Government of Canada’s consultation on lowering the criminal rate of interest

This past August, the Government of Canada launched its anticipated consultation paper to seek feedback from stakeholders and vulnerable members of the public on the criminal rate of interest and the availability of high-cost installment loans often offered by alternative lenders.

While the Government of Canada’s policy goal has not resulted in a new criminal rate of interest yet, a reduction in the criminal interest rate could potentially have market-changing implications for lenders and borrowers.

To continue reading this article by Me Joyce M. Bernasek and Me Dominic Duchesne from the Osler law firm, follow this link.

CARR releases anticipated CDOR loan fallback language

On August 3, 2022, the Canadian Alternative Reference Rate working group (CARR) published the highly anticipated recommended fallback language for loan agreements (the Recommended Language) that use the Canadian Dollar Offered Rate (CDOR) as the interest rate benchmark, together with a white paper that provides an overview of the language (the White Paper). The Recommended Language was based on language published by the Alternative Reference Rates Committee (ARRC) and the Loan Syndications & Trading Association (LSTA), both of which are related to the replacement of LIBOR with the Secured Overnight Financing Rate (SOFR), which market participants will be familiar with.

To continue reading this article by Lisa Mantello and Jasmyn Lee of the Osler law firm, follow this link.

Margill’s CEO accepts 5-minute video challenge

Margill’s CEO, Marc Gelinas, was recently put to the challenge to make a video to show most of the main features of the Margill Loan Manager software.  Knowing that the software contains  more than 600 000 lines of code, and knowing that nowadays, everything needs to be short and sweet in order to keep the viewer’s attention, the challenge was to do this video within 5 minutes.

Can he do it?  Find out if he did.


Discover Margill Loan Manager in 5 minutes

Margill Loan Manager 5-minute Challenge

Survol des régimes fédéral et québécois de protection des consommateurs de certains produits et services financiers

Le 30 juin prochain entrera en vigueur le nouveau Cadre de protection des consommateurs de produits et de services financiers et son règlement. Dans ce bulletin, on présente certaines des règles intégrées au Cadre, sous la perspective de règles similaires applicables au Québec en matière de protection des consommateurs de services financiers.

Ce bulletin présente également certaines des autorités de supervision et de surveillance en matière de services financiers, au fédéral et au provincial (Québec). Il met en perspective leurs différentes approches de supervision et présente plusieurs des pouvoirs dont ces autorités disposent pour réaliser leur mission.

Pour en savoir davantage, vous pouvez lire le bulletin de Me Guillaume Talbot-Lachance sur le site de BLG Avocats.

On a $1000 loan at 20% interest, why is my interest not $200 for one year?

Q: On a $1000 loan at 20% interest, why is my interest not $200 for one year?

A: This is a common question that we often get and some information is missing to answer the question so we’ll analyse this, taking into account various scenarios and how to manage this in Margill Loan Manager.

There is a misunderstanding as to the concept of “amortization”.

Here is how we get to $200 in interest on a loan. It must have ONE (1) lump sum payment at the end (one year later) of 1200 to get a balance of 0.00. So there is no amortization in this loan:

Compute to get the Results table:

Let’s look at this with bi-weekly $0.00 payments just to see the interest accrued (so 26 payments and the last payment on Jan. 1, 2023 to give exactly one year). This is Compound interest (not Simple interest), so the interest keeps on increasing:

So you get exactly 200 (+ or – a few cents due to rounding) as the interest amount.
However, when you add true payments that pay interest and principal (every 2 weeks, so 26 for a full year approximately), you are not lending 1000 for 1 year since principal gets paid back every 2 weeks, thus reducing the interest accrued.

“Compute” to get a real amortization schedule at 20% annual (APR). Notice my balance goes down so the fortnightly interest (every 2 weeks) goes down and so does the interest per period. So for an amortized loan, the interest is very far from 200 total, only about half (96.96) because of the amortization effect.

There are two ways to get the desired $200 in accrued interest for 1 year when there are true principal and interest (P&I) payments:
Method 1): Calculate the REAL interest rate
  • Desired Interest per payment: 200 / 26 = 7.69
  • Principal per payment: 1000 / 26 = 38.46
  • So 26 payments of 46.15 each (26 x 46.15 = 1199.90)
Leave the Annual Nominal Rate blank and enter the Payment of 46.15. Margill will compute the rate.

 “Compute” and notice the real interest rate (APR) is now 43.97% (APR). We are at 199.90 in interest (almost 200).

2) Use Fees, not true interest
Other option is to use Column fees (that are not computed on a daily basis but entered once and no matter what, you will have 200 in “finance costs”, not real interest). Click on Add Fees (I called them Admin fees – you can rename them to anything you want) and add 7.69 (200 / 26) in “interest” (Admin Fees here) per payment.

