Payday Loan Times

The message on the brochure from Quad-Cities Interfaith couldn’t be more blunt. “Don’t get ripped off,” it says.

It also lists the names and contact information for five area banks and credit unions that offer small consumer loans with interest rates that are more reasonable than rates offered by payday advance lenders that have popped up throughout the Quad-Cities in recent years.

“These financial institutions will help you with your credit report, show you your interest rate up front and protect you from being charged an unreasonable and unnecessarily high interest rate.”

The brochure, in circulation for eight months, is one of at least two efforts at work in the area to help consumers see the cost of faxless payday loans that can have annual interest rates of hundreds of percentage points and can, if used to excess, lead to financial difficulties.

A task force formed by Interfaith that examined predatory lending practices in the Quad-Cities investigated payday lending after noticing an increase in the number of shops in the area, said Rita Cunningham, chairman of the group.

Area banks and credit unions were contacted and invited to meet and discuss how to let people know that they offer lower-interest alternatives to bad credit cash loans and can educate consumers about credit, its use and about developing healthy relationships with traditional financial institutions, Cunningham said.

“With payday loan offices popping up all over, we asked what this was about and why this was happening,” Cunningham said. “A lot of people are embarrassed to come forward and talk about their bad experiences with payday loans.”

Alcoa Employees & Community Credit Union offers a small consumer line of credit at 13.5 percent that consumers who qualify can draw against in $100 increments, said R. Dale Owen, vice president of lending. Alcoa is one of the five listed in the brochure.

Banks and credit unions offer small loans at interest rates far lower than payday loan offices but don’t tend to market them as heavily, Owen said. Those loans aren’t as profitable, but they do provide a service to the community and those who many need to borrow small sums.

The Iowa Credit Union League, a trade group for the state’s credit unions, is also working on legislation that would allow them to offer small loans in much the same way that no fax cash loan shops do, except that the annual percentage rate would be lower and there would be a consumer education component, Owen said.

QC DollarWise, an organization of 40 financial institutions and community-based groups, helps to coordinate financial literacy education and has pushed for greater access to that type of learning for the general public, said Lisa Ahern, a representative of the group.

“Last year, we looked at existing financial education in the Quad-Cities and found that to have access to it, 80 percent had to be a member of some financial institution or a recipient of some type of social program,” Ahern said.

QC DollarWise advocates for more availability of financial literacy education to greater numbers of people, regardless of whether they have bank accounts, are members of credit unions or are receiving some public benefit, Ahern said. One recommendation from the group asks that there be continued education about fast payday loan lending, other forms of sub-prime lending and alternatives to it.

“It’s about education, education, education,” Ahern said. “We want to do some kind of media campaign. You see all the commercials for payday lenders, but nothing to counteract that.”

SOURCE: The Quad City Times