Is payday lending just a necessary evil? It is necessary, agreed members of a panel discussion during GAC-and it doesn't have to be evil, stressed two credit union representatives.
On hand for the session was the CEO of the largest payday lender in the U.S. as well as two CU CEOs whose credit unions have started offering the service credit union-style.
Billy Williams, who has grown wealthy as CEO of Advance America Cash Advance Centers, said his firm provides a much-needed service and explained why the price of these services comes so high to consumers.
"We have high fixed costs. We have high hours of operation [some outlets are open 24 hours a day], our office size is fixed, and we have high bad-debt costs," Williams told the standing-room-only crowd jammed into a meeting room at GAC. "But credit unions, because of their cost structure, can offer these loans at very competitive rates."
In fact, Williams said, credit unions are in a much better position to offer these types of services.
"Credit unions are better qualified to offer small-denomination, unsecured credit options than we are," he said. "People want and need this credit option. And you're closer to your customers than any other financial institution."
State Employees CU, Raleigh, N.C. and State Employees CU, Olympia, Wash., are two credit unions that have looked at the payday lenders and taken a "if you can't beat 'em, join 'em" approach-but with a decidedly CU twist (The CU Journal, Feb. 24).
Jim Blaine, CEO of the North Carolina SECU and an outspoken critic of payday lending operations, said his credit union decided to offer payday lending after a survey of his membership revealed that about 4,000 of them use payday lenders. SECU will lend up to $500 for 31 days at 11.75% and a $2.50 finance charge. Members must have a checking account and direct deposit and be employed, and to date, some 25,000 members are using the program. The credit union is making money on the program, and Blaine has urged others to duplicate the model.
Similarly, Kevin Foster-Keddie of the Washington-based SECU said his CU developed a payday lending CUSO in order to help other credit unions get into the payday market.