Pa. Treasurer: Payday lending alternative saves Pa. consumers $12 million
Published: September 2, 2010
Font size: [A] [A] [A]
Treasurer Rob McCord urged people who need quick access to cash to make a “Better Choice” when seeking short-term loans. He said that since the program’s inception, consumers have used Better Choice loans to make ends meet, saving $12 million in fees and interest typically associated with payday lending products.
“Many Pennsylvanians need their dollars to stretch further in these tough times – to help them avoid a costly ‘debt trap,’ Treasury is proud to support the unique Better Choice payday lending alternative,” Mr. McCord said. “Better Choice short-term loans have helped families make it to Pay Day and help borrowers save millions in predatory fees and usurious interest rates.”
Developed by Treasury and the Pennsylvania Credit Union Association, Better Choice loans are available at 80 credit unions with 242 locations in Pennsylvania, and additional credit unions continue to sign on. Participating credit unions have made more than 35,000 loans totaling $16.7 million in volume since 2006. During the first half of 2010 (Jan. 1 – June 30), 6,780 loans totaling $3.4 million were issued.
“I’m pleased that credit unions stepped up to the plate and are meeting the small-dollar borrowing needs of Pennsylvanians. Just as important, credit unions are also providing financial counseling to help assist borrowers with managing their money,” said Jim McCormack, President/CEO, Pennsylvania Credit Union Association.
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. In addition, as a condition to receiving the loan, the borrower agrees that $50 of the borrowed funds is deposited into a savings account, which allows them to develop a savings habit. The program reinforces this wealth-building component by providing financial education in an effort to help borrowers make better financial decisions.
Total Number of Loans Issued
(From Oct. 19, 2006 to June 30, 2010: 35,018
Total $ Amount of Loans Issued
$16,705,785.14
Total $ Amount of Consumer Savings vs. Payday Lender
$12,028,165
Average Loan $ Amount
$477.06
