc. are generally expense items related to OppFi Inc.'s status as a
public company and the income or expense for the change in fair value of warrant
liabilities related to the Company's warrants, as well as the Company's
approximate percentage interest in the non-controlling interest. The underlying
income or expense components that are attributable to OppFi Inc. for the three
months ended September 30, 2022 are gain on change in fair value of warrant
liabilities of approximately $1.3 million, partially offset by tax expense of
approximately $1.4 million, payroll and stock compensation expense of
approximately $0.2 million, general and administrative expense of approximately
$0.2 million and board fees of approximately $0.1 million, for total (loss)
attributable to OppFi Inc. of approximately $(0.5) million. The (loss) also
includes OppFi Inc.'s percentage interest in the income attributable to
non-controlling interest of approximately $(0.1) million, for net (loss)
attributable to OppFi Inc. of approximately $(0.6) million.

The underlying income or expense components that are attributable to OppFi Inc.
for the three months ended September 30, 2021 are gain on change in fair value
of warrant liabilities of approximately $13.1 million, partially offset by tax
expense of approximately $0.7 million, general and administrative expense of
approximately $0.1 million and board fees of approximately $0.1 million, for
total income attributable to OppFi Inc. of approximately $12.2 million. The
income also includes OppFi Inc.'s percentage interest in the income attributable
to non-controlling interest of approximately $1.9 million, for net income
attributable to OppFi Inc. of approximately $14.1 million.

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Comparison of the nine months ended September 30, 2022 and 2021


The following table presents our consolidated results of operations for the nine
months ended September 30, 2022 and 2021 (in thousands, except number of shares
and per share data).

(in thousands, excluding share and per

              share data)                          Nine Months Ended September 30,                         Change
                                                      2022                    2021                  $                  %
Interest and loan related income               $        331,814          $   253,581          $   78,233               30.9  %
Other income                                              1,015                1,029                 (14)              (1.4) %
   Total revenue                                        332,829              254,610              78,219               30.7  %
Provision for credit losses on finance
receivables                                              (2,043)                (181)             (1,862)            1028.7  %
Change in fair value of finance
receivables                                            (162,280)             (52,635)           (109,645)             208.3  %
   Net revenue                                          168,506              201,794             (33,288)             (16.5) %
Expenses:
Sales and marketing                                      43,067               35,114               7,953               22.6  %
Customer operations                                      31,933               30,036               1,897                6.3  %
Technology, products, and analytics                      24,848               19,669               5,179               26.3  %
General, administrative, and other                       40,965               45,686              (4,721)             (10.3) %
   Total expenses before interest
expense                                                 140,813              130,505              10,308                7.9  %
Interest expense                                         24,421               17,406               7,015               40.3  %
   Total expenses                                       165,234              147,911              17,323               11.7  %
   Income from operations                                 3,272               53,883             (50,611)             (93.9) %
Gain on forgiveness of PPP loan                               -                6,444              (6,444)                 -  %
Change in fair value of warrant
liability                                                 7,024               13,139              (6,115)             (46.5) %
   Income before income taxes                            10,296               73,466             (63,170)             (86.0) %
Provision for income taxes                                1,757                  703               1,054              149.9  %
   Net income                                             8,539               72,763             (64,224)             (88.3) %
Less: net income attributable to
noncontrolling interest                                   4,576               58,638             (54,062)             (92.2) %

Net income attributable to Opfi Inc. $3,963

   14,125          $  (10,162)             (71.9) %

Earnings per share attributable to OppFi
Inc.:
Earnings per common share:
Basic                                          $           0.29          $      1.08
Diluted                                        $           0.09          $      0.29
Weighted average common shares
outstanding:
Basic                                                   13,694,733           13,107,874
Diluted                                                 84,277,277           84,464,783



Total Revenue

Total revenue consists mainly of revenue earned from interest on receivables
from outstanding loans based only on the interest method. We also earn revenue
from referral fees related primarily to our turn-up program, which represented
less than 0.2 % of total revenue for the nine months ended September 30, 2022.

