APPLETON, Wis. — The $146 million Prospera Credit Union is rolling out a program that promises to help credit unions all over the country offer their members an alternative to high-interest payday loans. At the same time, a payday lending-financed study has raised questions about the impact of interest rate caps at payday lenders.Prospera worked with CU*Answers, a credit union technology CUSO, to develop a turnkey payday lending solution to replace a software package used by the payday lending industry with a much more affordable version, according to Prospera CEO Ken Eiden."When we first started GoodMoney, we had to use a software package that cost us $5,000 just to license and then $18,000 per year in different fees," Eiden explained. "Obviously if our goal was to provide a not-for-profit alternative to the payday loans, credit unions were going to need to have an alternate system, and we had to develop that."Prospera financed the development of the new software out of its own funds though it was helped afterward by a grant of $75,000 from the National Credit Union Foundation, according to Eiden. He further expressed a high degree of satisfaction with the result. The new turnkey package handles all aspects of a short-term, low-dollar loan program, including underwriting, marketing, collections and other issues, he said.Prospera first launched its GoodMoney payday loan program in 2005 in cooperation with Goodwill Industries of North Central Wisconsin. The program offers the payday lending alternative, along with check cashing and wire transfer and remittance services, through a Goodwill Industries store. This put the credit union's alternative payday lending in locations frequented by its target market and helped spur the program's growth.Since then, the credit union has invested more in the program, streamlined and improved it and has begun offering it in all five of its branches in addition to the Goodwill store outlet.Eiden said the opportunity GoodMoney represents has been well received by credit unions. Two credit unions, Superior Choice Credit Union, headquartered in Superior, Wis., and Delta Country Credit Union, headquartered in Escanaba, Mich., have already taken it on and are working to launch a program for their members, Eiden explained. More than 17 other credit unions have also contacted Prospera for more information, Eiden said."And by contacted, I mean that they have asked for copies of the agreements to set up the program, et cetera, so they can do their due diligence with them," Eiden said. "So they really expressed a sincere interest in getting the program underway."Eiden explained that while the GoodMoney program worked extremely well using Goodwill or other thrift stores as outlets for the service, the program is not reliant on having those outlets."We believe firmly that every credit union that has a payday loan store in their community should begin to offer GoodMoney or some other payday loan alternative so that they have some other place to go to meet these needs," Eiden said.Sandra Zander, vice president of member services at Superior Choice Credit Union, said her credit union decided to start offering GoodMoney after they began clearing checks their members wrote to payday lenders as part of getting the loans."We figured out pretty soon that this was an issue for our members after we started seeing the checks," Zander said. "Sometimes we were clearing 75 of them per week."Zander explained that Wisconsin has virtually no limits on payday lending and that the payday lending outlets had mushroomed in the community, which is right across the river from Minnesota.Zander said that Superior would not use a thrift store outlet for its program but would instead begin by offering it through their branches. She also explained that while the program was definitely turnkey, it does require training to set up properly; Superior had been delayed in getting started by personnel changes and the need to get someone trained.Meanwhile, a study has suggested that merely moving payday lenders out of an area without providing a better alternative hurts consumers. The study was authored by Jonathan Zinman, an economist who recently co-authored a study for the Filene Research Institute on how consumers use debit and credit cards (see story page 18). Zinman is an assistant professor of economics at Dartmouth College.In his study Zinman studied the effects of an interest rate cap on payday loans put into place in Oregon in July of 2007. The cap essentially limited payday lenders in Oregon to charging $10 per $100 lent and set a minimum loan term of 31 days. The majority of payday lenders in the state left.Zinman's study, funded in part by payday lenders through contributions to the Consumer Credit Research Foundation, found that consumers suffered after the departure of payday lenders."I find that the cap dramatically reduced access to payday loans in Oregon, and that former payday borowers responded by shifting into incomplete and plausibly inferior substitutes," Zinman wrote. "Most substitution seems to occur through checking account overdrafts of various types and/or late bills. These alternative sources of liquidity can be quite costly in both direct terms (overdraft and late fees) and indirect terms (eventual loss of checking account, criminal charges, utility shutoff)."In his study Zinman used data comparing the experiences of Oregon consumers after the departure of payday lenders with that of consumers in Washington State, just across the border, where no payday lending cap had been put into place.–[email protected]