The investigatative article found that at least 15 credit unions are offering high-cost loans that closely resemble traditional payday loans, including Mountain America FCU in Salt Lake City (see image) and Kinecta FCU in Manhattan Beach (CA).The article cites the case of Sam Heredia who borrowed $400 every two weeks for the past year from Nix Check Cashing, a subsidiary of Kinecta FCU. This means that Heredia paid $1000 in interest and fees over that year on $400 that was revolved every two weeks. Nix charged Heredia an application fee each time the loan was renewed.
Thomas Glatt, a credit union industry consultant, is quoted as saying:
"Not every credit union is as pure as they could be. If they are offering something similar to what is sold on the street corner, you have to wonder if that is keeping with the credit union philosophy."
While there are credit unions that are responsibly offering payday loan alternatives, it is clear that some credit unions are putting profits first.
Read the Washington Post article.
A longer version of the article appears on the iwatch news website.
Wonder what Mr. Heredia would have paid if the credit union option was not available to him. Go CREDIT UNIONS!
ReplyDeleteanonymous...your comment says it all. as long as its a cu, its ok. missing the point completely.
ReplyDeleteI believe your point was credit unions are acting outside what you consider their realm. My point is that credit unions are here to serve the membership. If a particular credit unions field of membership relies heavily on payday lenders, then should the credit union offer an alternative? That is a business decision. The benefit is for the members at large; the business stays solid, the membership has an alternative to "sharks". As I said GO CREDIT UNIONS!
ReplyDeleteHow is a FCU supposed to cover its costs with an 18% interest rate cap? Look at $400 for 14 days at 18%APR. How much is that to the FCU? $2.76 to cover the processing and maintence of the loan. What about banks who charge 30.24% on their credit cards with a $49 annual fee? Is that a bank or a loan shark?
ReplyDeleteThis is the end for the good reputation that Credit Union's have had over the years. This is just pure greed now infesting some Credit Union people. The military is protected with a max. rate of 37%. This should be extended to all. We will constantly have financial problems if such things as this payday lending to Credit Unions is allowed.
ReplyDeleteAnything a CU gets through a revenue stream covers its costs and goes BACK TO THE MEMBER in the form of BETTER RATES, BETTER SERVICES and BETTER DIVIDENDS. There is no such thing as profit, that is the nature of organizational structure of a Credit Union. If banks want to be like credit unions and give back to their customers, then get rid of your profits, paid boards, etc. Good luck with that.
ReplyDeleteHow will you know if that credit union is putting high interest rate? What are the average APR that should take note if we will be applying for a loan through the credit union?
ReplyDelete