Goal Is to Rollout Payday Lender Alternative

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Many credit unions decry the existence of payday lenders in their communities.

But Washington State Employees Credit Union is doing more than paying lip service; it is offering an alternative for those who find themselves in need of emergency cash. And it is making plans to roll the product out to other credit unions that are interested in using it.

WSECU recently unveiled a pilot, short-term loan program called "Q-Cash." Members can obtain $50 to $700 at a cost of $10 per $100 borrowed. The credit union said its pricing is a full one-third lower than the industry standard. First-time users of the program have a maximum loan amount of $250.

Q-Cash loans currently are available at five of WSECU's 19 branches. Kevin Foster-Keddie, the CU's president, told The Credit Union Journal Q-Cash soon will be available at all WSECU branches. Plans are also in the works to offer the service on contract to other CUs later this year.

"We hope to have it up and running by June," he said. "We are setting up an automated program and it is working well in tests."

The Q-Cash program has been a hit with WSECU members so far. Foster-Keddie said more that 200 loans have been issued. The popularity was expected, because the credit union was aware of the demand among its membership. Three years ago, an employee noticed that many members were using cashier's checks to pay payday lenders. WSECU began doing research, and discovered its members were spending an estimated $1 million per year on payday lending.

According to Foster-Keddie, the goal of the new program is to change the way payday lending is done. He said its relatively low cost will provide price pressure on the lenders, and he hopes consumers will change the way they think about the process. Among the key differences between other payday lenders and WSECU are: borrowers can repay the loans in two installments, and they have the option to be referred to BALANCE, a consumer-counseling program.

"Every payday lenders charge the maximum allowed by law. Some payday lenders in Nevada even charge by the hour," said Foster-Keddie. "Payday lenders want to keep people coming in, so they can keep making money off them. We want to get people in, have them open accounts and not need payday lending any more. We want to change their lives for the better."

Providing an alternative was a necessity, he added.

"We can't preach to people. We have to be in the game, and we have to offer them what they want."

WSECU is the second-largest CU in Washington. It has more than $1 billion in assets and serves more than 122,000 members.

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