HARRISBURG, Pa. — Though proportionately the numbers remain small, 45 Pennsylvania credit unions have now signed up for "Better Choice," the branded payday loan product launched last summer by the Pennsylvania Credit Union Association.
"Remember, this is a product that takes plenty of internal programming and there are many small credit unions in this state which are a little cautious about getting into something like this," explained Thomas Mies, vice president of lending at the $533 million American Heritage Federal Credit Union in Philadelphia, which plans an April debut of Better Choice.
Better Choice, launched in August 2006 and funded last January with an extraordinary $20 million investment by the state treasurer's office, provides 90-day, $500, 18% loans with a $25 application, a savings feature and counseling.
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In recent months, PCUA's payday project has had a high profile considering it won the ringing endorsement of the Pennsylvania Department of Banking and former Democratic state treasurer Robert P. Casey Jr., elected in November a U.S. Senator.
Casey had called Better Choice "an innovative program" and deserving of the state's financial participation since it "provides low fees and safeguards to prevent borrowers from getting caught in vicious debt traps." A spokeswoman for the current acting state treasurer, Tony Wagner, said there are no plans to alter the $20 million Better Choice arrangement.
Though the maximum is 18% on the loans, some Pennsylvania CUs have varied the terms. American Heritage, for example, is offering 16% for borrowers who use payroll deduction, but requires the maximum 18% for those with coupon books.
"This is by no means the end-all that will solve the payday problem, but it is a start," said Mies.
The chairman of the PCUA, Norbert Kaczmarek, who also is president/CEO of Erie Federal Credit Union, echoed Mies on the reluctance of small CUs to get on board, but he predicted, "by yearend we'll have double that amount to 90 participants."
There are 628 CUs in the state, but many are too small or ill equipped to offer payday alternatives, said Kaczmarek.
But 45 "is heartening to me," he maintained, noting also the coverage is now statewide with those CUs having 142 branches.
Even so, it is encouraging, he said, that Better Choice is one of many plans now being offered by CU groups and individual CUs across the U.S. citing league ventures and one put forward by State Employees Credit Union in Raleigh, N.C., a vigorous advocate of a payday product with a savings feature.
Anthony Silvi, vice president of financial Services at the $330 million Freedom Credit Union in Philadelphia, said his CU was readying its Better Choice program for media debut "within a week."
One of the most laudable elements of the program is that it seeks to "end the payday cycle" that so many members are caught up in plus it "provides financial counseling and budget advice," he said.
During the Christmas holidays, Better Choice proved to be a morale builder for loan employees who gained satisfaction from helping out the needy, noted Angie Stemmer, loan manager at the $41 million LANCO Federal Credit Union in Lancaster.
"It's just such a pleasure for me to sit down and help somebody out and see their expression when they find out we are not about to charge them fees," said Cookie Yoder, president/CEO of the $6.2 million Pittsburgh Federal Credit Union, a community development CU located in the city's predominantly black Mount Olive neighborhood. –[email protected]
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