Payday Project in Dakota Gains CUs
With Bank Transfer Day as a backdrop, credit unions in western South Dakota managed to gain some high level attention recently by becoming prime participants in the “Bank on Rapid City” venture that is designed to warn against predatory payday lending.
Four Black Hills-area credit unions joined by three community banks kicked off the local campaign last month with a mission to aid and protect the underserved from harmful payday practices.
The four credit unions, Black Hills FCU, Minuteman Community FCU, Sentinel FCU and Highmark FCU, said the program’s goal is “to increase access to banks and credit unions and help citizens avoid high fees and interest rates that prevent them from building savings and becoming financially stable.”
Preparation and training for the program has been underway for nearly a year. The participating financial institutions agreed to offer low-fee starter savings and checking accounts to the unbanked and underbanked. In addition, the CUs and banks are offering second chance accounts for those who might otherwise be turned away but agree to participate in a financial education course.
The Dakota venture is modeled after a League of U.S. Cities initiative that got its start in San Francisco and has now spread to about 50 locales.
The BTD timing was coincidental, said Barb Garcia, Bank On coordinator for the city’s Community Development Division. Garcia stressed that payday lenders do provide a needed service that traditional banks won’t handle in extending loans of $500 and less. But the 400% rates that payday shops are charging in South Dakota are harming the people they serve, she said.
Only one major bank, Wells Fargo which has a Rapid City presence, pulled out of the program, said Garcia pointing to a decision by its corporate managers outside of Rapid City.
“We are really happy to partner with other financials and nonprofit agencies to reach out to the underserved in our community,” said DeeAnn Dietrich, vice president-loans & member services at the Black Hills FCU. “Although this is not new for us, we believe it is important to continue to partner with other organizations to bring financial education to those in need.”