Consumer Reports: Up to 311 Percent Interest Rates when Renting Appliances Instead of Buying

Consumers who believe that renting appliances and electronics is cheaper than buying them are in for an unpleasant surprise. A recent investigation made by Consumer Reports revealed that the interest rates of appliance-renting services can go as high as 311 percent, meaning the consumer paid more than three times the price of the item.

Several rental companies were passed through the microscope by Consumer Reports (CR), and the results of the investigation show that people who rent appliances could easily end up paying more than three times the price of an item without owning it at the end of the rental agreement. Also, if the same item would be purchased, consumers would save significant amounts of money.

Consumer Reports Associate Editor, Anthony Giorgianni, said that appliance rentals are especially attractive to low-income families, which don’t have the financial strength to buy the needed appliances and electronics right away. Giorgianni recommends them to postpone purchases to a more convenient time or even try to obtain a small loan to cover the purchase cost.

A case study is a Toshiba laptop worth 612 dollars. One of the rental stores investigated by Consumer Reports offered it for a rental fee of 38.99 dollars weekly with a minimum rental period of 48 weeks. The cost for renting this laptop, not including sales tax and other fees, would be 1,872 dollars. With this amount of money, the renter would be able to purchase three laptops and end up owning all of them at the end of payment, if purchased at the price suggested by the manufacturer. The interest rate for the rental amounts to 311 percent.

The rental option is an expensive one even when compared to credit cards with high-interest rates. If the same laptop was purchased with a credit card at an interest rate of 29.99 percent, by paying 38.99 dollars weekly, the laptop would cost 1,000 dollars less than in the renting scenario, and it would be the consumer’s property in approximately 20 weeks. In this scenario, if the consumer were to wait four months, and save 38.99 dollars every week, he or she would be able to buy the laptop with the savings, paying no interest rate whatsoever and saving a total of 1,260 dollars.

Among the suggested alternative to cover the necessity period without throwing away money at rental shops are borrowing from a friend or using free/cheap public alternatives (such as library computers) until the required amount of money for the purchase is saved or until the consumer is able to secure a retail loan.

According to data from Consumer Reports, Canada and the US have some 8,600 rental stores which generate annual sales of more than seven billion dollars. These stores are attractive because they don’t usually perform credit checks, and rentals are for small periods of time (weekly or monthly basis) but many of them use questionable business practices, on top of the already proven high interest rates.


S&P/Experian Credit Default Indices Show Mainly Decreases in Default Rates

Over the past twelve months, the indices that follow consumer default rates have shown improvements, according to Experian and S&P.

Data released today by Standard & Poor’s and Experian for the indices of consumer credit defaults shows that, in May, the year-over-year defaults of consumer credits have decreased to 2.09 percent for first mortgages and to 1.42 percent for second mortgages, from the levels in April, of 2.16 percent and 1.51 percent.

The default rate for auto loans has also dropped to 1.34 percent in May, from 1.45 percent in April. In the credit cards sector, the default rates have increased slightly from 5.91 percent in April to 5.93 percent in May.

Chairman and Managing Director of the S&P Indices’ Index Committee, David Blitzer, said that month-to-month statistics presented some volatility. However, he added, the evolutions of default rates for several categories of consumer loans indicate that consumers are straightening out their balance sheets over the past years. Compared to the same period of last year, said David Blitzer, the indices show lowered default rates, and the image is even more optimistic if the data from this year is compared to that of 2008 and 2009.

The largest decreases of default rates were noted in New York – from 2.11 percent to 1.94 percent, Los Angeles – from 2.57 percent to 2.39 percent. Miami and Chicago posted default rates for May of 5.31 percent and 2.37 percent, respectively. In Dallas, there was a slight increase from 1.56 percent to 1.59 percent.

The data was provided by Experian, which has access to a database covering 11 trillion dollars worth of outstanding loans, collected from 11,500 financial lending institutions in the US.

Less than a Quarter of Americans Have a Six-Month Savings Safety Net

A recent Bankrate survey reveals that only 24 percent of Americans had savings that could cover their expenses in case of loss of income while another 24 percent had no safety net in savings whatsoever.

