Pennsylvania Credit Unions Counter Payday Loans
Thinking about a payday advance in Pennsylvania? There's now another option to consider.
In fact, there's a "Better Choice." That's the name of the program developed by the Pennsylvania Credit Union Association (PCUA) in partnership with State Treasurer Robert P. Casey, Jr.
The new Credit Union Better Choice program provides affordable, 90-day loans of up to $500 with a unique savings component equal to 10 percent of the loan amount. Unlike payday loans online, which impose staggering costs on unsuspecting borrowers, Better Choice loans have low fees and safeguards to prevent borrowers from getting caught in vicious debt traps.
"Payday lenders prey on desperate families and cost those who are already struggling to make ends meet billions of dollars per year in fees," Casey said.
"Our Better Choice program gives working people a real alternative to borrowing against their next paycheck. With lower costs, extended installment payments, financial counseling, and a savings boost, Better Choice helps families make ends meet without devastating their budgets."
Better Choice loans differ from these cash loans in a number of important ways:
* A Better Choice loan must be paid in full before a borrower can take out another loan.
* Better Choice customers will be loaned an additional 10 percent that will be deposited in an interest-bearing savings account in the borrower's name.
* Credit unions will offer financial counseling to Better Choice customers to improve their fiscal literacy and help them make smart long-term financial decisions.
* The Better Choice loan application fee will not exceed $25, regardless of loan size. Payday cash loan lenders commonly charge as much as $25 per $100 borrowed.
* The interest rate charged on Better Choice loans will not exceed 18 percent. Payday lending debt traps can lead to effective interest rates in excess of 500 percent.
* No collateral is required.
* The 90-day loan repayment term is considerably longer than most regular or faxless payday loans, which require payment in full by the next paycheck.
* Loan payments can be made in weekly, bi-weekly, or monthly installments.
"There is clear demand for low-dollar, short-term loans," said Acting Banking Secretary Victoria A. Reider, a supporter of the Better Choice program. "The annual volume of loans made by so-called payday lenders is astonishing, as are the allegations of abuse that characterize the industry."