Monday, October 2, 2006

Unaware that such a demand existed, more and more credit unions in Oregon are beginning to offer cash loans to their members.

"We didn't realize there was such a demand within our own membership," said Bob Corwin, the executive president of Beaverton-based First Tech Credit Union.

Of the 85 credit unions in Oregon, First Tech is among two dozen that offer payday-type lending, according to the Credit Union Association of Oregon and an article in The Statesman Journal.

Corwin's credit union began offering the new loans in June 2004 after its regulatory agency found that many of its members were using outside payday loan outlets. Members of First Tech can quality for a percentage of their paycheck.

They can be loaned as much as $500 for as many as 30 days on an 18 percent annual rate. The personal loan must also be paid off by the member's next payroll date. For the 133,000-member credit union, about 700 salary-advanced loans are outstanding at any given time, Corwin said.

A growing need for payday loans: The payday lending niche has grown rapidly. In Oregon, the number of no fax cash loan outlets has nearly doubled within the last five years, according to the Department of Consumer and Business Services.

Corwin said he understands why people would turn to payday lenders, but many don't realize that they could qualify for loans already offered by credit unions.

"If (customers) show a pay stub, they know it'll qualify," Corwin said.

First Tech has posted displays in its lobbies and sent mailings to its members to help notify people of their new services.

"Hopefully, people would understand what the true costs of payday loans are and know that there is some alternatives to the payday lender," Corwin said.

In July, the Department of Consumer and Business Services and the Credit Union Association of Oregon began an ad campaign to promote cash advances offered by credit unions. Since the campaign began, "payday loans" has been searched about 1,741 times on the department's Web site, or about 16 percent of total searches, according to Diane Childs, the communications director of the department.

And from the state's consumer-information line, about 363 calls have been specific to cash advance payday loan options offered by credit unions, or about 6 percent of total calls for the two-month period.

Meanwhile, lawmakers recently acted to try to keep tabs on the industry.

Gov. Ted Kulongoski signed legislation in April that will cap interest rates that payday lenders may charge. Annual interest rates often can go beyond 500 percent. The law won't go into effect until 2007.

Critics of the law say it will drive payday lenders out of business.

"No one can operate profitably under the guidelines," said Luanne Stoltz, the vice president of a group representing the payday-loan industry in Oregon.

In the meantime, some payday cash advance lenders have begun applying for other types of licenses. State officials say they are working on legislation to further tighten licensing regulations.

Corwin said his credit union is looking at how it can tailor its payday-lending service. For customers who discover that their next paycheck isn't enough to cover the loan, monthly minimum payments might be the next alternative.

"We'll hopefully be able to use this experience with members to try to direct them to behaviors that will keep them out of the payday loan cycle," he said.

This entry was posted on Monday, October 2nd, 2006 at 5:22 am and is filed under Oregon.