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Texas CUs offer payday loan alternatives
DALLAS (7/6/09)--Credit unions in north Texas are working together to develop a payday loan alternative that will cap the interest rate paid by borrowers at 18% (Fort Worth Start-Telegram and Lone Star Leaguer July 2). Credit unions in the Texas Credit Union League (TCUL) are developing the payday loan program as part of the league’s participation in the National Credit Union Foundation’s REAL Solutions program. Representatives of the participating Texas credit unions are currently examining credit union payday loan alternatives developed in Iowa, New Mexico and Pennsylvania. For example, $44.9 million-asset Hershey FCU in Hummelstown, Pa., offers loans of up to $500, which must be repaid in 90 days at 18% interest plus a $25 fee. Ten percent of the loan amount is deposited in a savings account. Loan applicants must be credit union members for 90 days, provide proof of income and be employed for six months. The Texas group hopes to launch its own payday alternative by year-end. Credit unions planning to participate include $5.7 billion-asset Guardian First FCU, Fort Worth; $49 million Security One FCU, Arlington; $36.5 million First Class American CU, Fort Worth; and $5.322 billion American Airlines FCU, Dallas. Payday lenders typically charge interest rates of 300% to 400%. Fifteen states have capped the interest rate at 36%, but a 2008 attempt to limit payday loan interest rates in the Texas legislature failed.


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