State Campaign About Small Loans Leads To Big Increases In Volume

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HELENA, Mont.-After an aggressive public awareness campaign in the latter half of 2010, a dozen CUs across Montana reported a 24% increase in small loans made during Q3 and a subsequent 26% increase in Q4.

The effort came after officials at Montana Credit Unions for Community Development, part of the Montana Credit Union Network, determined in 2008 that credit unions in the state could be doing more to promote their small loan services-and lure potential members away from predatory payday lenders. The result was a statewide program established to help increase public awareness. The spot can be seen at http://montanacreditunions.coop/RTF1.cfm?pagename=Small%20Loan%20Needs.

Since initiating the program in 2008, about 5,000 loans have been funded, including 524 in Q3 and 664 in Q4 of 2010, totaling more than $687,000 for that six month period. The average loan amount over the life of the program is just below $600, with more than $2.8 million having been funded since launch.

The most recent promotion for the effort has included TV and radio ads, underwritten in large part via a grant from NCUF's REAL Solutions program, which is designed to create financial service products for low-income people.

While the TV and radio campaign was only funded for two months, credit unions in the state are continuing to promote small loan services through websites and through materials available at branch locations, according to Jeanne Saarinen, executive director of Montana Credit Unions for Community Development.

Professor Provides Analysis

The Montana Credit Union Network has also enlisted the volunteer services of a Montana State University associate professor to analyze the statistics and determine trends among borrowers. Saarinen said statistics are not yet available on which borrowers were and were not CU members prior to getting a loan.

"I think we can expect some interesting analysis in the next six months or so," said Saarinen. "But we're just barely scratching the surface of what we want to track."

Saarinen said that in the future plans call for tracking additional trends and changes in lending habits, along with whether members taking out small loans return to the CU for larger, subsequent loans, such as for a vehicle.

"We have the reporting capabilities now to pull that data; we just need the right person to analyze it and make sure it's accurate data," she added.

Saarinen said that during the last five years her organization has done a lot of work with credit unions throughout the state to help develop loan products specifically to combat payday lending. Loans made by credit unions are are capped at 18% APR, and Montana voters recently approved a ballot measure to limit payday lending rates to 36%-a move Saarinen said the state legislature worked on unsuccessfully for nearly a decade before turning the matter over to voters last November.

Saarinen said that as a result, a number of payday lenders are beginning to leave the state, "but there are still Internet companies doing business in Montana, and they're going to get creative. I have a feeling we won't see the end of payday loans in Montana, even with this 36% cap."

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