The Salt Lake Tribune is reporting that the Coalition of Religious Communities, a social justice advocacy group, has charged eight Utah-based credit unions of offering predatory payday loan-type products to members and wants the credit unions to stop offering these products.
The group cites that the annual interest rates on these short-term loans range from the equivalent of 254 percent to 312 percent.
“This is not what I expect from my credit union,” Linda Hilton, a coalition spokeswoman, said, who noted that she is a member of America First Credit Union. (emphasis added)
The eight Utah credit unions offering these loans are Alliance, America First, Cyprus, Family First, Heritage West (which failed on December 31, 2009), Mountain America, Southwest and USU Charter.
But I do have a comment to Ms. Hilton -- if you do not like the behavior of America First, move your money.
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Move your money? Where, to an ABA member, FDIC insured BANK? Keith, your timing is perfect, but your knowledge of your own world is SooOOOooo lacking.
ReplyDeleteEspecially because this week your precious, financially upside-down, cutsie-name dropping FDIC’s Advisory Committee on Economic Inclusion (ComE-IN) highlighted their BANK (emphasis added) alternative for Payday lending, that suggests offering consumers even more money than available at most payday lenders, $2,500 for up to 90 days at a 36% APR, PLUS A LOW FEE. (Another emphasis added because I know you love emphasis.)
Of course, once you calculate the APR on the bank fee and add it to the bank rate, the overall bank cost is right in the range the Utah Collation is complaining about. Maybe we can hook them up with the regional banks that participate. Maybe Ms. Hilton should make this a national issue, not just a Utah issue.
Or is the timing bad for the banking industry?
And, could a bank get CRA credit for overcharging consumers AKA providing "economic inclusion" in this way?
Dear Anonymous:
ReplyDeleteYou must not have read the FDIC proposal carefully. Origination and other upfront fees plus interest charged equate to APR of 36 percent or less.
http://www.fdic.gov/smalldollarloans/
It was read. Additional upfront fees are allowable.
ReplyDeleteI am a former big credit union supporter who, as you suggested to the lady the newspaper article, moved my money away from America First. The payday "alternative" loan is a people helping people practice only if you put Tony Soprano as the person making the loan. The notion that members will go somewhere for the service is only a way attempt to justify ripping off vulnerable members to make a buck. Sure, it's has a savings component - they (America First's program) deposits a portion of the LOAN into a savings account paying 0.4%. That makes real sense! If they wanted to truly help people, increase counseling efforts and return overdraft fees as part of an organized counseling plan. It will cost money, but it will actually help members.
ReplyDeleteI watched a member abuse the CU payday loan plan after I went to great lengths as an employee to help her improve her money management skills and dig out of her deep hole. Frustrated that my work kept getting undercut by one of our own products, I sought to stop the payday lending to her. I was shot down because she paid back her loans! It didn't matter that it hurt her.
These kinds of "services" offered at Credit Unions makes me think that they shouldn't be allowed near the underserved and un-banked. I don't think they are truly interested in that segment, though. Not profitable enough...