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Pa.s small-dollar loans save consumers nearly 17M
HARRISBURG, Pa. (9/15/11)--Nearly 50,000 Credit Union Better Choice loans have been issued to Pennsylvania credit union members for short-term cash needs since the program launched in 2006, according to the Pennsylvania Credit Union Association (PCUA). The 81 participating credit unions statewide have issued 49,971 loans, totaling more than $23 million since the program’s inception. It has saved borrowers nearly $17 million over using a traditional payday lending product. The Credit Union Better Choice loan is a payday lending alternative product where credit unions offer borrowers a 90-day loan with a $500 limit. Reasons cited for the loan’s purpose have included Christmas gifts, taxes, school clothes and funeral expenses. Credit Union Better Choice was developed through a collaboration of PCUA, the Pennsylvania Treasury Department and the Pennsylvania Department of Banking. During the first six-month cycle (Jan. 1 through June 30), 6,780 loans totaling $2.9 million dollars were issued. Borrowers could also place $290,000 into savings accounts during the period. “The continued increase in loans shows that consumers still need cash quick,” said Jim McCormack, PCUA president/CEO, adding that “every Pennsylvanian should be afforded access to loans at reasonable fees and rates." A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or roughly $450 over 90 days, said PCUA. A $500 Credit Union Better Choice loan costs consumers about $42.50 for the same 90 days and at the end of the loan term, the consumer has $50 in a savings account. Also, the program builds upon this new wealth-building component by providing financial education to consumers 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 Credit Union Better Choice rather than through a typical loan from a payday lender, PCUA said. That translates into nearly $17 million that consumers kept in their own pockets by using credit unions that offer the loans.
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