Brewery CU tells how it tackles payday lending
MILWAUKEE (10/27/06)--When payday lenders began coming into Brewery CU on a regular basis to cash checks that members had written to them weeks earlier, President and CEO Jim Schrimpf felt compelled to act.
Brewery CU estimates that roughly 15% of its 7,000 members have done business with a payday lender in the last 12 months (Milwaukee Journal-Sentinel (Oct. 25).
To counter that trend, Schrimpf obtained guidance from the Filene Research Institute, Wisconsin Credit Union League and Milwaukee consumer finance lawyer Amy Salberg. Their input helped Brewery create the "Fast Cash" program that began offering small, short-term loans to members last winter.
One essential element was offering members the same fast and friendly experience they get when doing business with payday lenders, who are known for catering to customers.
Like payday lenders, Brewery CU does not use credit checks to determine whether a Fast Cash loan will be approved. Instead, the credit union subscribes to a payday loan industry database that shows whether the applicant currently has outstanding loans or has defaulted on past payday loans.
To get a loan, applicants must join the credit union, which requires a $5 savings account deposit. As part of the process, members also receive non-judgmental financial counseling that helps wean them from high-cost loans.
So far, about 100 Brewery CU members have paid the Fast Cash fee of $9.95 for every $100 borrowed, which is less than half the cost of a typical payday loan. The program is priced to cover the credit union's costs, rather than generate revenue.
Schrimpf hopes the program will eventually create competition for Milwaukee's payday lenders. More important, he wants Brewery CU to help borrowers break the predatory lending cycle to join the financial mainstream.
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