Payday Loan Times

In a recent editorial on the interest cap that will be imposed on car-title lenders, the Register encouraged credit unions to reach out to “Iowans without good credit.” Indeed, Iowa credit unions are working to offer additional products and services to underserved Iowans that have been stuck applying for cash advances.

Credit unions are known as being consumer-friendly alternatives in the financial industry, with a mission of helping our members achieve financial success.

In 2006, the Iowa credit-union movement assembled a fast payday loan lending task force to identify ways in which the industry could improve service and provide alternatives to individuals who utilize payday and car-title lenders. The task force reviewed credit union “payday alternative” models around the country and ultimately developed a draft of the proposed legislation that has evolved into Senate File 347.

The bill is designed to help Iowa’s not-for-profit credit unions reach out to underserved populations and provide a lower cost alternative to the check-cashing, wire-transfer and payday advance loan products in today’s marketplace.

Specifically, the bill would allow credit unions to offer check-cashing and wire-transfer services to anyone who is eligible for membership at their credit union. By providing a lower-cost alternative than these other outlets, the often “unbanked,” low-income or immigrant populations would be better able to wire money internationally. This provision mirrors legislation recently passed by Congress for federal credit unions.

Several credit unions in Iowa are working to offer alternatives to personal cash loan lending, including Scott Schools Credit Union, University of Iowa Community Credit Union and Veridian Credit Union. These credit unions have discovered ways to offer lower-cost alternative loans to their members that include a built-in savings component to encourage better financial habits and help members get out of the cycle of debt.

To further reach out to underserved populations, the Iowa Credit Union Foundation has a mission to eliminate poverty in the state of Iowa.

The foundation has developed a pilot program that could be replicated nationally to allow low-cost ways for immigrants to send money home, helping them avoid predatory lending. The program also includes individual development accounts, helping consumers save money by having their contributions matched.

The Iowa Credit Union Foundation is hosting a regional conference, “Discovering Untapped Markets,” focused solely on serving potential applicants for no fax payday loans and how to meet their changing needs. All credit unions from Iowa and surrounding states are invited to attend this event May 15 and 16 in Des Moines.

Furthermore, the Iowa Credit Union League has made a commitment to provide credit unions with the resources they need to better serve emerging populations. Recently, the league formed a subsidiary company, Coopera Consulting, whose mission is to inspire people, business and communities to partner for new economic opportunity.

The principals, Warren Morrow and Max Cardenas, are working with individual credit unions to identify new products and services to meet the needs of underserved markets.

Patrick S Jury is chief executive officer and president of the Iowa Credit Union League.

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

The Iowa Supreme Court rejected a challenge to a state law that allows payday loans with annual interest rates more than 300 percent.

In Monday’s ruling, a unanimous Supreme Court said the issue should be taken to the Legislature, not the court system. The court, ruling in a Polk County case, said state law governing cash advances meets constitutional muster, even though interest rates allowed under the law are high.

The ruling comes as the Legislature debates another controversial lending practice, seeking to put new restrictions on car title loans.

Iowa Democratic leaders are joining with Attorney General Tom Miller in pledging to pass new restrictions on car title loans, while also considering such acts in the face of increase payday loan use.

Democrats, who gained the majority in the Legislature in last month’s election, predict a bill to restrict the industry will be introduced during the first month of the session, which starts on January 8.
Consumers who get car title loans put up the title to their car as collateral. They can face annual interest rates as high as 360 percent. Missing a payment can mean the loss of a car. Those that miss a cash advance payment simply face increase fees the next time around.

Senator Joe Bolkcom, an Iowa City Democrat, says he’ll push the restrictions as part of a larger package dealing with predatory lending practices, such as payday advance loans and other dangers to consumers.

Forget a payday loan.

Focus on a payday alternative loan.

That's the basic message being given by UI Community Credit Union, which told The Daily Iowan is was offering a quick cash option known by this aforementioned moniker.

The credit union is now offering the Payday Alternative Loan, which is a loan for as much as $500, said Steve Quigley, the senior vice president of retail sales for the facility.

Although the loan could seem as though it would bury customers in debt, it is actually intended to encourage saving habits. When a member takes out this kind of fast cash loan, the credit union doubles the amount, placing half into a savings account. Quigley said the feature is intended to give a person a feel for savings.

"When the loan is paid off, you now have [extra money]," he said.

The credit union's objective is to help its members, especially those living paycheck to paycheck.

"There are a lot of people who go to [payday alternative loans] for things that come up unexpectedly," he said. "It could put a real dent in their budget if their water heater goes out, for example."

(Read on …)

Former Democratic vice presidential nominee John Edwards said that payday loan companies should be more strictly regulated during a trip to Iowa over the weekend, writes the Waterloo-Cedar Falls Courier. Edwards said that payday advance lenders victimize Americans who are worried about things as basic as paying rent or feeding their families.

“They don’t have anything they can fall back on, so the result of all that is they’re just laying open and vulnerable for these predators to take advantage of them,” Edwards said.

Critics complain that payday lenders charge interest rates topping 300 percent, which can make paying short-term loans back a challenge, even though the terms are so short (two weeks is the standard).

Car-title loans are similar to payday loans, but require consumers to put their vehicles up as security. Those who cannot pay back the cash advance and high interest charges have their vehicles repossessed.

(Read on …)