Six CUs Chosen to Create Payday-Loan Alternatives

January 1, 2006

Six credit unions across the nation are part of a plan to create alternatives to payday lending for consumers.

The National Federation of Community Development Credit Unions and JPMorgan Chase & Co. selected credit unions that have a record of improving the communities they serve, according to Lewis Jones, president, J.P. Morgan Chase Foundation.

Grants totaling a combined $225,000 will go to:

ASI FCU, Harahan, La., $25,000. The $193-million asset credit union will launch APPLE consolidation loans that allow members to pay off debts of up to $1,000 with predatory lenders. Member-borrowers have up to 18 months to repay the 10% annual percentage rate loans. Part of each loan payment will go into a savings account to help the member in future emergencies.

Bethex FCU, Bronx, N.Y., $25,000. Bethex FCU will expand its "Cash in a Flash" program, which provides emergency loans up to $500 without a checking account or good credit history. The $8-million asset credit union generally will approve loans the same day and will work to bring people in for credit counseling, financial literacy training, and other services.

Faith Community United CU, Cleveland, Ohio, $50,000. The credit union will use its grant to ease requirements for newer members and increase their "Grace" payday loans by 30%. The credit union requires borrowers to save a minimum of $10 per month and show proof of employment. Almost 30% of its members are below the federal poverty line, and many meet the current minimums for the "Grace" payday loans.

Lower East Side People's FCU, New York, $25,000. The $12.5-million asset credit union will offer emergency, nonrenewable loans of up to $500 to any employed member who gets paid by check. It expects to make at least 500 payday alternative loans, enroll 250 borrowers in financial literacy classes, and counsel 200 about economic independence.

Northeast Community FCU, Mission Area FCU and Patelco CU, San Francisco, $50,000. The three credit unions have formed a consortium to offer financial services to San Francisco's most underserved populations. It will refine Northeast Community FCU's "Grace Loan" program and expand it to Visitación Valley, Excelsior, and Bayview-Hunters Point. These linguistically and culturally diverse areas are particularly at-risk for using payday lenders. The credit unions also will create a credit union service organization, satellite branch office, and field offices.

South Side Community FCU, Chicago, $50,000. The credit union, newly chartered in November 2003, already launched the first payday loan alternative on Chicago's South Side. It will use its grant to more than triple the number of Payday Alternatives Loans in 2005. The grants are part of a $400,000 project announced by the federation and the bank earlier this year.

CUNA's Alternatives to Payday Lending Task Force also is addressing the issue and has published a resource of credit union programs aimed at payday lending.