The National Consumer Law Center and the Center for Responsible Lending said this week that nine federalcredit unions in five states continue to offer members payday loanswith triple-digit interest rates.

The Center for Responsible Lending is a subsidiary of the49,000-member, $590 million Self Help Credit Union, headquarteredin Durham, N.C.

The credit unions range in size from $5.9 million to $3.3billion in assets.

The allegations came in a letter Thursday to NCUA Board ChairmanDebbie Matz that brought up to date a report that NCLC prepared onwhat it called credit union payday lending in 2010

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Since then, the letter noted that 52 of the 58 credit unionsthat had been identified in 2010 have left the business and praisedlarge numbers of credit unions that have found innovative andcreative ways to help meet their members' needs for small shortterm loans.

“But a few persist, and others have entered the business,” theletter read.

They are:

• Tri-Rivers FCU, Montgomery, Ala., $18.6 million
• Kinecta FCU, Manhattan Beach, Calif., $3.3 billion
• Buckeye Community FCU, Perry, Fla., $74 million
• Martin FCU, Orlando, Fla., $108 million
• Orlando FCU, Orlando, Fla., $181 million
• Railroad & Industrial FCU, Tampa, Fla., $276 million
• Tallahassee FCU, Tallahassee, Fla., $5.9 million
• Louisiana FCU, La Place, La., $174 million
• Clackamas FCU, Oregon City, Ore., $250 million

The letter singled out Kinecta for special mention, noting thatit is the largest FCU to offer the loans through its check cashingsubsidiary.

“The largest credit union making payday loans of which we areaware is Kinecta Federal Credit Union in California, which has beendirectly offering payday loans at its Nix Check Cashing locations.Kinecta discloses a 15% APR for its two-week loans, but it adds an'application fee' on each loan that brings the true APR on a $400loan to 223%. Kinecta may not legally charge more than 18% APR.Other credit unions use a similar ruse,” the NCLC and CRLwrote.

They also mentioned credit unions partnering with CUSOs to dothe same thing and avoid the loan cap, the organizationscharged.

They also observed that the NCUA is alone among federalfinancial regulators not to have done anything on the topicrecently.

“All four federal bank regulators acted last month to addresspayday lending by financial institutions,” they wrote, adding: “Thecredit union loans we have identified have all of the samehallmarks of predatory lending as do traditional payday loans andbank deposit advance products.

“In 2001, NCUA warned credit unions that payday loans 'normallyhave high fees, are rolled over frequently and can result inoffensive lending practices.' Yet the NCUA's 12-year old letter hasnot stopped a handful of credit unions from offering abusive paydayloans to their members. More needs to be done.”

John Neusaenger, CEO of Orlando FCU, said his credit unionoffers the loans to help keep members away from other paydaylenders.

“It is also worth noting that Florida has very strictrules constraining payday lending,” Neusaenger wrote in an emailresponse to questions. “Borrowers may only have one payday loanoutstanding from a Florida payday lender at one time. The borrowermust pay off the one loan 48 hours before obtaining another loan.Florida maintains a database, via a contractor, to monitor thisactivity. These constraints offer some assurance that Floridapayday borrowers will not end up as deep into the payday lendingcycle as other states allow their citizens.”

Orlando FCU offered the loans to have an opportunity to movemembers away from the payday loan cycle and into more traditional,lower cost credit union consumer loans, Neusaenger explained.

“We know some of our members are using payday loan products toget from one pay period to the next but the demographics of theaverage payday borrower is not what the media typically portray,”he added.

The letter reiterated its call to the NCUA to ban theproducts.

“NCUA has clear authority to stop predatory lending by creditunions,” the letter concluded. “When manipulation of the APR byfederal credit unions (FCUs) is the problem, NCUA should use itsauthority under the Federal Credit Union Act and the Federal TradeCommission Act to forbid FCUs from evading theFCUA 18% usury cap bycharging fees that vastly outstrip the finance charge and thatmanipulate the APR.

“When FCUs offer their name to CUSOs, NCUA should tighten up itsfinder's fee rule to ensure that FCUs are not incurring third-partyrisk and profiting off of loans that are illegal for them to makedirectly.”