RICHMOND, Va. – Gov. Tim Kaine unveiled a new payday loan program yesterday exclusively offered by Virginia CU, originally the state employees’ credit union.
The Virginia State Employees Loan Program, a partnership between VCU and the Commonwealth of Virginia Campaign will offer loans short-term loans up to $500 to state employees at 25% interest and no fees and no credit checks.
"We’ve been helping them with it and the program design for some time," said Glenn Birch, head of marketing for the $1.8 billion credit union.
Borrowers must be a credit union member with at least $5 in a savings or checking account. To qualify for a loan, participants must successfully complete an online financial course and a 10-question financial literacy exam.
"Our credit union was founded by state employees in 1928 so we have a long-standing relationship with state employees," Birch told The Credit Union Journal yesterday.
Loans will have six month maturities, with payments through direct deposit from the employees credit union account. Employees can have only one loan at a time and two per year.
State officials decided to use the Commonwealth of Virginia Campaign, the state's employee charity giving program, to set up a fund where Virginia's nearly 100,000 employees could donate money for co-workers in distress. In a year it collected about $70,000.
The program awarded about $31,000 in grants, but because of the high number of applicants, officials decided they needed a fund that was self-sustaining and settled on the 25% interest.
Employees who take out a $100 loan would pay back about $108, or $540 on a $500 loan. Borrowers would pay less interest if they paid off the loan sooner.
