Don't Shop 'Till You Drop
Avoid the Holiday Shopping Hangover this Season

By Stanley J. Kershman

It's that tinselly time of year again. The turkey coma from Thanksgiving is barely fading before we're heading through the door to the malls to find the perfect gifts for all of the special someones on our lists: once the dishes are done, there are just 31 days left before Christmas. Can we do it?

More importantly, can we afford it?

We'll spend an average of approximately $700 over the holidays, which can be a big chunk of January's paychecks - so, all too often, the answer is "no, we can't afford it," especially if we don't have the funds available to pay those post-holiday bills. Still, it's so easy to become caught up in the season's spirit of giving, especially when it comes to impulse buys.

Think for a moment about the flip side of that generosity, however. If, for example, we can afford to pay only the minimum monthly payment on a credit card bill of $1,000, it would take us 153 months to pay it off - that's almost 13 years, with $1,100 in interest charges along the way.

Finances aren't something that we tend to talk about among family and friends, but if we asked them if they really wanted us to put ourselves in that position for them, they would surely tell us "no."

There is a solution, however. With a little planning and forward thinking, you can show how much you appreciate the people in your lives while avoiding the holiday shopping hangover. Along the way, you'll also be setting a wonderful example for your family, especially children, about recognizing love and friendship without attaching a monetary debt to it.

Try these five simple steps to avoid shopping 'till you drop for the holidays:

1. Write a list. Enter the person's name, and decide whether a gift is really needed, or whether a beautiful card and handwritten note would be just as valued.



2. Set a budget. Figure out how much you can afford to spend this year on gifts, and divide that amount among those you wish to buy for.



3. Strategize. If your budget doesn't stretch far enough, come up with alternatives. Can you join forces with other family members to make your dollars go further? How about agreeing to a cost limit on presents between family members or friends? Or agreeing to make a donation in each other's names to favorite causes? Or hand-crafting your gifts?



4. Shop ahead. Check out sales flyers, online catalogs and stores to come up with suggestions for each person. Monitor the prices you've found, so that you'll know when the sale's a good one.



5. Keep track. When you make the purchase, enter the date and how much you paid, so that you'll know how much you're spending compared to how much you budgeted - and so that credit card bills in January won't be a shock.

And above all - cherish the warmth and light of the season, all the while secure in the knowledge that you're not putting yourself deep into debt to do so.

Stanley J. Kershman is a bankruptcy lawyer with the law firm of Perley-Robertson, Hill & McDougall LLP and is the author of Put Your Debt on a Diet: A Step-by-Step Guide to Financial Fitness. Free copies of his handy Holiday Planning worksheet, and more financial fitness tips can be found at www.debtonadiet.com. He can be reached at (613) 238-1924 or skershman@perlaw.ca.

"Payday" Borrowers
Knowing Your Rights, Maximizing Your Options

By Stanley J. Kershman

Have you ever needed an advance on your paycheque? Simply a small amount to cover that unexpected expense or inflated bill payment? If so, you may have been tempted to visit a local "payday" outlet. For years, certain companies have eagerly offered to provide their clientele with a sum of money equal to an anticipated cheque. Now might be just the right time for you to accept that offer. However, borrower beware. These loans come with a significant price tag attached.

Within the system as it currently exists, payday lenders often tie their services to a number of conditions: interest charges and fees can be much higher than those found at local banks or credit unions; individuals may be asked to provide personal bank account data; and personal property may be required as security on the loan. As a result, many people have been taken advantage of, simply because they're in a position of economic vulnerability. In some cases, fees and interest have breached the provisions of Canada's Criminal Code. Despite these known issues, this industry has escaped any form of government regulation. Until now.

Today, there is a tremendous push within the Ontario government to change the way payday lenders do business. The introduction of Bill 193, which has already received second reading, has spearheaded this process. When the Bill passes its third and final reading, borrowers will - for the first time - have a set of rights that will protect them against a profiteering payday lender. As a result, it will become easier for borrowers to pay back payday loans, with fewer strings attached.

Here's how the new system will work: any loan transaction that's $3,000 or less with a term of two months or less will be covered. Lenders will be required to obtain a license from the Ministry of Consumer and Business Services to ensure that they follow a strict set of guidelines. In reality, getting licensed will be a demanding hurdle. Lenders will have to pay a fee to do business and will need to disclose their working capital before setting up shop. They will also have to publicize a significant amount of sensitive data, such as ownership, corporate structure and decision-makers.

Under Bill 193, once a license has been obtained by the lender, it may be suspended or taken away at any time by a Registrar, who will be appointed by the Minister of Consumer and Business Services. Although a Tribunal will soon be set up to handle any licensing disputes, the Registrar will retain a significant amount of discretionary authority. If, in the Registrar's opinion, it would be in the public's best interest to shut down a payday lender immediately, the Registrar will be able to do so, subject to certain strict limitations.