Total revenue increased by $78.2 million, or 30.7%, to $332.8 million for the
nine months ended September 30, 2022 from $254.6 million for the nine months
ended September 30, 2021. The increase was due to higher receivables balances
throughout the period, which was driven by both higher beginning balances and
origination growth.

Change in fair value and total provision

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Commencing on January 1, 2021, we elected the fair value option on the OppLoans
installment product. To derive the fair value, we utilize a discounted cash flow
analyses that factors in estimated losses and prepayments over the estimated
duration of the underlying assets. Loss and prepayment assumptions are
determined using historical loss data and include appropriate consideration of
recent trends and anticipated future performance. Future cash flows are
discounted using a rate of return that we believe a market participant would
require based on the risk characteristics of the loans. We did not elect the
fair value option on our SalaryTap and OppFi Card finance receivables as these
products launched in November 2020 and August 2021, respectively, and inputs for
fair value are not yet determined. Accordingly, the related finance receivables
are carried at amortized cost, net of allowance for credit losses.

Change in fair value consists of gross charge-offs incurred in the period on the
OppLoans installment product, net of recoveries, plus the change in the fair
value on the installment loans portfolio. Change in fair value totaled $162.3
million for the nine months ended September 30, 2022, which was comprised of
$161.5 million of net charge-offs and a fair market value adjustment of $0.8
million, up from $52.6 million for the nine months ended September 30, 2021,
which was comprised of $62.1 million of net charge-offs and a fair market value
adjustment of $(9.4) million. The fair value adjustment for the nine months
ended September 30, 2022 had a negative impact due to a decrease in the fair
value mark, partially offset by the increase in receivables in the period.

For the nine months ended September 30, 2022, total provision consists of gross
charge-offs incurred in the period, net of recoveries, plus the change in the
allowance for credit losses for our SalaryTap and OppFi Card products. Total
provision increased for the nine months ended September 30, 2022 due to the
increase in gross charge-offs on the SalaryTap and OppFi card products from
their launch in 2021.

Net revenue


Net revenue is equal to total revenue less the change in fair value and less
total provision costs. Total net revenue decreased by $33.3 million, or 16.5%,
to $168.5 million for the nine months ended September 30, 2022 from $201.8
million for the nine months ended September 30, 2021. This decrease was due to
the rise in gross charge-offs, which offset higher total revenues.

Expenses

Expenses include salary and benefits costs, interest expense and amortized debt issuance costs, sales and marketing, customer operations, technology, products and analytics, as well as other general and administrative expenses.


Expenses increased by $17.3 million, or 11.7%, to $165.2 million for the nine
months ended September 30, 2022, from $147.9 million for the nine months ended
September 30, 2021. A large portion of the increase was related to higher direct
marketing costs to drive higher new originations throughout the first half of
the year, an increase in professional fees related to tax and legal guidance,
further investment in technology infrastructure, higher insurance costs
associated with being a public company and increased interest expense as a
result of increased debt draws to support higher receivables balances. Due to
headcount reductions and vendor savings implemented in the first half of 2022,
expenses as a percent of revenue decreased year over year from 58% to 50% for
the nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021.

Income from operations


Income from operations is the difference between net revenue and expenses. Total
income from operations decreased by $50.6 million, or 93.9%, to $3.3 million for
the nine months ended September 30, 2022, from $53.9 million for the nine months
ended September 30, 2021.

Gain on PPP loan forgiveness

Gain on cancellation of PPP loan for the nine months ended September 30, 2021
included the $6.4 million PPP loan gain.

Change in fair value of warrant liability


Change in fair value of warrant liability for the nine months ended
September 30, 2022 included the change in fair value of the warrant liability in
the amount of $7.0 million. This warrant liability arose with respect to
warrants issued in connection with the initial public offering of FGNA and is
subject to re-measurement at each balance sheet date.

