DUBLIIN, Ohio -- A credit union alternative to traditional payday lending, StretchPay, saved members of 31 credit unions more than $3 million in 2007.
Collectively, credit unions in Ohio, Maryland, Michigan and the District of Columbia made 64,400 StretchPay salary advance loans last year totaling nearly $25 million, accumulating $476,000 in fees and $187,000 in interest at an annual percentage rate of 18%.
According to StretchPay program provider Credit Union Outreach Solutions Inc., members borrowing the same amount at traditional payday lenders--which typically charge $15 per $100 borrowed and up to 391% APR--would have paid more than $3.7 million in interest and fees.
Designed to be a lower cost alternative for consumers in need of small cash advances for short terms, StretchPay is positioned as a way to help members avoid turning to payday lenders. A credit union charges an interest rate of 18% APR, along with an annual fee of $35, for a $250 StretchPay loan. The borrower must repay the entire balance within 30 days before he or she can take a new advance. Some credit unions also offer $500 StretchPay loans at 18% APR, with an annual fee of $70.
Credit unions offering the StretchPay loan product are members of Credit Union Outreach Solutions, a cooperative organization formed in 2006 and headquartered in Ohio, to offer turnkey outreach programs and community commitment initiatives to credit unions nationwide.
"Our goal is to get our members on a path to economic prosperity," said Bill Burke, CEO of Day Air CU and chairman of Credit Union Outreach Solutions. "We helped our members keep more than $3 million in fees and interest. The free financial counseling and education help them make wise, long-term financial decisions."
In addition to loans, members who take part in StretchPay receive financial education and counseling from their credit union to help them break free of the lending cycle. Credit unions also report loan payments to the credit bureaus, allowing StretchPay consumers to build their credit standings.
StretchPay is the first CUOSI program to be introduced. As of mid-February, three leagues--Ohio, Wisconsin, and the Maryland & District of Columbia Credit Union Association--and 38 credit unions are members of CUOSI. They offer StretchPay loans at 125 branch locations.
For more information about StretchPay, visit www.ohiocreditunions.org/StretchPay.htm.
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