SEATTLE — Credit unions are not doing enough to protect market share being lost to payday lenders, a vice president of San Francisco-based Patelco Credit Union told Washington State CU executives.
"The nurses, teachers, police and health care workers" who patronize the payday shops in huge numbers "should be our members," declared Ed Swanson, Patelco's vice president of national accounts.
Addressing a break-out session at the annual convention of the Washington Credit Union League, Swanson pleaded with the CU execs to step up introduction of alternative products and services reaching out to low- and moderate-income members in a more aggressive fashion.
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The fact is, he said, the explosion of payday shops particularly in metropolitan areas shows no signs of lessening with the outlets garnering "boatloads of loans" which could belong to CUs.
"We now have more payday stores than fast food outlets," he said, with 22,000 shops today projected to hit 40,000.
"Average loan balances at an outlet for a two-week period are $40,000 and that translates to more than $1 million a year," said Swanson who works out of a Deerfield, Ill. office servicing Patelco members in the Walgreen's Drugstore chain.
The newest payday shops being built "are clean, attractive facilities with bilingual tellers who speak the language" of their clients, whether it be Spanish, Haitian or Filipino, he said. Moreover, the skills of employees have become even more sophisticated by "even knowing the dialects," he said.
Some of the outlets, with colorful signs and flashing lights, "resemble casinos," creating special appeal to this group of borrowers, he said.
In his remarks, Swanson stressed the predatory and destructive nature of payday practices and the "sick money" that is generated, calling it "frightening" and yet CUs need to take heed of how the firms have filled a vacuum.
Some audience members gasped when Swanson described an unheard of 1,800% rate at outlets in the South.
"How can they live with themselves when they act like vampires?" asked one Washington executive. Swanson responded that as abhorrent as that might be, these are workers trying to make a living "just as you do at your jobs."
The Patelco vice president said CUs can no longer "live in ivory towers" watching the shops capture CU business. He said CUs need to move "out of your comfort zone" by seeking out ways to fund the loans.
Considering the vast Hispanic market, Swanson suggested CUs put more effort into offering IRNet transfer products with attractive 2.5% rates as one avenue as well as keeping longer hours and staying open on Sunday.
Large banks have recently taken notice of the payday volume with Wells Fargo offering free money transfer accounts and JPMorgan/Chase opening 100 mortgage offices near underserved Hispanic areas. Bank of America, he said, is looking to open 550 new branches in Hispanic areas by the end of the decade.
Meanwhile, Allstate Insurance, Liberty Mutual and Farmers Insurance are opening up bilingual offices, said Swanson.
The Patelco officer offered statistics showing some CUs are indeed taking steps to reach out to those of modest means with 33% making a loan to a member of $100 or less and 67% making a loan of less than $300.
Credit unions, he said, can also participate more heavily in low/modest income organizations by making contributions and grants and doing more advertising in local newspapers, billboards and radio. –[email protected]
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