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Contents

income before taxes


Income before income taxes is the sum of income from operations, the gain on
forgiveness of PPP Loan and the change in fair value of warrant liability.
Income before income taxes decreased by $63.2 million, or 86.0%, to $10.3
million for the nine months ended September 30, 2022, from $73.5 million for the
nine months ended September 30, 2021.

Income taxes


OppFi Inc. recorded a provision for income taxes of $1.8 million for the nine
months ended September 30, 2022 and $0.7 million for the nine months ended
September 30, 2021. As noted above, OppFi-LLC is treated as a partnership and is
not subject to income taxes. Prior to the consummation of the Business
Combination on July 20, 2021, there were no taxes attributable to OppFi Inc. as
OppFi-LLC was the only reportable entity.

Net revenue


Net income decreased by $64.2 million, or 88.3%, to $8.5 million for the nine
months ended September 30, 2022 from $72.8 million for the nine months ended
September 30, 2021.

Net income attributable to Opfi Inc.


Net income attributable to OppFi Inc. was $4.0 million for the nine months ended
September 30, 2022. Net income attributable to OppFi Inc. represents the income
solely attributable to stockholders of OppFi Inc. for the nine months ended
September 30, 2022. As a result of the Company's Up-C structure, the underlying
income or expense components that are attributable to OppFi Inc. are generally
expense items related to OppFi Inc.'s status as a public company and the income
or expense for the change in fair value of warrant liabilities related to the
Company's warrants, as well as the Company's approximate percentage interest in
the non-controlling interest. The underlying income or expense components that
are attributable to OppFi Inc. for the nine months ended September 30, 2022 are
gain on change in fair value of warrant liabilities of approximately $7.0
million, partially offset by tax expense of approximately $2.3 million, payroll
and stock compensation expense of approximately $0.6 million, general and
administrative expense of approximately $0.5 million and board fees of
approximately $0.3 million, for total income attributable to OppFi Inc. of
approximately $3.3 million. The income also includes OppFi Inc.'s percentage
interest in the income attributable to non-controlling interest of approximately
$0.6 million, for net income attributable to OppFi Inc. of approximately $4.0
million.

The underlying income or expense components that are attributable to OppFi Inc.
for the nine months ended September 30, 2021 are gain on change in fair value of
warrant liabilities of approximately $13.1 million, partially offset by tax
expense of approximately $0.7 million, general and administrative expense of
approximately $0.1 million and board fees of approximately $0.1 million, for
total income attributable to OppFi Inc. of approximately $12.2 million. The
income also includes OppFi Inc.'s percentage interest in the income attributable
to non-controlling interest of approximately $1.9 million, for net income
attributable to OppFi Inc. of approximately $14.1 million.

CONDENSED BALANCE SHEET

Comparison of closed periods September 30, 2022 and December 31, 2021

The following table presents our condensed balance sheet September 30, 2022 and December 31, 2021 (in thousands):

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© Edgar Online, source Previews

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What Are Your Benefits Really Worth? https://paydayadvanceusca.com/what-are-your-benefits-really-worth/ Sun, 06 Nov 2022 03:39:35 +0000 https://paydayadvanceusca.com/what-are-your-benefits-really-worth/ Benefits make up more than 30% of typical job compensation, according to the US Bureau of Labor Statistics. But understand what your advantages worth is not always easy. You may need to do some research to find out how much your employer contributes to health insurance, retirement packages and other benefits. Some benefits also have […]]]>

Benefits make up more than 30% of typical job compensation, according to the US Bureau of Labor Statistics. But understand what your advantages worth is not always easy.

You may need to do some research to find out how much your employer contributes to health insurance, retirement packages and other benefits. Some benefits also have non-monetary value, and people can value the same benefits in different ways.