The new legislation will protect the borrower by capping interest rates on payday loans. The Minister will be given the authority to set a maximum annual percentage rate and to determine how the rate itself is calculated. Moreover, the Minister will have the power to identify - and therefore limit - any other borrowing fees that may be lawfully charged by the lender for its services.

The Bill will also introduce a cap on loan amounts. In basic terms, it will be illegal for the lender to advance anything more than 25 percent of what borrowers expect to receive from their next pay deposit or benefits cheque. For instance, if a borrower anticipates receiving a paycheque of $1,000, the lender will legally be entitled to advance that individual a maximum of $250 at a capped annual interest rate.

In addition, Bill 193 proposes a structure for dispute resolution. As a first step, if borrowers believe they have been charged an unlawful fee, they may personally demand a refund from the lender. This demand must be made within one year of the initial payment. If the lender refuses to issue a refund, borrowers will be entitled to file a complaint with the Tribunal. This Tribunal will have the power to compel the lender to repay that fee, and will also be able to punish an abusive lender by issuing an order for punitive damages.

Finally, strict offence and penalty provisions have been introduced by the Bill. This will undoubtedly protect the borrower by deterring many possible violations. For instance, if convicted of an offence under this legislation, an individual will be liable for a fine of up to $50,000, a term of imprisonment of up to two years less a day, or both. The corporate penalty for such a conviction will be a fine of up to $250,000. Both provisions serve as a strong indicator that breaches of the governing legislation will be taken quite seriously.

Overall, Bill 193 has been proposed to protect the borrower from a small yet damaging group of unscrupulous lenders. By passage of this legislation, many individuals will have the opportunity to better understand their rights when it comes to payday loans, and to maximize their options. Their unexpected financial needs will become much easier to fulfill, at a much reduced price tag. And overall, the payday lending industry will experience a regulatory regime that has been needed for some time.

Stanley J. Kershman is the head of the Bankruptcy and Restructuring Department of Perley-Robertson, Hill & McDougall LLP. He has been certified as a specialist in bankruptcy and insolvency law by the Law Society of Upper Canada. He provides expert opinion for television, radio and print media. He is the author of Credit Solutions: Kershman on Advising Secured and Unsecured Creditors (Carswell) and Put Your Debt on a Diet: A Step By Step Guide to Financial Fitness (Wiley). You can reach Stanley at (613) 238-1924 or at skershman@perlaw.ca. For more information about Stanley, visit www.perlaw.ca.

For a Happier New Year
Financial Resolutions to Take to the Bank

There's nothing like a brand new year to convince us that anything is possible - including getting our financial houses in order.

"Debts are a source of worry or anxiety for too many of us," says Stanley Kershman, one of the leading authorities on solving financial disasters, and the author of Put Your Debt on a Diet: A Step by Step Guide to Financial Fitness. "But we don't have to live that way. Setting our goals, and deciding how we're going to achieve them, is half the battle."

To help you set financial resolutions that you can keep, Stanley offers the following advice:

The Five Best Financial Resolutions to Make
1. I will set specific, measurable and time-sensitive financial goals, and I'll put them in writing.
2. I will pay off my debts, putting the most money each month toward the one that charges the highest interest rate.
3. Once my debts are repaid, I will take 10 percent of each paycheck and invest it in savings.
4. I will analyze my choices for retirement planning, to make sure that I'm making the most of them.
5. I will assess all risks to my family's financial health - including the death or long-term disability of a family member - and obtain insurance to cover them.

The Three Financial Planning Solutions that Too Many People Miss
1. Reviewing your mortgage. Did you make the best choice for your mortgage? If you didn't, how much would the penalty be if you renegotiated? If your mortgage is fine, are you taking advantage of all of its options, such as the annual principal pay-down clause?
2. Making a will. Leaving your family without a will to help deal with your financial estate could cost them dearly - in expenses, legal fees and emotional wear and tear.
3. Preparing a power of attorney. Make it easier for your family to make health-related or financial decisions if you're incapacitated.

The Worst Mistakes That People Make When Setting Financial Goals
1. Expecting instant solutions. It takes time to get into debt, and time to get out of it.
2. Going it alone. When you need health advice, you visit your doctor; when you need financial advice, you should visit a qualified, licensed advisor.
3. Not writing it down. Create a plan, write it down, and review it regularly. If it needs to change, change it.

A leading authority on solving financial disasters, Stanley J. Kershman has been helping people get out of debt for more than 25 years. Put Your Debt on a Diet: A Step-by-Step Guide to Financial Fitness is available at www.amazon.com.

Consumers can find free copies of Stanley's handy budgeting and debt reduction worksheets at www.debtonadiet.com.

Contact Stanley J. Kershman for information or interviews at:

Phone: 613-566-2862
Pager: 613-751-1350
E-mail: skershman@rogers.blackberry.net