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Pa.s small-loans program saves consumers 12M
HARRISBURG, Pa. (9/3/10)--More than 35,000 small-dollar loans have been issued by Pennsylvania credit unions through the Credit Union Better Choice program--a payday loan alternative, said the Pennsylvania Credit Union Association (PCUA). Borrowers also placed $1.6 million into savings accounts. The program is a partnership of PCUA and the Pennsylvania Treasury Department. Through the program’s lending alternative product, credit unions offer borrowers a 90-day loan with a $500 dollar limit. The loans have totaled $16.7 million dollars since Credit Union Better Choice launched in 2006. The program has saved borrowers more than $12 million over a traditional payday lending product, PCUA said. Since the program’s inception, 80 credit unions have offered Credit Union Better Choice loans. Participants continue to sign on. During the first six-month of 2010, credit unions issued 6,780 loans totaling $3.4 million dollars. “Credit unions stepped up to the plate and are meeting the small-dollar borrowing needs of Pennsylvanians,” said Jim McCormack, PCUA president/CEO. “Just as important, credit unions also are providing financial counseling to help assist borrowers with managing their money. The continued growth of the Credit Union Better Choice program shows that consumers are still feeling the effects of the down economy and that paychecks do not stretch far enough when unexpected expenses occur.” “Many Pennsylvanians need their dollars to stretch further in these tough times--to help them avoid a costly ‘debt trap,’” said Pennsylvania Treasurer Rob McCord. “Better Choice short-term loans have helped families make it to pay day and help borrowers save millions in predatory fees and usurious interest rates.” A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or about $450 over 90 days. A $500 Credit Union Better Choice loan costs consumers about $42.50 for the same 90 days, and at the end of the loan term, consumers have $50 in a savings account, which allows them to develop a savings habit, PCUA said. Also, the program builds upon the wealth-building component by providing financial education to consumers so they can make better-informed financial decisions. Pennsylvania consumers saved an average of 80 cents in loan fees and costs for every dollar borrowed through a Credit Union Better Choice loan rather than through a typical loan from a payday lender, translating into more than $12 million saved, PCUA concluded.
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