For example, people with medical conditions are likely to appreciate guaranteed access to disability or life insurance that might otherwise be difficult to obtain or prohibitively expensive. Someone who has student loans may value a student debt relief program much more than someone who does not have student debt.

Now that open enrollment season is back, it’s a great time to review your current employer offers. Understanding what your benefits are worth could renew your commitment to your current job or make you realize it’s time to look for a better deal. If you’re considering becoming self-employed, you can better understand how much extra you’ll need to earn to replace your current benefits.

Here are some of the most common benefits, along with typical employer contribution amounts, according to Mercer, a benefits consultant.

Health insurance: $5,000 to $20,000

Employer-provided health insurance plans range from the simplest to the most extravagant. On average, however, employers paid 83% of the premium of $7,739 last year for individual coverage and 73% of the premium of $22,221 for family coverage, according to KFF, an employment research organization. ‘Health Insurance.

You can find what you and your employer paid for health insurance last year on your 2021 W-2, says Paul Fronstin, director of health benefits research at the Benefits Research Institute, or EBRI. The annual figure is often reported using a ‘DD’ code.

Your employer can also itemize their contribution on your pay stub. A pay stub is a document that provides details of your gross and after-tax pay as well as various deductions. You can often access your pay stub through your company’s online payroll system. check with your human resources department.

Of course, premiums are only one factor in evaluating your healthcare coverage. Deductibles, copayments and provider networks also matter. Having access to different types of plans can make open enrollment more confusing, but it can also help you tailor your coverage to your situation.

Retirement savings plan: 3% to 10% of salary

EBRI surveys have consistently found that the benefit employees value most after health insurance is access to a pension plan, with all other benefits falling “a distant third,” Fronstin says.

According to AARP, people who have workplace retirement plans such as 401(k)s are much more likely to save for retirement than those who don’t. These plans offer automatic payroll deductions, and many people also enroll automatically.

Most 401(k)s also come with company matches, which is free money that can help employees build wealth faster. Some of the more common matches include 50% of the first 6% of salary the worker contributes, or a dollar-for-dollar match of 3% to 6% of salary.

Employers can contribute an even higher percentage of salary to traditional pension plans, which promise a specified monthly benefit amount upon retirement. This contrasts with 401(k) and other defined contribution plans, where the amounts you receive in retirement depend on the amount of contributions and the performance of your investments.

Pensions are still common among government agencies, colleges and nonprofit health care organizations, though only about 15% of private sector workers have access to such plans, according to the Bureau of Labor Statistics.

Everything else: from zero to thousands

Employers who offer dental insurance typically pay $500 to $2,500 a year for coverage, according to Sandra Sweeney, director of professional practice at Mercer. Life insurance costs on average between $100 and $300 per employee, while disability insurance generally costs between $250 and $1,500.

Employers may offer access to other coverage, such as supplemental life insurance, long-term care insurance, or pet insurance. Workers generally pay the full cost, but may qualify for group rates for policies, Fronstin says.

Tuition assistance is also increasingly popular. About half of employers offer tuition assistance, according to the Society for Human Resource Management. And of the companies surveyed by EBRI last year, 17% offered some sort of student debt relief, while 31% planned to do so.

Workers can also exclude up to $5,250 in tuition assistance from their income on their tax returns, according to the IRS. And through 2025, the limit also includes student loan repayment assistance.

Remember that your employer offers benefits to attract, retain and reward workers. If you’re not sure about all of your benefits or their value, your human resources department should be happy to inquire, Fronstin says.

“Ask your employer,” says Fronstin. “It’s not a secret.”

By Liz Weston of NerdWallet

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are intended for general informational purposes only and should not be construed or construed as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or other personal finance advice. Epoch Times assumes no responsibility for the accuracy or timeliness of the information provided.

