SAN DIEGO -
The first product, known as the "NOW!" loan, gives access to up to $300 with no credit check or income verification, the credit union said.
The cash is deposited in a USA FCU checking or savings account. Automatic payments are required, but instead of a 400% rate, which the credit union said is common at payday lenders, USA FCU members will pay an 18% APR on a mandatory, three-month repayment plan.
Only four "NOW!" loans may be accessed in a six-month period. The "Freedom Plan" is designed for those already caught in the "payday lending trap," the credit union said. Qualifying members can receive up to $1,200; half of which is used to eliminate existing payday loans. The remainder goes into a "Payday Saver" account.
As with the NOW! loan, the Freedom Plan requires automatic payments and carries an 18% APR. The loan is repaid over three months and includes budget and spending counseling.
Because payday lending is a hot button issue here, Mary Cunningham, USA FCU's president, was interviewed about the new loan products for a local news broadcast that aired earlier this month.
Close Ties with Military Community
A significant portion of USA FCU's members are military personnel and their families. The credit union cited Department of Defense research that found military service members are four times more likely than civilians to be payday borrowers. For example, the California Reinvestment Coalition said the largest concentration of payday lenders in the Golden State are near the Marine Corps base at Camp Pendleton, just a few miles from USA FCU's headquarters.
Nicole Anderson, vice president of marketing and public relations for USA FCU, said she is proud of her credit union and its board of directors for making a statement about payday lenders.
"They trap people, and it is a vicious cycle they can't break free from," she said. "We are staying true to the credit union mission by offering a better alternative. USA Federal Credit Union is very networked with the military community. We have been listening to the voice of concern regarding the negative impact the predatory lending environment is having on our military servicemen and women. Therefore, we saw the importance of entering into a dialog with our military leaders to develop alternative solutions."
DoD Seeks Improvement
"The Department of Defense is aggressively seeking to improve the financial health of our active duty personnel," Capt. Mark Patton, U.S. Navy and Head of the Joint Task Force on Financial Health (Southwest), said in a statement released by USA FCU. "But this cannot be done with education or legislation alone. When combined with financial education and counseling, payday loan alternative products, like those proposed by USA Federal Credit Union, provide access to needed credit, at reasonable rates, and help to reduce the financial stress on our service personnel and their families."
Retired Adm. Len Hering, Commander of the Navy Region (Southwest), said "right outside our gate, predatory lenders market high-cost loans that trap our young men and women in a cycle of debt.
"Families are affected, careers are being destroyed, and our nation's security is at jeopardy. Predatory lending practices represent a real and growing threat to the military readiness of our Navy men and women stationed in California."
In August 2006, Hering participated in an online radio show on the payday lending issue with Cunningham. The weekly "Money and You" show is hosted by USA Federal and is available at its broadcast time and in archive format on the credit union's website: www.usafedcu.org.
USA Federal Credit Union is a $700-million credit union that serves more than 61,000 members.
It has 22 branches, including locations in San Diego and Riverside Counties in California, Las Vegas, Japan and Korea.
