Following the lead of credit unions in several other states, at least 14 Pennsylvania credit unions are teaming up to offer their members a cheaper alternative to payday loans.
Credit Union Better Choice will provide loans up to $500 for as long as 90 days, said Michael Wishnow, chief spokesman for the Pennsylvania Credit Union Association, which developed the program in conjunction with state regulators. The cost will be a $25 application fee and an APR of 18%. The application fee may be charged up front or financed as part of the loan.
The payday loans will also have a forced savings component, requiring members to borrow 10% more than the amount of the loan, which will be deposited into the member's savings account.
Credit unions in states including Ohio, Wisconsin, and Oregon, have launched similar payday loan programs in recent months.
Last week the Pennsylvania Department of Banking sued Advance America, the nation's largest payday lender, saying that it provided lines of credit without a license and that its interest and fees were in violation of state law.
