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By Darby Finch
Four men were arrested in Indiana for allegedly using shell companies to defraud nursing home patients in the senior communities where they were executives. They overcharged for drugs and other goods and received the extra money through a shell company. If a vendor questioned the inflated prices, the executives would move on to another company that would pay the prices they were asking. They reportedly used more than twenty shell companies to receive $5.5 million in kickbacks.
By Greg Williams
Puerto Rico Governor Alejandro García Padilla submitted a fiscal plan to the new Puerto Rico Financial Oversight and Management Board when it met in New York October 14th. Congressional legislation passed in June created the board and requires the Governor to submit a fiscal plan to the board for approval. Congress passed the legislation to address Puerto Rico's $70 billion debt crisis.
"Puerto Rico's fiscal plan needs to protect the vulnerable, promote economic growth and prevent further austerity," commented Eric LeCompte, Executive Director of the religious development coalition Jubilee USA. LeCompte testified before Congress in February on resolving Puerto Rico's crisis. "The most important issue facing the board is restructuring Puerto Rico's debt to sustainable levels."
In addition to approving the Governor's fiscal plan, the oversight board has the power to initiate a debt restructuring process for Puerto Rico. Puerto Rico avoided a large-scale July 1 default when President Obama signed the debt crisis legislation June 29th. The legislation placed a temporary hold on debt lawsuits against the island, a provision some investors are challenging in court.
The Governor is expected to prioritize public services and pensions in his plan. Puerto Rico's poverty rate is over 40% and nearly 60% of Puerto Rico's children live in homes that receive government assistance. Over 10% of the island's population has left in the past decade. Puerto Ricans are US citizens and can leave the island for the US mainland without participating in any immigration process.
"Austerity in fiscal plans will only make a bad situation worse," said LeCompte who is serving on a task force of independent experts that is reviewing the oversight board's actions.
Read more about the Puerto Rico economic oversight board
Read more about the Puerto Rico debt crisis legislation that created the oversight board
Read more about the task force monitoring the Puerto Rico oversight board
Read a timeline of Puerto Rico's debt crisis
By Greg Williams
Jubilee USA participated in a variety of ways at last week's International Monetary Fund/World Bank Annual meetings.
By Greg Williams
Friday, October 7th is the final day for the public to comment on new proposed federal regulations on "payday loans." Payday loans are short-term loans that carry an average annual interest rate of nearly 400% and are often marketed to low-income communities. The Consumer Financial Protection Bureau (CFPB) issued a proposed "rule" in June that would require a payday lender to assess the borrower's ability to repay the loan and meet basic living expenses. The CFPB will incorporate the public comments - more than 500,000 messages to date - before issuing a final regulation.
"We need to be sure that vulnerable communities are not targets of predatory lending practices," said Eric LeCompte, Executive Director of Jubilee USA, a religious development coalition that submitted comments on the rule. "We are pleased with the work of the bureau in promoting responsible lending practices."
Critics claim payday lending can trap borrowers in a worsening debt cycle. Eighty percent of short-term loans are re-borrowed within a month and over fifty percent of all short-term loans are followed by at least 3 or more additional loans. Half of payday loan borrowers earn less than $25,000 per year. Predominantly African-American neighborhoods have three times as many payday lending stores as predominantly white neighborhoods.
In its public comments, Jubilee USA called on the CFPB to strengthen the rule. It called for strong definitions of what makes a loan "affordable," a clear process to assess a lender's default rate and for caps on the number of consecutive loans a consumer can borrow.
On October 14-16, more than 100 US faith communities affiliated with Jubilee USA will hold prayer services that focus on concerns around payday lending. The communities will promote alternatives to payday lending and advocate for state laws to cap payday interest rates.
"Responsible lending lifts communities up," stated Andrew Hanauer, Jubilee USA's Campaigns Director. "People of faith are concerned with lending practices that hurt the poor."
Read more about payday lending
Read more about the Consumer Financial Protection Bureau's new rule on payday lending
Read Jubilee USA's comments to the Consumer Financial Protection Bureau on its proposed payday lending regulations
Read more about faith communities' actions on payday lending
Washington DC - Finance Ministers, heads of central banks and government delegations open the Annual International Monetary Fund (IMF) and World Bank meetings through October 9th. As the meetings start, the IMF reports a sluggish economic growth forecast and a slow recovery from the global financial crisis of 2008.
