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ELA Responds to New York Times Article on Equipment Leasing Practices
August 13, 2004 - Monitor Daily
Dear Mr. Feyer,
I would like to clarify a few points in the article "In Equipment Leasing Deals, Let the Renter Beware" (August 12, 2004). The article is misleading as it implies that so called "access fees" -- more commonly referred to as application or commitment fees -- are unusual. The article also suggests that such fees should always be fully refundable. Whether a home mortgage, line of credit or an equipment lease, the application or commitment fee document should clearly spell out the responsibilities of the parties, including conditions such as refundability.
In most financial businesses it is common for credit application fees or commitment fees to be part of the financing transaction. Similar to loan application fees when applying for a mortgage, lessees pay a commitment fee to a lessor. These fees pay for the research and due diligence before credit is extended. As standard practice, commitment fees aren't refunded if the lease deal does not go through because the organization needs to defray costs for work already conducted.
Every day 30,000 to 40,000 leases are written for hundreds of thousands of companies from small bakeries to multi-national companies in the U.S. The overwhelming number of these transactions proceed routinely as reflected by an industry-wide delinquency rate of less than 2 percent.
The industry, as a whole, produced between $100 billion and $300 billion additional real GDP, produced between $227 billion and $229 billion additional real equipment investment, and created between three million and five million additional jobs between 1997-2002.
But, the most important contribution of the equipment leasing industry lies in providing access to capital. If leasing were unavailable many entities, from non-profit to private organizations, from tax-exempt entities to public companies, would not be able to acquire the equipment they need.
Michael Fleming
President
Equipment Leasing Association
CHOOSELEASING.COM
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