CUs' payday loan programs in the news in three states
MADISON, Wis. (9/27/06)--Awareness of credit unions as an option to payday lenders is growing around the country. Media coverage continues to grow after last week's feature article in USA TODAY.
In Iowa, a Sept. 23 editorial in The Des Moines Register exhorted legislators to support credit unions in their efforts to provide alternatives in a state that has 253 payday lenders and more than 20 car-title lenders.
The Iowa Credit Union League has a payday lending task force that is working on a legislative proposal that would enable credit unions to provide lower-cost short-term loans.
A small application fee to cover costs and the ability to provide the service to non-members will need legislative approval, according to Justin Hupfer, vice president of government affairs at the league.
"Lawmakers can surely find the courage to do something else: Help credit unions offer a better deal," The Des Moines Register editorial noted.
The not-for-profit institutions may be able to find a niche in giving Iowa residents these services while educating them and introducing them to financial services, it said.
The editorial used the University of Iowa Community CU's payday alternative loan program as an example. The $515 million asset credit union charges no fees for the loans, which can be up to $1,000. The loan carries an annual interest rate of 21%, and borrowers have to place half of the loan in a savings account. Since its Aug. 1 inception, 15 members have used it.
In another state, the Pennsylvania Credit Union Association, the Pennsylvania Department of Banking and the State Treasurer's Office will launch the Better Choice program this week
Better Choice loans will have a maximum amount of $500 and a maximum term of 90 days at a rate of 18% or less. Borrowers will pay an application fee of $25 per loan. It also has a forced savings aspect (News Now July 17).
The program was lauded by State Treasurer Bob Casey and then-Secretary of Banking William Schenck in an August webinar (Life is a Highway Aug. 10).
And in Mississippi, consumers who need such loans should shop carefully and consider credit unions, according to Tawnya Crockett. The family resource management area agent for Mississippi State University Extension Service wrote about payday lending in the Hattiesburg American Sept. 22 edition.
Nearly 1,200 payday lenders do business in Mississippi.
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