This statistic represents a wake-up call for Americans, as the number of people who have been unemployed for at least six months has reached 6.2 million.

The most likely to have savings that could cover expenses for six months are people with higher incomes, most in the 50s or 60s. However, in this age group, about half do not have an emergency savings fund. The worst performers in the savings department are low-income households and people below 30.

An additional portion of 22 percent has very small savings that would not allow them to cover expenses for three months. About 46 percent of the respondents said they had sufficient savings to cover expenses for at least three months.

The survey also shows that the Americans do not feel as secure about their financial security in June as they did in May. The index measuring financial security dropped from 98.5 to 97.8. However, 26 percent of the respondents said they were more relaxed about their debt compared to last year. Those that are uncomfortable with their debt accounted for only 19 percent of the participants to the survey, the lowest portion since December last year.

The index for financial security, issued monthly by Bankrate, is based on phone interviews with more than 1,000 US adults over the age of 18.

US RBC Bank to Be Acquired by PNC

Royal Bank of Canada (RBC) and the financial services company PNC announced today that they entered an agreement for RBC’s subsidiary in the US, RBC Bank USA, to be acquired by PNC for the price of 3.45 billion dollars.

The acquisition of RBC Bank USA will grant PNC access to very attractive markets in the southeast of the country, while adding value for PNC shareholders, explained the chief executive and chairman of PNC, James Rohr.

He added that the company’s recent acquisitions have demonstrated through their success that the company’s products are able to gather new clients and reduce costs, and the current transaction represented an incredible opportunity for the company’s growth.

RCB Bank, based in Raleigh, North Carolina, has 424 branches in South Carolina, Virginia, Georgia, Alabama, Florida, and North Carolina. After the acquisition, the two companies will have a total of 2,870 branches, pushing them to the fifth position in the top of US banks.

The transaction is expected to be accretive to PNC’s earnings in 2013, based on how much of the transaction price of 3.45 billion dollars will be paid in common stock. PNC has the option to pay RBC about one billion dollars in common stock, representing three percent of PNC’s shares at the price of 57.79 dollars, the closing price on Friday, June 17.

The acquisition offer represents some 97 percent of the current value of RBC Bank USA, based on the bank’s April balance sheet.

After the transaction is finalized, PNC could incur planned integration and merger costs of some 322 million dollars. PNC estimates that, after the merger, RBC Bank’s non-interest expenses would be reduced by approximately 230 million dollars through the improvement of administrative and operational efficiency.

The estimated closure date is estimated to be March 2012. The merger agreement has been approved by the management boards of both companies. The current price is subject to adjustments, based on the value of delivered tangible assets at the time of closing the transaction.

Lockton: The Law of Health Reform Causes Deep Distress to Employers

A recent survey from insurance broker Lockton revealed that almost 20 percent of employers considered the alternative of abandoning group coverage in 2014.

The “play or pay” mandate of the health reform law, taking effect in 2014, causes employers serious concerns. Roughly 70 percent of the employers interviewed by Lockton said they were either “very concerned” or “concerned” about the impact this law would have on their businesses.

By law, in 2014, most workers will have the possibility to choose from a number of insurance programs subsidized by the federal government, and this will allow employers to become more flexible and to terminate group insurance contracts. According to Lockton’s most recent, survey 18.8 percent on employers planned to do so.

The director of Compliance Services at Lockton, Edward Fensholt, said that the move would not be surprising. He added that the company’s clients have been hinting in this direction for the past few months and that they seemed apprehensive with regards to the provisions of the new law. Furthermore, employers are aware of the fact that the future would bring them increased expenses and work.

The survey is based on the answers of some 40 percent of Lockton’s client-companies. The survey consisted of 10 questions on the health reform. The responses were consistent, revealing a high level of frustration about the fact that the new law will make the administration of health plans even more burdensome from an administrative point of view and more costly than it currently is.


The Conference Board: LEI for US increases in May

The Leading Economic Index issued by The Conference Board for the US increased in May to 114.7, up 0.8 percent, after a slight decline of 0.4 percent in the previous month and an increase of 0.7 percent in March.

