Bank One and J.P. Morgan Foundations Grant NFCDCU $400,000 for Alternative Pay-Day Loan Programs
CHICAGO - The National Federation of Community Development Credit Unions has received $400,000 from the Foundations of Bank One and J.P. Morgan Chase in order to fund community development credit union efforts to develop alternatives to so-called payday loans. According to a press release from Bank One, the grant will...
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CHICAGO – The National Federation of Community Development Credit Unions has received $400,000 from the Foundations of Bank One and J.P. Morgan Chase in order to fund community development credit union efforts to develop alternatives to so-called payday loans. According to a press release from Bank One, the grant will give $50,000 to five CDCUs to create or expand programs that offer alternatives to the high-cost loans. Fifty percent of each grant will go to fund a loan-loss reserve and 50% will go to financial education and other expenses. A sixth credit union, the North Side Federal Credit Union, a $9.2 million CDCU headquartered in Chicago, will also receive $50,000 to provide technical assistance to the five credit unions and the remaining $100,000 will be divided into two parts. Fifty thousand dollars would go to the Federation for running the program and the other $50,000 will go to a third party for evaluating the program “Payday loan alternatives will help many of these same consumers get a better deal through both more affordable loans and financial education,” said Cliff Rosenthal, executive director of the Federation. “Working with a long-time partner, JP Morgan Chase, and a new partner, Bank One, we will make a major financial difference for these consumers and families.” Ed Jacob, CEO of North Side, reluctantly accepted credit for originating the idea for the grant. Jacob worked for Bank One, which is based in Chicago, from 1992 to 1999 and North Side has had a payday loan alternative products for some time. He reported that he had approached his old employer with the grant idea after it seemed to him that the time had come to start trying out different approaches to the payday loan alternative product. “I really see this as an opportunity for us to increase the scale of this product as well as test different models,” Jacob said. “We offer a payday loan alternative that has a six month term. Jim Blaine down at State Employees CU (of N.C.) does it in a slightly different way. Other people do it in other ways, we need to start collecting data and testing these approaches,” he added. Tom Kelly, spokesman for Bank One said the bank was particularly interested in finding out what product did best in different markets. “Ed’s been offering one sort of loan in his area,” Kelly said, “but would that product work as well outside a military base, for example?” Rosenthal said he anticipated that the Federation would start to take applications for the funds in mid to late July and looked forward to selecting the five credit unions by late October. The goal would be to have the credit unions begin their programs on January 1, 2005, Rosenthal explained. -
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