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Is auto leasing better than buying your next car? https://paydayadvanceusca.com/is-auto-leasing-better-than-buying-your-next-car/ Thu, 03 Nov 2022 15:47:34 +0000 https://paydayadvanceusca.com/is-auto-leasing-better-than-buying-your-next-car/ When it’s time for you to get a new car, you might want to consider whether you should buy it or lease it. Both choices have their pros and cons. Knowing the facts can help you make a better decision. Benefits of buying a car Buying a car offers several advantages over leasing that could […]]]>

When it’s time for you to get a new car, you might want to consider whether you should buy it or lease it. Both choices have their pros and cons. Knowing the facts can help you make a better decision.

Benefits of buying a car

Buying a car offers several advantages over leasing that could make it a better deal for you, especially if you want to keep it longer. Although the monthly payments are higher than if you were leasing, you will own the car when you are done paying for it. At this point, you’re free to do whatever you want with it. The upside is that there’s an end to your payments, at least until you buy your next car, which could be years later.

As a car owner, you can also drive the car as much as you want without worrying about mileage limitations. You also won’t have to worry about any issues while the manufacturer’s warranty is still in effect, but after that the cost of repairs will be your responsibility.

A car you own accumulates equity as you make payments, just like a house. It allows you to trade it in later for the value of the car at that time, giving you a discount on your next vehicle.

The downside of buying a car

Buying a car often results in a six to eight year loan. Although a long-term loan pays you less (the longer a loan, the shorter your payments), there may be a problem if you have to sell it or if it gets destroyed. This can mean that you end up paying for the vehicle years after you no longer have it, and you also end up paying for another car.

When considering the question of buying versus leasing a car, Forbes concludes that it is a better financial option to buy– but it depends on your unique needs. It’s best if you plan to keep the car for years because your payments come to an end and you end up owning the car.

When buying, consider how quickly the car depreciates. Investopedia says that new cars typically lose 15-25% of their value in the first five years. You can save money if you buy one with a few miles – a certified used vehicle – and avoid the significant depreciation of a new car when you drive it off the lot.

Advantages of renting a car

If you don’t mind ongoing payments, leasing a car would be a better option, as long as the dealer performs the maintenance for free. Even if you will never own the car, you can choose the duration of your lease: 24, 36, 48 or 60 months. This can be a big plus if you’re looking to use a short-term vehicle.

Payments for renting a car are cheaper than they would be for the same model. This can make leasing quite attractive, as it will allow you to drive newer car models for less than if you bought the car, and continue to do so.

Rental contracts generally include maintenance and any repairs. The car is still under the manufacturer’s warranty, which helps to ensure that any issues are resolved at no cost to you. You will be responsible for obtaining insurance for this.

At the end of the lease, you can select another new or newer car and repeat the process, if you wish. You may also have the option of buying the car at the end of the lease. If this option is available, the price must be specified in the rental document, if purchase is an available option.

Some car dealerships may offer no-cash leasing, which would make it cheaper than buying the vehicle. Forbes says that some rental contracts will require you to pay a deposit, which will reduce your monthly bill. You should probably avoid large down payments, Serious said, because if the car is stolen or destroyed soon after you get it, you won’t get your money back. In lieu of a down payment, some dealerships may charge an “acquisition fee”, but the cost will be about the same. You must also pay sales tax on the depreciated value of the car.

Disadvantages of renting a car

At the end of the lease, you will return the car to the dealership. They will examine it carefully for damage. If the wear and tear is deemed excessive, you will pay a charge for it and any damage.

If you decide you no longer need or want the car and decide to return it, you may have to pay a considerable fee. The amount may be equal to what you would have paid if you had kept the car for the full term.

Driving a rented car over the mileage limits means paying for it at a specified cost, which is usually a lot per mile over the limit. consumer reports says that these fees could range between 10 and 50 cents per mile. Most dealerships limit mileage to 12,000 miles per year, but you can get higher limits, for a price.