The most important contributions to the index were brought on by housing permits, consumer expectations and the spread of interest rates.

According to The Conference Board economist Ataman Ozyildirim, the LEI for US recovered in May, and it resumed its positive trend, which was interrupted shortly by the April decline, as most of the index’s components supported its growth. The expert added that the indexes’ evolution continued to point towards upcoming economic growth.

Another Conference Board economist, Ken Goldstein, underscored the fact that economic growth is hampered by some strong trends, such as a soft housing market and high food and gas prices. He added that, while the economy will continue its growth, indicators point to slow advancement over the summer and fall.

The index measuring the current economic factors, the Coincident Economic Index, also increased, continuing its previous trend by increasing slowly but constantly. In May, the Coincident Economic Index increased to 102.9, up 0.1 percent, following increases in April and March of 0.1 and 0.2 percent, respectively.

The US Leading Economic Index account for manufacturing weekly hours, weekly initial jobless claims, new orders, materials and consumer goods, vendor performance and supplier deliveries index, new orders from manufacturers for capital nondefense goods, building permits for housing units, the prices for the top 500 common stocks, interest rates, consumer expectations and money supply.


President Medvedev Meets with Russian and US CEOs to Support Russia’s Entry in WTO

Board Members of the US-Russia Business Council, under the leadership of Alcoa’s CEO and Chairman Klaus Kleinfeld, met with Russian president Dmitry Medvedev at the International Economic Forum in St. Petersburg and presented him a letter in support of the accession of Russia to the World Trade Organization.

The full support was granted by 35 US and Russian chief executives from leading companies and corporations upon the conclusion of an agreement that is commercially viable and the Russian government’s approval.

President Medvedev was assured by the CEOs that membership in WTO will improve Russia’s position on the global market as a rapidly growing and key member.

The USRBC president, Ed Verona, said that, Russia’s accession to the WTO would integrate the country into the world trading system, which will also increase investor confidence that the country will respect the norms and rules of the largest global trade organization. Russia will also gain access to procedures of dispute resolution, which were previously inaccessible to the country, and expand US – Russian investment and trade ties.

WTO accession will also attract much needed investors and technology to the country, accelerating the Russian economy’s growth in the long run.

Furthermore, WTO accession will also create an environment of increased market competition and dynamism, improving the country’s export activity and offering Russian consumers a variety of benefits.

The companies showing their support for Russia’s accession to the WTO were VTB Bank, Volga-Dnepr Group, Visa, United Technologies, Troika Dialog, TMK, Severstal, Sberbank, RUSNANO, Renova Group, Procter & Gamble, PricewaterhouseCoopers, Pfizer, PepsiCo, Microsoft, Medtronic, KPMG, JPMorgan Chase, International Paper, Intel, General Electric, ExxonMobil, Ernst & Young, Dow Chemical, Deere, ConocoPhillips, Coca-Cola, Cisco, Chevron, Caterpillar, Boeing, Alfa Group, Alfa Bank, and Alcoa.

PVA TePla Introduces a G5 Generation MultiCrystallizer, for Higher Loads

German manufacturer of solar systems based on silicon crystallization, high-temperature and vacuum systems, PVA TePla AG, based in Wettenberg, launched a crystal-growing system for higher loads. The new product is part of the G5 generation of the MultiCrystallizer.

The MultiCrystallizer VGF732Si HC is based on freeze processes with vertical gradient, and it is a directional solidification vacuum furnace. The furnace processes multicrystaline silicone into photovoltaic wafers.

The furnace uses 480-520-millimeter crucibles, compared to the older standards of 420 millimeters, and it enables higher loads of up to 560 kilograms.

The furnace’s unique system for controlling temperatures allows silicone ingots to solidify in columns, even on the exterior. The MultiCrystallizer VGF732Si HC generates materials with the same quality levels as the ones from furnaces with 420-millimeter crucibles and a 0.4 percent higher efficiency than the industry standard. Furthermore, the yield of ingots is 75 percent.

Also, a 480-millimeter crucible, because of the higher load, can produce bricks with optimal height of 250 millimeters. At this height, wafer cutting is the most efficient, making the process very cost-effective.

