<p>TACOMA, Wash. – "If you can't beat 'em, join 'em." That may be the motto of Harborstone Credit Union when it comes to dealing with the proliferation of payday lending and check cashing outlets. Rather than watching their members use the services of those businesses when they needed a small short-term loan, the Tacoma, Wash.-based credit union countered by offering a "CU on Payday" program for its 51,000 members. "This is a service, whether we provide it or not, that our members are using," noted John Renforth, senior vice president for marketing at the state's largest community-based credit union. "We are not going to change that behavior by willing it so. The question is do we want the credit union to be a resource for them?" Renforth said the credit union offers those seeking a payday loan an environment that is "more caring and concerned" than can be found in one of the lending storefront operations. He compared it to dealing with "family" versus going to a stranger "who doesn't know you from Adam and who you don't know from Adam." "We felt we could do this perhaps in a more safe and sane way for our members rather than them going to these storefront places," he said. "We could do it less expensively for them, provided in an atmosphere where they know they're cared for and where there are people looking out for them. Even though we set it up to be self-service, it is still within the credit union environment and we think that has some appeal to our members." CU on Payday has been so successful since it was started six months ago that Harborstone hopes to make it available within the next 60 to 90 days to other credit unions in Washington and throughout the U.S. Officials say it can be offered to both a credit union's members as well as non-members. Renforth said the credit union debated long and hard about whether it wanted to get into the payday loan business, especially in light of concerns raised by consumer watchdog groups over lending operations that they say may violate state usury laws, small loan rate caps and payday loan state legislation. In the end, however, Harborstone officials decided that offering the loan service followed in the best tradition of the credit union movement. "Credit unions got their start with short-term loans of $200, which no one does anymore," said Ed Seidenberg, chief financial officer and president of the credit union's CUSO that operates CU on Payday. "We want to help members achieve their financial goals, and adding CU on Payday to our umbrella of services is filling a need." "Sure, we have credit cards and we have signature loans, but a lot of people either can't qualify for those or they don't have time (to apply)," Renforth added. Renforth noted that CU on Payday was especially suited for members who were faced with unexpected expenses. "These are not just people who are at the rock bottom of the credit scoring scale, meaning the people who couldn't qualify for a loan," he explained. "It's not just those scraping by and living over their means paycheck to paycheck. We recognized that sometimes it's people who have an emergency arise. The national statistics point that out. Why do consumers use payday advance type services? It's to do things like cover unexpected expenses such as emergency car repairs or a household emergency or they just need cash for a short period of time between paychecks." Since the program was launched in a partnership with a group experienced in payday lending, Harborstone has loaned more than $20,000 to its members. It expects to handle 500 loans in May, up from 300 the previous month. Its goal is to handle 1,500 loans per month. Harborstone is the third largest credit union in Washington with assets of some $490 million. CU on Payday-loans are available for up to $500; first time participants can borrow $300. The loan operation is a three-step, self-service process. Members first fill out a one-page loan application at a kiosk in one of four Harborstone branches. They then fax the application – containing member, financial, employment and reference information – from the kiosk and within 15 minutes have a decision on their application. Among the requirements to qualify for a loan, applicants must be at least 18 years of age and have a gross income of $1,000 a month or, if on Social Security or other benefits, $800 per month. They must be employed for at least six months and have maintained an active Harborstone checking account for 90 days. They must also have direct deposit to their checking account in an amount at least equal to the loan amount requested. If approved at the kiosk, applicants then sign and fax back a disclosure statement. The funds are then automatically deposited into their account. Their account is debited for the amount the next time a direct deposit is made. "When their check comes in, it automatically repays the loan," Renforth said, noting that payback is usually within two weeks. "This prevents people, unlike when they walk into a storefront, from getting totally upside down on some of these loans." Loans are available in $100 increments. The loan fee is $12 per $100 borrowed, which the credit union said is lower than most storefront payday lending businesses. "It's a nice neat sort of process," Renforth said. "There are minimal things the member has to do. Since we started this we have not had one single loss." He noted that the program, which has attracted interest from credit unions nationwide, provides a way for the credit union to generate additional fee income. "This is another way to build fee income," he said. "That's why I think other credit unions are so interested. Many of them are seeing the same thing we are. A certain portion of their members are using these (storefront) services, so why send them down the street if it's something we can offer that's fairly safe, sane and good for them and the credit union." "One of the reasons we think payday lending and check cashing services have sprung up is because we and other credit unions have gotten out of this business," Seidenberg added. "There was a void in the marketplace. They picked it up. We definitely believe we can be competitive to these other services. Right now, we're focused on members only, but there's no reason why we can't expand it to non-members as well." [email protected]</p>