How to get your car: buy or lease

Whether you buy or rent your next set of wheels comes down to your preference. If you prefer to drive newer vehicles and don’t mind mileage limits, leasing is your perfect option. If you’re only interested in a short-term lease, this could help you avoid further debt and possibly pay a large sum of money up front.

Getting a lease on a new car can also be easier to get than getting a loan on one. MarketWatch mentions that you probably won’t need as much money for a lease as for a loan. Sales tax is also lower in most states for leasing a car than for buying a car.

Kevin O’Leary, a CNBC “Money Court” judge, says it’s a good idea to rent a car as long as its transmission is warranted. If longer than that, you can expect to add a maintenance fee to your rental fee.

O’Leary also says that when you sell a car, you get back some of the money you spent on it. The value of the car can reduce the cost of your next vehicle. If you rent, you do not recover any costs. If you include the money you get back when you sell your car, you probably spent less on buying the car than on leasing it.

When you start looking for another vehicle, go to more than one dealership and compare prices whether you are buying or leasing one. You can also watch online. Car prices vary widely from dealer to dealer, as do car rental contracts. Deciding whether to lease or buy a car ultimately comes down to your needs and preferences, and having a good credit rating will also help you get a better deal.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are intended for general informational purposes only and should not be construed or construed as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or other personal finance advice. Epoch Times assumes no responsibility for the accuracy or timeliness of the information provided.

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Mike Valles has been a freelance writer for many years, focusing on personal finance articles. He writes articles and blogs for businesses and lenders of all sizes and seeks to provide quality, up-to-date, easy-to-understand information.

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How the rapid appreciation of the US currency is causing stress in developing countries and emerging markets | D+C https://paydayadvanceusca.com/how-the-rapid-appreciation-of-the-us-currency-is-causing-stress-in-developing-countries-and-emerging-markets-dc/ Sun, 30 Oct 2022 01:15:00 +0000 https://paydayadvanceusca.com/how-the-rapid-appreciation-of-the-us-currency-is-causing-stress-in-developing-countries-and-emerging-markets-dc/ The US dollar is currently appreciating rapidly. Against the backdrop of the crises caused by the Covid-19 shutdowns and the Russian invasion of Ukraine, this trend is causing difficulties in many developing countries and emerging markets. Central banks in high-income countries pay little attention to the global implications of their decisions. Exchange rates have recently […]]]>

The US dollar is currently appreciating rapidly. Against the backdrop of the crises caused by the Covid-19 shutdowns and the Russian invasion of Ukraine, this trend is causing difficulties in many developing countries and emerging markets. Central banks in high-income countries pay little attention to the global implications of their decisions.

Exchange rates have recently become increasingly volatile. Faced with inflation, the Fed (Federal Reserve – the central bank of the United States) adopted a hawkish policy, raising interest rates several times. The fed funds rate was close to zero at the start of the year and is now between 3 and 3.25%. For several reasons, this effort to control rising prices increases the risks of recession not only in the United States and may indeed lead to a global slowdown.

The pandemic and the war have generally increased uncertainty. Investors have therefore become more risk averse. Moreover, higher interest rates make investments in the real economy, which are important engines of growth, more expensive. The reason for this is that these investments are normally financed at least in part by loans. High interest rates therefore generally reduce growth. This mechanism applies to all economies, including the United States.

The great irony is that central bank interest rates have very little impact on energy and food prices, which are currently the main drivers of inflation. However, higher rates make clean energy investments more expensive, which would reduce the relevance of fossil fuel imports and make economies more environmentally sustainable.

