Pennsylvania Officials Encourage Alternatives to Cash Loans
By J.J. CameronPayday Loan Writer
The Philadelphia Inquirer reports that Pennsylvania officials want mainstream lenders to do what they try to discourage check-cashing agencies and payday lenders from doing:
- Provide loans to high-risk borrowers.
While a handful of major banks have not signed on, credit unions have.
Former Banking Secretary A. William Schenck III began approaching banks last year, looking for "a fair and reasonable alternative" to cash loans, which can cost borrowers the equivalent of more than 400 percent in annual interest.
However, Schenck and state Treasurer Bob Casey Jr. have had a tough time persuading major banks to expand their menus. Therefore, Pennsylvania has turned to its credit unions.
An alternative to payday loans: The Pennsylvania Credit Union Association has responded with a new program - Better Choice - that will offer $500, three-month loans at an annual interest rate of 18 percent, plus an application fee of up to $25, and a savings deposit of $50. Despite the fees, it's cheaper than a no fax cash advance.
Better Choice borrowers can pay back a $500 loan with monthly payments of $197.50 - including interest and principal - and have the loan paid off, plus $50 and market-rate interest in savings at the end of the loan term, said Diane Powell, spokeswoman for the credit union association.
"The idea is to get them out of the lending trap," Powell said, "not just to fee them to death."
Powell said some large Philadelphia-area credit unions planned to participate in the Better Choice program. She said the association hoped the alternative to payday cash loans would be offered before the end of next month.