Here are the results. I added a few cents in Admin Fees at the end and increased my payment to get exactly 200 as my finance cost. Notice my interest rate is 0% since I am now using Column fees, not real interest.

I also invite you to consult our White Paper on interest. It explains basics and more advanced issues with interest: https://www.margill.com/en/interest-calculation-white-paper/

Important notification regarding the Apache “Log4j2” vulnerability

Please note that Margill products have not been impacted by the Apache “Log4j2” vulnerability.

The Margill Team wishes you all a very Happy New Year 2022!

Happy Holidays!

The entire Margill team wishes you, in spite of the current exceptional situation, a very Happy Holiday Season. 

May 2022 be filled with happiness and health!

Photo Mira Kireeva – Unsplash

How can I mass import “Unpaid” payments with an Excel sheet in Margill Loan Manager? I need to obtain the Outstanding payment amounts.

Question: How can I mass import “Unpaid” payments with an Excel sheet in Margill Loan Manager? I need to obtain the Outstanding payment amount too.

Answer: Usually, when payments are NOT made (so were skipped or the payments returned for non sufficient funds (NSF), on a historical basis, these would simply be ignored and only the Paid payments entered (even partial and late payments)

However, in order to count the number of Unpaid payments and to obtain the Outstanding amounts, it may be a good idea to enter payments lines of 0.00 and include the payment that SHOULD have been paid, thus allowing Margill to calculate the Outstanding payment amounts.

One would go through the “Post payment” tool under “Tools”. On the far right is the “Bulk Payment Import” button. You need “Import new payments”.

This mass (or bulk) import tool allows you to import payments (Paid pmt, partial pmt, late pmt, etc.) (as well as additional principal – a negative amount – and column fees and other information in the Results or payment table) but does not allow the import of Unpaid payments of 0.00. So we must be a little creative…

The tool does allow the import of what are called “Other” Line statuses. “Other” Line statuses never pay interest or principal – they are made to manage special scenarios and allow you to add more data in bulk such as Column Fees or other information in columns to the right. If the Outstanding amount was not important you could rename, for example, “Other 3” to “Unpaid” and mass import these. However, when “Other” is added, since this is not a real “payment”, no matter how it is renamed, an amount in the “Expected Pmt”  column will not affect the Outstanding as an Unpaid Pmt does (see example below where Other 3 does not increase the Outstanding to 1000):

In the question at hand, the Outstanding amount is required, so we cannot use an “Other” Line status with a payment of 0.00.

What can be done however, and this will be our solution, is to use a “Paid Pmt (x)” Line status, rename it to “Unpaid…” (renamed to “Unpaid Special” below) and mass import this Line status with a payment of 0.00 and an “Expected Pmt” for the amount that was supposed to be paid.

Margill allows “Paid” type Line statuses with a payment of 0.00. A little odd I agree, but this allows for greater flexibility. Even with the name “Unpaid”, the payment must not necessarily be 0.00 as in a real “Unpaid” Line status (line 6 below “Unpaid Visa” where must =0)

Once this Line status is created, in Bulk Payment Import > Import new payments, find the appropriate number for “Unpaid Special” (6 in this case – this is not the Line status order as in Line status Settings that vary depending on the order you desire). The Excel sheet must contain data and a header in columns A, B, C, D and L.

Here is the Excel sheet with only 2 loans. Notice I also added fees (column T for my Admin Fees)

Bulk import window:

Final result in Record 10003 after pressing on “Insert lines” with an Outstanding of 1300:

You can even get the number of each and every Line status through “Personalized Reports” > “Record List” (“Tally” theme):

What’s criminal? Lenders beware – amendments to Criminal Code under Bill C-274

An Act to amend the Criminal Code Bill-C-274 (the Bill) entered first reading in the House of Commons on May 11, 2021. The Bill would amend1 the definitions of “criminal rate” and “interest” in subsection 347(2) of the Criminal Code, while also repealing section 347.1, which had allowed certain exceptions for payday loans.

The Bill will be of interest to lenders, especially payday lenders and other non-traditional lenders, as the amendments proposed would lower the criminal rate at which interest charged or received is under the Criminal Code from 60% to 30%.

To continue to read the text by Me Joyce M. Bernasek and Me Ramz Aziz from the law firm Osler, follow this link.

 

Credit agreement best practice – LIBOR cessation

Osler law firm offers an excellent article regarding the London Interbank Offered Rate (LIBOR) which will eventually end. And even in these difficult times of the COVID-19 pandemic, there is no suggestion that LIBOR’s end will be delayed and should end, as expected, on December 31, 2021.

A text by Andrew G. Herr, Lisa Mantello and Joyce M. Bernasek that you can read here.