HARRISBURG – Pennsylvanians saved nearly $2 million last year by taking advantage of the only statewide program providing an alternative to payday lending, according to Pennsylvania Treasurer Robin L. Wiessmann and the Pennsylvania Credit Union Association (PCUA). The Credit Union Better Choice program was developed through a public-private collaboration between the Pennsylvania Treasury Department and the PCUA.
“I am extremely pleased to see that so many Pennsylvanians have taken advantage of this important loan product, and I look forward to its further expansion,” Treasurer Wiessmann said. “By making the Better Choice, consumers are not only receiving the short-term loan they need, but are also making an investment in their financial future, through the program’s savings and fiscal literacy components.”
Since the program’s launch in late October, 2006, 64 credit unions with 181 locations have agreed to offer Credit Union Better Choice loans, with additional participants continuing to sign on. From the participating credit unions, 50 made 5,706 loans totaling $2.7 million dollars in volume.
“This loan volume confirms that Pennsylvanians need access to low-cost short term loans. In our tough economy, the Credit Union Better Choice program provides members with access to emergency money,” said Jim McCormack, President/CEO, Pennsylvania Credit Union Association.
Payday lending (sometimes called cash advance) is the practice of using a post-dated check or electronic checking account information as collateral for a short-term loan. According to the Center for Responsible Lending, these predatory practices cost Pennsylvanians at least $100 million every year. Studies have shown that payday lending is especially widespread in predominately lower-income and minority areas where consumers may have more difficulty gaining access to less costly credit options.
A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or approximately $450 over 90 days. A $500 Credit Union Better Choice loan costs consumers approximately $42.50 for the same 90 days and at the end of the loan term, the consumer has $50 in a savings account, which allows them to develop a savings habit. In addition, the program builds upon this new wealth-building component by providing financial education to consumers in an effort to help them make better-informed financial decisions.
Pennsylvania consumers saved an average of 80 cents in loan fees and costs for every dollar borrowed through a Credit Union Better Choice loan rather than through a typical loan from a payday lender. This translates into nearly $2 million that consumers kept in their own pockets by using credit unions that offer Credit Union Better Choice loans. In addition, borrowers were able to place $273,432 into savings accounts for future needs.
To learn more about the Credit Union Better Choice program, visit www.pacreditunions.com. For information regarding the Pennsylvania Credit Union Association, please visit www.pcua.coop.
The Pennsylvania Treasury Department, under the leadership of Treasurer Robin L. Wiessmann, acts as the Commonwealth’s bank, serving as custodian, investor and disburser of the Commonwealth’s funds. Treasury also offers a variety of programs and services that help Pennsylvanians find money with the Unclaimed Property program, save money with the nowU College Savings Program and the KeystoneHELP low-interest loan program, or invest money with the INVEST program for local governments and nonprofits. For more information about Treasurer Wiessmann and the Pennsylvania Treasury Department, visit www.patreasury.org.