"These meetings are an opportunity for us to come to a consensus on preventive measures for financial crisis," noted Eric LeCompte, Executive Director of the religious development coalition Jubilee USA who is participating in events during the meetings. "Unfortunately, even with concerning IMF global economic reports, I fear we are not ready to improve financial regulations."
Earlier this week, the IMF announced it will continue to lend at zero-interest to some low-income countries for at least two more years. The "Poverty Reduction and Growth Trust," an IMF project, offers loans at concessional rates to low-income countries. IMF Managing Director Christine LaGarde noted that many low-income countries face increased danger because of current global economic challenges. According to IMF data, 55 of 70 low-income countries are in "debt distress" or at risk of debt distress.
"We applaud the decision of the IMF," stated LeCompte, who serves on United Nation expert finance groups. "Our hope is that the IMF will make this this zero percent lending permanent."
Read more about the IMF's projection for global growth
Read more about the zero interest loan project
Read more about an IMF event Jubilee USA is sponsoring on resolving financial crisis
By Greg Williams
The International Monetary Fund (IMF) released its bi-annual report on the state of the global economy, noting that global growth is "subdued" and uneven. Ahead of the IMF/World Bank Annual Meetings in Washington, the World Economic Outlook report projects the economy to grow by 3.1 percent in 2016. The Fund notes "the precarious nature of the recovery eight years after the global financial crisis." The report notes strong growth in Asia but weaker growth in Latin America, Africa, the Caribbean and "advanced economies."
"Too many countries are still dealing with the effects of the global financial crisis," noted Eric LeCompte, a United Nations finance expert and the Executive Director of the religious development coalition Jubilee USA. "Some of the poorest countries face nearly insurmountable economic challenges."
The IMF projects 2016 growth of 1.6% in advanced economies and 4.2% in developing and emerging economies, with most of that growth coming from emerging economies in Asia. The Fund projects negative growth for Latin American and Caribbean countries and only 1.4% growth in Sub-Saharan Africa. The largest economies in South America and Africa (Brazil and Nigeria respectively) are both expected to contract in 2016.
On October 3rd, the IMF executive board voted to extend zero-interest lending to low-income countries. IMF Managing Director Christine LaGarde praised the decision and noted zero-interest loans would help low-income countries guard against future "shocks." According to the IMF, 55 of 70 low-income countries are currently in "debt distress" or at risk of debt distress.
"The IMF's decision means less debt for some of the world's poorest countries," stated LeCompte. "Extending zero percent interest on these loans helps mitigate the shocks many poor countries are struggling with."
Read the October 2016 World Economic Outlook
Read more about the IMF's decision to extend zero-interest loans to low-income countries.
By Greg Williams
G20 Finance ministers and central bank heads meet on October 6 to discuss economic growth and anti-corruption measures. The meeting comes ahead of the International Monetary Fund and World Bank Annual Meetings in Washington. The G20 meeting will review corruption facilitated by the use of "anonymous shell companies." Some of these companies are linked to crime, theft and money laundering.
"It's critical that the G20 is focusing on structures that allow corruption to happen," noted Eric LeCompte, executive director of the religious development coalition Jubilee USA. LeCompte serves on expert working groups at the United Nations on finance and is participating in this year's meetings. "Corruption is an obstacle to development and economic growth."
Anonymous companies contribute to the more than $1 trillion that leaves developing countries each year due to crime, corruption and tax evasion. Congress is currently debating legislation that would make it more difficult to set up anonymous companies in the United States. The Incorporation Transparency and Law Enforcement Assistance Act (HR 4450, S. 2489) would give law enforcement access to the identity of who owns these companies when they suspect criminal activity. After this year's "Panama Papers" revelations exposed the use of more than 200,000 shell companies to finance crime around the world, the number of co-sponsors of the legislation tripled.
"Concern is growing in Congress around the lack of transparency and the behavior of some of these shell companies," stated LeCompte.
Read more about the crime and corruption facilitated by some shell companies
Read more about the G20 Finance Ministers' and Central Bank Governors' meeting