PenFed Expands Payday Loan Program To Partner CUs
ALEXANDRIA, Va. – Pentagon Federal CU has extended its ARK payday loan program to eight other credit unions and is looking for new credit union partners.
The program – known formally as Asset Recovery Kit – provides subsidized loans through the participating credit unions at a one-time, $6 fee with no interest and the loan loss reserves are provided through PenFed’s non-profit PenFed Foundation. Under the partnership with other credit unions, the Foundation will provide the loan loss reserves and the credit union can brand the loans with their own brand. The use of funds from the tax-exempt foundation for loan loss reserves is important because of an average 10% charge-offs for the program.
“This is something they can do to serve their members,” said Kate Kohler, chief operating officer of the Foundation, which has provided millions of dollars in grants to veterans projects, such as adjunct facilities at Walter Reed Hospital. “This is not a money-making product, this is really a public service initiative.”
The other credit unions partnering on the program are: Fort Stewart FCU; Fort Gordon FCU; Fort Bragg FCU; Schofield FCU; Fort Shafter FCU; San Diego Medical FCU; AmeriCu CU and Pearl Harbor FCU.
Under the terms of the loan at PenFed, the borrowers must be military personnel, there is no credit check, loans of up to $500 must be repaid within two weeks, and applicants for additional loans must agree to financial counseling through PenFed’s partner, Credit Counseling Service. Most of the borrowers, as a result, are first-time participants in the program, according to Kohler. “Because of the terms, you don’t see as much recidivism as we might see at other payday lenders,” she told Credit Union Journal yesterday.
Since inception, ARK has helped 3,500 borrowers with $1.5 million in cash advances. ARK’s cash advances to date in 2010 totaled $143,003 for 344 borrowers.