The National Consumer Law Center (NCLC) found that some credit unions were offering “sham” alternatives that were very similar to loans offered by traditional payday lenders.
This is disturbing because credit unions were established to be an alternative to usurious money lenders.
For example, NCLC reported that Kinecta Federal Credit Union in California purports to offer 15 percent loans but when fees are included this brings the APR to 275 percent on an annual basis. The APR on a $400 14-day loan from Nevada Federal Credit Union comes to an annual rate of 455 percent.
Other federal credit unions in Nevada, Utah and Texas have lent their names to loans offered by credit union service organizations that are charging triple-digit rates.
NCLC also found that some state credit unions, including Prospera Credit Union, are charging triple-digit payday loans.
So much for looking out for the little guys.
Payday lending and courtesy payment of checks should be outlawed at any level!
ReplyDeleteI agree with the previous comment. If a bank or credit union wants to let a customer overdraft his/her account, make it subject to reg z like any other loan and charge a reasonable interest rate. Even at a rate of 20%, an overdraft line-of-credit would be a better option for the consumer than $25 - $39 per overdrawn item and another fee of $3 - $9 per day the account is negative.
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