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PORTLAND, Ore. – The debate over the regulatory enforcement role on payday loans continues to roil Oregon credit unions this month with suggestions by some CEOs the NCUA ought to take a look at safety and soundness issues. Though there have been no formal requests made to NCUA so far, the Credit Union Association of Oregon at a Nov. 17 meeting of its Governmental Affairs Committee is due to consider a policy response on what has been described as threats or mandates to state-chartered CUs to start offering payday loan alternatives or face scrutiny on community charters. “You know, as an industry, part of our responsibility is to do a continuous job of educating, informing and persuading regulators and legislators how we serve our members and how we do it safely and soundly,” declared Rick Hein, co-chairman of the GAC Committee. The “ramifications of offering payday alternatives,” and “the pressure, quota or demands” on state CUs as put forward in September by Floyd Lanter, administrator of the Oregon Division of Finance and Corporate Securities, will likely come up at the Nov. 17 session, said Hein, who also is president/CEO of the $369 million OSU FCU of Corvallis. But some Oregon CUs with community charters are “under the gun,” as one CEO put it, and are suggesting Lanter could conceivably put CUs in financial jeopardy by insisting they offer payday alternatives. But the Oregon regulator, obviously conscious of safety and soundness, has maintained he would not do that and is pressuring CUs as non-profits. Lanter, however, has said that federal charters seeking to convert must prove “in business plans” their approach on offering payday alternatives. There have also been hints his leverage would also apply to new branches. As a result of his directives, NCUA, some CUs claim, may need to look into safety and soundness concerns in Oregon depending on how far Lanter pushes CUs to offer the less than profitable product to the underserved. Meanwhile, a number of large and small CUs – both state and federal – have within the last three months begun implementing payday alternative packages or have started actively promoting products that have been on the shelf for some time. The latest to debut a product is the $615 million Unitus Community Credit Union of Portland, which agreed the state “is on the right track” in urging CUs to fill a void but also wants banks included in the Lanter call. In detailing its product, Unitus said on Dec. 1 it will be offering a no-credit check $500 product called “Cash Now” with a shortened repayment schedule “of one month for every $100 borrowed up to three months.” “We think ours is a little different since we are not extending a line of credit with a firm date for full repayment,” said Paul Kirkbride, vice president of credit services. Cash Now will have rates “somewhere in the teens to low 20′s,” he said. Pat Smith, president/CEO of Unitus, said there seems little doubt that CUs in Oregon and elsewhere “have taken our eye off the ball” by failing to meet convenience needs of members who have sought out the payday shops “just as they did the old finance companies.” In essence, CUs have indirectly helped foster the growth of payday shops and now need to find ways to rectify conditions by reaching out to those members who patronize the facilities. But what is being questioned, said Dal King, president of Oregon First Community CU of Coquille, is Lanter’s “imposing a requirement” for the product. Technically, said King, Lanter has that authority, but “the jury is still out” on whether the CU regulator will be using his leverage on new branch applications. The $213 million First Community, he said, does not offer “payday loans per se” but does engage in risk-based pricing with no minimum small loans carrying no application fees. But the larger issue, he said, is how Oregon CUs like his are already reaching out to the underserved in different ways. “We’ve long sought to put credit union branches in communities or neighborhoods” that lack financial facilities or where banks have pulled out, said King. He said Lakeside -population 1,500 – is a recent example where First Community put in a branch and there are other “highly populated areas with no bank at all” now served by the Coquille CU. Helen Byrnes, president of the $430 million Northwest Community CU in Springfield said that the state is headed in the right direction in pushing payday alternatives but she questioned not including banks in the overview. “We need to ask how we can extend payday lending alternatives to all types of credit unions and banks – not just community credit unions,” she said. “Any real solution to this problem has to be comprehensive and involve more than just one type of institution.” Community CUs can do their part in this effort, she said, “but I think we need to approach this with the best information we can get and apply the best strategy,” and on that front she added, “we need reliable data so we can manage risk.” She said Northwest Community began offering a short-term payday alternative called “Quick Cash” two months ago and has five other related products that it promotes in such areas as overdraft protection and Visa cards. Still Northwest Community has no intention “of giving away the shop” with these products, she said. Douglas Grout, senior vice president of operations at the $553 million SELCO Community CU in Eugene, said his CU for a year has been looking at payday alternatives but Lanter’s September letter to CEOs on the topic “reinforced” the CU’s moving ahead with “Quickdraw,” an alternative product coordinated with pay schedules on a 30-day cycle. -

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