International implications

The Fed’s new stance has other impacts internationally. Higher interest rates in the United States are an incentive for international investors to seek the safe harbor offered by the dollar. As a result, the dollar exchange rate continues to rise against the currencies of most economies. At the same time, the strong dollar tends to hurt developing economies in particular in several ways:

  • Many of them – and in particular the least developed countries – cannot borrow in their own currency. They must service loans denominated in dollars in dollars. The service consists of repaying the loan plus the interest rate. As the dollar appreciates, their loans therefore become more expensive measured in their national currencies. The sovereign debt burden, which is already a huge problem in many countries, is growing.
  • To prevent their own currencies from depreciating, central banks in other countries must follow the Fed’s lead and raise interest rates. They are already quite high in many developing countries and emerging markets. While higher interest rates help stem capital flight to safer financial assets in the United States, they make investing in the real economy even less attractive.
  • If a dollar-denominated loan needs to be refinanced, the new loan will not only carry a higher exchange rate, but also a higher interest rate.

The current situation is extremely difficult. On the one hand, the central banks of developing countries want to encourage the inflow of foreign investment. On the other hand, rising interest rates increase the cost of domestic borrowing and have a stifling effect on growth. In the longer term, weaker growth is also likely to undermine government revenue, further aggravating debt problems.

Trade impacts

The appreciation of the dollar also has repercussions on trade, especially since the American currency dominates international transactions. Even companies that operate in non-dollarized economies use it to settle business. Commodities, in particular, are usually bought and sold in dollars everywhere, so countries that export commodities may actually benefit to some degree from the strength of the dollar.

Other countries, however, often see their exports increase as well. The reason is that the high dollar exchange rate makes their products relatively cheap in the eyes of foreign buyers. On the other hand, imports become more expensive in terms of national currencies. This applies both to consumer goods – including food, on which some countries depend – and to intermediate goods needed to produce other goods. As a result, domestic companies may be forced to reduce their investments and/or production.

It is very important that most developing economies are so-called “price takers”. The term means that they are unable to influence world market prices. As they depend on world trade, they are forced to sell their goods at the prices currently paid. All in all, while economies with strong export sectors can benefit from a strong dollar as it allows them to sell even more abroad, most economies suffer.

Exchange rate volatility is a problem in itself

The high volatility of an exchange rate is also a problem in itself. Rapid and unpredictable changes in the external value of a currency contribute to the general feeling of uncertainty. The fastest exchange rate this year was the Russian ruble (mainly due to the war), followed by the Turkish lira and the Brazilian real. Such volatility tends to be counterproductive for the real economy, as it causes sharp reversals in capital flows and undermines planning. The threshold above which exchange rate volatility begins to negatively affect the real economy is generally lower in small economies than in large ones.

Finally, excessive exchange rate volatility has implications for monetary policy. It can make monetary policy ineffective, especially when there are inconsistencies between the policies of central banks and those of ministers in charge of finance and the economy. Persistent central bank interventions to stabilize exchange rates can also entail high costs. This may be the case in terms of declining foreign exchange reserves and/or the central bank buying assets of questionable value.

Harder times

The appreciation of the dollar is currently aggravating economic problems in many places. The new Fed policy means tougher times for most disadvantaged nations. To a lesser, but still important extent, this also applies to the European Central Bank (ECB), which is also, albeit more slowly, raising its rates.

Central banks in high-income countries are not used to considering the impacts on poorer regions of the world. People in developing countries and emerging markets are used to the model of established Western powers appealing to the global common good when it suits them, but pursuing narrowly understood national interests when they can.

Unfortunately, developing countries have few options to deal with the challenges of short-term exchange rate depreciation and volatility. It is best to address these challenges pre-emptively rather than reactively. Generally speaking, developing country governments should only engage in sustainable borrowing and always ensure that they have a strong flow of domestic revenue.

However, even in times of crisis, policymakers must do their best to find ways to encourage investment to spur economic growth while reducing fiscal pressures. The international community, in turn, must do more to accelerate debt restructuring, which will be crucial to put developing countries back on a more sustainable fiscal path (see Kathrin Berensmann on www.dandc.eu).


André de Mello and Souza is an economist at Ipea (Instituto de Pesquisa Econômica Aplicada), a federal think tank in Brazil.

andre.demelloesouza@alumni.stanford.edu

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