A payday loan program offered by the $814 million Nevada Federal Credit Union has started to draw the attention of the mainstream press.
USA Today picked up on the story of the Las Vegas-based credit union manipulating its use of fees in a payday loan program to avoid the 18% usury cap. Nevada Federal was named by the National Consumer Law Center in a January letter to NCUA, which was followed by an NCUA letter to federal credit unions on guidelines for payday lending alternative products.
Many credit union payday alternative loans really help consumers, said Lauren Saunders, the NCLC managing attorney quoted in the story, but others "are only marginally cheaper than traditional payday loans."
Nevada Federal offers payday loans of up to $700 and charges a flat fee of either $60 for members who have their paychecks directly deposited in the checking accounts or $70 for those who do not. Nevada defends the program by arguing that its fixed fees do not violate federal regulations on fees and interest rates, and that the fees should not be used in calculating an annual percentage rate for the short-term loans.
Nevada Federal considers the payday advances a service and not loans, according to Greg Barnes, senior vice president for marketing at the credit union. "So there is no calculated APR associated with the product," Barnes wrote in e-mail. "Our fee is roughly half of the interest charged by typical payday lenders."
