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Matz to iWash. Posti CUs offer payday loan alternatives
ALEXANDRIA, Va. (6/7/11)--National Credit Union Administration (NCUA) Chairman Debbie Matz said in the Washington Post Monday that credit unions are authorized to offer loans designed to provide members affordable short-term cash, and that the loans are “very attractive” compared to triple-digit costs of payday loans. Matz noted that it was just last September that the NCUA approved the rule to allow federal credit unions to offer the short-term, small amount loans to their members. Interest rates for these loans must be capped at a maximum of 10 percentage points above the established interest rate ceiling. The current maximum APR on these loans would be 28%. A $20 application fee may also be charged. Matz said that with a 28% ceiling, the short-term credit union loans have a higher annual rate than conventional loans, which are capped for federal credit unions at 18%. But, she added in her published letter to the editor, a recent Post article titled “Credit unions increasingly offer high-rate payday loans” was misleading. The Post reported that credit unions are offering alternative short-term loan products, with some of those loans having an effective interest rate of over 100% when the $20 loan application fee is factored in to a $200 short-term loan. “Predatory lending in any form is wrong,” Matz wrote, and added, “I am committed to protecting consumers and preventing predatory lending by credit unions and their affiliates.” However, she added, the “picture the story painted was misleading. More credit unions are offering payday loan alternatives.” For Matz's Washington Post item, use the resource link.
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