Payday Loans Are Credit Unions' Business
Washington State Employees Credit Union created Q-Cash, a payday loan alternative, after tellers noticed checks were cashed on the line for common payday loan amounts and made payable to known storefront for-profit payday lenders. Branches in more economically depressed areas or near military bases saw the most member activity related to the payday loan industry.
So we began asking questions: How many members were going outside the credit union to get a product we didn't offer? What were our members' needs that were going unmet? Was finding an in-house solution a decision that made sense financially, philosophically and from a brand perspective?
The cost of short-term loans-both to consumers and to the institutions that offer them-has been the topic of vigorous national and state-level policy discussions. Current public debate about payday loans is often centered around rates, with two extremes holding court and trying to sway public policy: those who want the loans to be priced at an unrealistically low level making them a loss leader and unsustainable and those from traditional payday lending organizations whose rates stretch as high as law allows, leading to claims of usury.
National consumer advocacy groups have settled firmly in to a position, pronouncing a 36% APR cap to be the ideal and only acceptable rate for these loans. Their argument states that such a rate still provides for reasonable earnings for the lender while being affordably priced for the consumer.