CUs Warned Of A New Type Of Emerging 'Predator'
A new type of "predatory" loan scheme is emerging.
U.S. Rep. Maxine Waters (D-CA) told a group of credit unions gathered here that in addition to the typical services offered payday lenders and pawn shops, shady tax preparation firms also inhabit low-income neighborhoods. Instead of advising consumers to file their returns electronically and receive their refunds in a few days via direct deposit, the tax preparers steer people into taking out "refund anticipation" loans, which carry high fees.
The role that credit unions can play in countering such lenders by offering reasonably priced services was at the center of much of the discussion during the African-American Credit Union Coalition's Fourth Annual Meeting at the Radisson Wilshire Plaza Hotel.
David Chatfield, president and CEO of the California league, and Rep. Waters took turns blasting the so-called predatory lenders.
"These are the credit union members of the future, and credit unions must prepare to serve a more diverse population," Chatfield said. "We must develop marketing strategies that recognize different backgrounds. We also must recognize there is diversity within diversity. Not all 'Asians' are the same-the background of someone from the Philippines is different than that of someone from China."
According to Chatfield, many people are not aware they can join a credit union. "We cannot let those who can least afford it fall through the cracks," he declared.
Chatfield zeroed in on check cashers, payday lenders and auto title lenders. "These predators proliferate in neighborhoods of people of color. We need to do everything we can to create products to take the place of payday loans. People go to these places because they need the money, so in one sense they serve a legitimate purpose. But I hate to see people paying the rates they pay."
Waters, who represents California's 35th Congressional District, told the conference she has belonged to a credit union her entire life.
"I have always felt credit unions offer the opportunity for the average worker to belong to something that understands car financing and other things that make the quality of life better," she said. "We need more credit unions."
Waters called upon CUs-especially small CUs-to seek available development funds from the government. "It is time to expand the credit union movement," she said. "Grow it, and give more of the services that are desperately needed. I want to end check cashing as we know it. I want to see as many credit union signs as there are signs for payday loan services."
Like Chatfield, Waters said people who are desperate for money are the ones who fall prey to these lenders-despite the high fees and APRs that can hit 800%.
"If there is no payback within two weeks, fee assessments are added to the principal. These people are being gouged, and they are the most vulnerable in our society," she thundered. "We must get rid of the people who are taking money out of the community by preying on the poor and the elderly. I am working on laws to do this. I am working on ways to allow credit unions to offer services outside membership."
"Credit unions can take the place of the check cashers," she continued. "Charge a fee, but don't gouge people. There need to be marketing campaigns to get people to join. Take advantage of credit unions' good reputation."