Payday Lending and Credit Unions Lois I Kitsch National Program Director National Credit Union Foundation.

Payday Lending Payday Lending and Credit Unionsand Credit Unions

Lois I KitschLois I KitschNational Program DirectorNational Program Director

National Credit Union FoundationNational Credit Union Foundation

Payday Loan Questions

What is a payday loan?

Very short term loans to consumers (mostly working families) using a check as collateral at very high rates of interest

Why are these loans so controversial?

90% of revenues are based on fees from trapped borrowers

A typical payday customer pays $793 in fees on a $325 loan

Consumer Federation of AmericaConsumer Federation of America

Size of Market

How big is the payday loan industry?22,000 payday lending stores

Combined loans of $28 Billion Total fees paid $4 Billion Average loan size$325

Payday Loan Questions?

A Credit Union Opportunity... Really?

Payday Loan Questions

Why are payday loan alternatives a member value proposition?

An estimated 7 to 15% of credit union members use payday loan products

It is known that even credit union employees are using the product

Our members are getting caught in the payday lending trap – making it difficult to honor other obligations

Payday Loan Questions

What motivates credit unions to get involved?

Good business decision – New members, new and often times profitable loans

Good social decision – Our members are using payday loans – we need to help them and other consumers out of the payday loan trap

Good advocacy decision –

Adding a Payday Lending Product

Why does our credit union want to offer this product?

Revenue

To bring in new members

To help our existing members

To help my community

To help the credit union movement

Adding A Payday Lending Product

What other issues should we think about?

Selling the product to your volunteers

Selling the product to your staff

Selling the product to your members

Selling the product to your community

The Credit Union Opportunity

How to make the Credit Union DifferenceHow to make the Credit Union Difference - Add appropriate products to your menu of servicesDetermine if your members are caught in the short term loan cycle – Members do want a low cost short term loan option - offer a product to help them move up a wealth pathPrice your product as low as possible to generate revenueEncourage your members to save and to become savvy borrowersVisit the FRI website for relevant publications