Thanks to its cooling and heating zones, which can be controlled independently, the MultiCrystallizer VGF732Si HC is very appropriate for the mono-like process. The mono-like structure can remain intact, as the stable crystallization front allows operators to avoid any faults.

GfK: Influential Americans’ Distrust of Corporations Increases

More than three years after the onset of the financial crisis, most Americans find it difficult to trust corporations. A majority of 64 percent of Americans said that corporations will find it increasingly difficult to earn their trust now compared to a few years back.

Furthermore, some 55 percent of Americans said that the situation is not likely to improve in the near future.

The highest level of distrust was noted in the group of influential Americans. This group includes about 10 percent of the American people who are highly involved in activities aimed at changing society. In this group, 74 percent said they found it harder to trust corporations now than they did a few years back, while 61 percent admitted that corporations would find it even harder to gain their trust in the future.

The figures resulted from the latest survey regarding corporate trust, conducted by GfK with the participation of 1,000 Americans. The survey examines the factors that influence the trust of American consumers.

Among the factors that drive down the level of trust, both overall and in the group of influential Americans, are the perceptions that corporate senior and chief executives are being paid too much (77 percent, 71 percent in the group of influential Americans), that corporate management is corrupt (71 percent overall, 70 percent in the influential Americans group), that corporations cover their losses at the expense of their customers (69 percent and 65 percent, respectively), and that an increasing number of products is produced outside the country (62 percent and 61 percent, respectively).

Other reasons for distrust at the top of the list are the lack of stability at management level and the declining quality of services and products.

The results of the survey indicate that Americans retain their suspicion about the corporate world, with only 16 percent of them believing that there will be some improvement in the near future in terms of corporate corruption.

The industry sector considered the most trustworthy by influential Americans is that of tech companies with 70 percent, followed by retail stores, with 67 percent. Overall, the positions are quite different. Other Americans have the highest level of trust in retail stores (71 percent) and manufacturers of packaged foods (65 percent), and manufacturers of personal care products (61 percent), followed by technology companies, with 60 percent.

Despite Growing Profitability, Biotech Industry Faces Research and Development Issues

The world’s biotechnology industry posted solid growth in 2010 and the industry has achieved profitability for the second consecutive year.

The most recent report from Ernst & Young on the state of the global biotechnology industry, “Beyond borders”, puts a spotlight on the pressure funding gaps put on the traditional model of business for biotechnology companies. Funding issues, which severely affect the research and development capabilities of biotech firms, might lead to a new approach to tackling research and development.

Some key evolutions in the industry include the growth of aggregate profitability by 30 percent in 2010, compared to 2009. Biotech companies from US, Europe, Canada and Australia posted combined profits of 4.7 billion dollars.

There were some positive evolutions in the funds companies managed to attract, as well. Biotech firms in US, Europe and Canada managed to raise some 25 billion dollars, which is the equivalent of the funding they received in the four pre-crisis years.

However, the industry is facing various challenges. One key concern is the reduction of pre-commercial funding. Before they enter the market with drugs and other products, biotech companies need substantial funding for several years to support their drug research and development activities. There is a growing gap between the funding received by established companies and that received by startups.

Among the negative evolutions is the decline in innovation funding. Profitable and mature US companies in the US increased their financing through large loans by 150 percent compared to 2009, and the innovation capital for the US biotech sector dropped by 20 percent.

Furthermore, the funding gaps became more obvious, as 20 percent of US companies managed to retain 82.6 percent of the total funding in the sector. The companies that make the bottom 20 percent of the US biotech sector received 0.4 percent of the funding in 2010, compared to 0.6 percent the year before.

Despite the fact that strategic alliances remained strong in 2010, amounting to a value of more than 40 billion dollars, up-front payments for still-developing projects went down 37 percent, totaling a mere 3.1 billion dollars.

According to the global biotech leader of Ernst & Young, Glen Giovannetti, biotech companies will have to find creative approaches to the way they use available funding, while demonstrating the potential value of their projects at earlier stages in order to attract support from regulators, investor and potential customers.