GREAT FALLS, Mont.-With many payday lenders leaving Montana following a voter-approved interest rate cap, Great Falls Teachers FCU has created a $500 line of credit that is accessible regardless of credit history.
The $84-million credit union is collaborating with Rural Dynamics Inc. a provider of credit counseling and financial education also based here. The Securing Access with Financial Education (SAFE) credit line is designed to help families overcome temporary financial hardships and move them toward economic stability.
To qualify, borrowers must be a member of the credit union for one month, be employed and complete a free individual financial analysis with a certified Rural Dynamics adviser.
The SAFE line of credit through Great Falls Teachers FCU will be reported to credit bureaus, with a goal of building credit scores.
In November 2010, Montana voters supported an initiative to cap short-term loan interest rates at 36%. Since then, many payday lenders have stopped or plan to stop offering short-term loans to consumers. The SAFE credit line carries an 18% interest rate and requires monthly payments of $50.
Gayle Jacoby, financial services officer for the credit union, noted the SAFE interest rate of 18% is "a far cry from 36%." She said Great Falls Teachers germinated the idea for a better payday loan alternative in March, and soon after began having conversations with Rural Dynamics regarding the financial education aspect.
The CU began offering SAFE to members in May, and local news coverage led to numerous phone calls.
"It is a revolving line of credit, so as people make payments on it the credit becomes available again," she noted. "We would like to see our members use it for emergencies, but then keep the line available to them."
Cap Of 100 Loans
GFTFCU has a program cap of 100 loans for a maximum aggregate limit of $50,000. It has made approximately 18 loans so far, and one has been repaid in full. Presently no one is past due on their payments because, according to Jacoby, "people know how important it is they remain current. We are giving them a chance, and we would like to think they are not going to take advantage of that."
As part of the one-hour budgeting class at Rural Dynamics, the company sets up a budget for SAFE borrowers. Jacoby said the feedback from members is they are "pretty impressed" with the counselors at Rural Dynamics.
"Our hope is they will budget a little better, eliminate some unnecessary expenses and cut back without taking all their fun away. Some members are telling us they would love to be in the position to buy a home in the future, but they can't until they get some things squared away on their credit."
The CU recommends members visit annualcreditreport.com and pull their credit report before going to Rural Dynamics, which Jacoby said gives RDI "something to work with."
"It feels good to be helping our members," she said. "It surprises me sometimes to see how important $500 is to some of these people. To many, $500 isn't much, but it is everything to people who are behind."
