Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

CU System
CU to pilot payday-loan consolidation program
MANHATTAN BEACH, Calif. (6/5/14)--A California-based credit union is one of five institutions to begin piloting a type of small-dollar loan program whose creator, the Center for Financial Services Innovation (CFSI), hopes will lead to better financial health for millions of borrowers.  

Kinecta FCU, Manhattan Beach, Calif., with $3.2 billion in assets, as part of the Small-Dollar Credit Test and Learn Working Group, will roll out a payday consolidation loan this month that will enable members to convert multiple outstanding payday loans into a single installment loan.

Consumers spent more than $41 million in 2012 on small-dollar credit products such as payday loans, deposit advances and auto title loans, often receiving the loans from predatory lenders who charge unmanageably high-interest rates that can shove borrowers deep into debt ( News Now Feb. 28).

Each of the members of the Working Group, funded by the MetLife Foundation, the Ford Foundation, and the Omidyar Network, will test a different small-dollar loan tool, which harness ideas developed by CFSI's Compass Guide to Small-Dollar Credit, released earlier this year.

"We believe that supporting initiatives like the Test and Learn Working Group will offer critical insights into aspects of financial inclusion that will enhance programs and advance our common goals," said Dennis White, president/CEO of MetLife Foundation. "We know that providing access to quality, affordable products and services for low-income individuals and families is important, but it is equally important to ensure that these programs advance research and deepen knowledge in this area."

Other institutions within the working group will test programs that will allow consumers to borrow money with less funds in their savings accounts; increase usage of a "Save as You Repay" program that incentivizes consumers to contribute additional funds to their savings each time they make a payment on an installment loan; and provide access to an online loan product where consumers can customize their loan terms and monthly payment amounts.

As defined by CFSI's guide, high-quality, small-dollar loans:
  • Are made with high confidence in the borrower's ability to pay;
  • Are structured to support repayment;
  • Create opportunities for upward mobility and improved financial health;
  • Are accessible and convenient; and
  • Provide support and rights for borrowers.

News Now LiveWire
Registration now open for @CUNA @WOCCU summer conference in Denver July 12-15 #ACUC #CUinDenver2015
11 hours ago
Emergency loans post- #Blizzard2015 offered by @ScientFCU in Conn.
11 hours ago
Did you get your spot in the @CUCB #CherryBlossom 10 Mile Run? Check lottery results here @CU4Kids @CMNHospitals
11 hours ago
@FamilyFirstFCU has implemented a grant program through the FHLB of NY to help first-time home buyers.
12 hours ago
#BREAKING: @federalreserve offers few new hints on rate-hike timing in policy statement
13 hours ago