LOS ANGELES (3/13/12)--Credit unions and local banks are increasingly offering short-term loans to counter an industry typically dominated by storefront payday loan centers, according to a Monday article in the Los Angeles Times.
Although more than two dozen community and regional banks offer versions of payday loans, the largest rise in payday loan alternatives has been seen at credit unions, Jim Puzzanghera reported in the article, "Credit unions, banks grabbing a share of payday loan dollars."
Nearly 400 credit unions now offer these products, the article said. Because of the troubled economy, which has a weak demand for loans, credit unions and banks have entered the payday loan arena because there is an expanding need for short-term loans. Credit unions and banks can offer them at terms that are superior to those of storefront payday lenders, the newspaper said. They have seen more financially strapped consumers turning to payday lenders.
The National Credit Union Administration (NCUA) has implemented restrictions for short-term loans--including a cap on the annual percentage rate, allowing members at least a month to repay, and not permitting them to roll over the loans, the paper said.
The number of federally chartered credit unions that offer payday loans has climbed to 390 this year from 244 in 2011. Payday loans outstanding rose to $18.7 million at the end of December, compared with $8.9 million at the end of March. The increase is a response to a real need, Debbie Matz, NCUA chair, told the Times.
The article also mentioned programs offered by Vons Employee FCU in El Monte, Calif., and Community Trust CU in San Francisco.