Forced savings and education are two of the most helpful features for payday alternative borrowing programs to wean members off traditional payday lenders, credit union executives said during an NCUA webinar on the underserved Wednesday.
Once members are required to save to get short term, low dollar loans eagerly much cheaper than they can at a pay day lender store front, they have the important realization they have the capacity to save, said St. Louis Community Credit Union Vice President Paul Woodruff and Phoenix-based MariSol FCU Chief Executive Officer Robin Romano.
Romano said the biggest power in education is showing members how much payday lenders take from their pocket books.
She noted her CU has found forced savings during the term of a loan is such an effective tool that MariSol is using it for non-poor recidivists who come to the institution every eight or nine months to borrow for a for washing machine, then tires.
But Woodruff and Romano admitted they have had mixed success at getting members off the triple digit interest rate for-profit payday lender addiction.
Romano added this may be inevitable. "They want to have to have to stop," she said. "Some people will never stop."
Woodruff said the real answer is to increase wages, but Romano said she has members with A-plus credit who borrow from payday lenders.
