Treasurer: Statewide payday lending alternative protects consumers from predatory lending
Published: March 4, 2010
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The state treasurer says that a typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or approximately $450 over 90 days. A $500 Better Choice loan costs consumers approximately $42.50 for the same 90 days.
Treasurer Rob McCord today reminded Pennsylvanians who occasionally need quick cash for an unexpected expense – or to make ends meet between paychecks – there is a "Better Choice" for short term loans. Announcing the latest results of the only statewide payday lending alternative, Treasurer McCord touted the fact that during its short history, the Better Choice program has kept nearly $10 million in interest and fees in the wallets of Pennsylvanians.
Developed by Treasury and the Pennsylvania Credit Union Association, Better Choice loans are available at 82 credit unions with 215 locations, and additional credit unions continue to sign on. Since the program’s inception, the participating credit unions have made more than 28,000 loans totaling over $13.4 million in volume. In 2009, 13,462 loans totaling $6.5 million were issued.
“In our rough economy, many Pennsylvanians are finding that their paychecks do not stretch far enough when unexpected expenses occur. I’m proud that credit unions offer an alternative to the high-cost payday lenders for short-term borrowing needs,” said Jim McCormack, President/CEO, Pennsylvania Credit Union Association. “More importantly, the credit unions are offering financial counseling to assist borrowers with money management and credit.”
A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or approximately $450 over 90 days. A $500 Better Choice loan costs consumers approximately $42.50 for the same 90 days. The loan includes an additional $50 (10 percent) that is placed in a savings account, which encourages them to develop a savings habit. Better Choice builds upon this savings component by providing financial education to consumers to help them make better-informed financial decisions.
Consumers saved an average of $.80 in loan fees and costs for every dollar borrowed through Better Choice versus a typical payday loan – and compiled over $1.3 million in savings accounts since the program’s start.
- Total Number of Loans Issued (10/19/06-12/31/09): 28,238
- Total $ Amount of Loans Issued: $13,319,285.04
- Total $ Amount of Consumer Savings vs. Payday Lender: $9,640,798.40
- Average Loan $ Amount: $471.68
