Pennsylvania CU Payday Loan Alternatives Save Members Millions
Members of Pennsylvania Credit Unions whose credit unions offer Better Choice loans have saved more than $12 million in fees since the program began in 2006.
The Pennsylvania Credit Union Association, organizer of the program, said that $16.7 million had been lent in the payday loan alternative product as well.
Since the program's inception, the association reported that 80 credit unions have participated in the program, offering the loans at 242 credit union locations across the Commonwealth. The program is a partnership between the PCUA and the Pennsylvania Treasury Department.
"I'm pleased that credit unions stepped up to the plate and are meeting the small dollar borrowing needs of Pennsylvanians. Just as important, credit unions are also providing financial counseling to help assist borrowers with managing their money," said Jim McCormack, CEO, Pennsylvania Credit Union Association. "The continued growth of the Credit Union Better Choice program shows that consumers are still feeling the effects of the down economy and that paychecks do not stretch far enough when unexpected expenses occur."
"Many Pennsylvanians need their dollars to stretch further in these tough times - to help them avoid a costly 'debt trap,' Treasury is proud to support the unique Better Choice payday lending alternative," Treasurer Robert McCord said. "Better Choice short-term loans have helped families make it to Pay Day and help borrowers save millions in predatory fees and usurious interest rates."
A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or approximately $450 over 90 days. A $500 Credit Union Better Choice loan costs consumers approximately $42.50 for the same 90 days and at the end of the loan term, the consumer has $50 in a savings account, which allows them to develop a savings habit, the association said. In addition, the program builds upon this new wealth-building component by providing financial education to consumers in an effort to help them make better informed financial decisions.