USA TODAY: CUs offer cheaper payday loan alternatives
WASHINGTON (9/21/06)--The need for payday loan alternatives is one that is being filled by credit unions, according to USA TODAY.
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Wednesday's USA TODAY led its Money section with an article about credit unions being an alternative to payday lenders. Credit Union National Association President/CEO Dan Mica and State Employees' CU President/CEO Jim Blaine were among those interviewed.
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More than 1,000 credit unions have such loan alternative products to combat the more than 22,000 payday lenders nationwide, Mica said.
The payday loan program at State Employees' CU was a major focus of the article. Since 2001, the $13.6 billion asset credit union has offered loans of a maximum of $500 at an annual percentage rate of 12%. Borrowers also are required to use direct-deposit and put 5% of the loan into savings accounts.
"We wanted to find a way to get our members out of this trap," Blaine told the paper. Blaine said the credit union makes 2% on these loans, which more than 40,000 members use each month.
Mica pointed out that these types of loans typically break even or provide community service because of the low credit quality of the borrowers.
Payday lenders have filled a niche, in a very expensive way, said Filene's Kitsch. The REAL Solutions program from Filene is available to help credit unions provide payday alternative loans, check cashing, international remittances, and perhaps most importantly, financial counseling.
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If more banks move into the arena, the banks will then have data to look at and determine "whether you're really going to be chasing people down for $200," according to James Ballentine, director of community and economic development, American Bankers Association.
States also are putting regulations into effect that cap interest rates or limit the number of loans a borrower can have, the article said.
Read the complete USA Today story using the resource link below.
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