Two Payday Models Show Progress; Wisconsin Effort Has Saved Users More Than $100,000
LAS VEGAS - Two innovative credit union models to counter payday lending, one in Ohio and the other in Wisconsin, are showing volume growth while also drawing favorable public attention.
Providing progress reports here on both, the co-op Stretch Pay CUSO venture in Dayton/Columbus and the GoodMoney/Goodwill branch in Appleton, Wis. were CEOs from the founding CUs making panel presentations at CUNA Mutual Group's annual Discovery conference last week.
"We are the guys with the white hats," declared William Burke, president of Day Air FCU in Kettering, Ohio in detailing plans for an Ohio CUSO which will offer a branded payday product across the western part of the state this year. It will consist of 10 CUs.
The proposed CUSO, to be formally incorporated in the next two weeks with the payday model set to expand nationwide, would bundle payday loans and share in the risk by pooling fees. It is based on an existing Stretch Pay package started in 2003 by Wright Patt CU and joined by Day Air.
Aiding the Ohio group has been the Ohio Credit Union League and Filene Research Institute, which revealed that a group of CUs in Maryland are making plans to debut Stretch Pay in conjunction with the Maryland/D.C. Credit Union Association.
Discussing the Wisconsin model, a successful CU branch called "GoodMoney" in a Goodwill Industries store, was Kenneth W. Eiden Jr. president/CEO of Prospera CU in Appleton who said in its first year of operation the branch has generated 2,000 short-term loans. Particularly gratifying, said Eiden, is that the branch has saved consumers more than $100,000 in loan fees that ordinarily would have been spent in payday outlets.
In his remarks on the payday panel, Eiden warned that while Good Money is getting positive feedback from the public and lawmakers, the threat from payday firms to basic CU products and member growth cannot be diminished.
"People absolutely love their payday lenders for the products they provide," said Eiden noting also that while the firms provide check cashing and high rate instant loans, "don't believe for a minute that they aren't looking at the entire financial model."
In opening the GoodMoney branch in Darboy, Wis. as part of a collaboration with Goodwill Industries of North Central Wisconsin, Prospera sought to develop a model which copied the payday format by using a catchy name, but still stressed sound money management.
On that score, GoodMoney offers short-term loans at half the cost of a typical payday loan service and customers have access to Financial Information and Service Center, a Goodwill program offering counseling, workshops and debt management plans.
Prospera officials said last week that the Darboy branch is so successful that effective May 1 the Wisconsin CU has expanded the service to all five of its Fox Valley branches including those in Neenah, Menasha and Appleton.
Audience members at the CUNA Mutual panel applauded both Eiden and Burke for their efforts suggesting the two models ought to be combined since one is a service and the other is a branch. The two agreed, but it remained to be seen what practical steps toward that end might be taken. -firstname.lastname@example.org