Credit Unions Reach Out, Offer Consumers Alternative to Payday Loans

Board of Managers Ohio’s Credit Union Outreach Solutions, Inc., CUSO
Bill Burke, CEO, Day Air CU	Doug Fecher, CEO, Wright-Patt CU
Catherine Herring, CEO, Communicating Arts CU	Dick Maslyk, CEO, MidState Educators CU
Paul Mercer, President, Ohio Credit Union League (ex officio member)

Dublin, OH (June 15, 2006) – A group of Ohio credit unions and the Ohio Credit Union League have unveiled a new low-cost loan alternative to help consumers who are caught up in the payday lending treadmill and paying as much as 400 percent APR (annual percentage rate) for a short-term loan.

StretchPay is a new short-term salary advance loan program being offered by a number of credit unions. A member pays a modest annual fee ($35 for a $250 loan, $70 for a $500 loan) and is charged an interest rate of 18 percent. The entire balance must be repaid by the borrower within 30 days before taking a new advance. A credit union member who takes 12 advances of $250 each in a year incurs a total cost of approximately $78. In contrast, the borrower would pay more than four times that amount -- up to $360 -- for 12 similar loans from a payday lender.

In addition to getting an affordable and reasonable rate for their loan, consumers receive an unprecedented service from their credit union – the opportunity to receive financial counseling and education to break free of the payday loan debt treadmill. Financial education has long been a core plank of the credit union philosophy.

The StretchPay program was first piloted by two credit unions in the Dayton-area market – Wright-Patt Credit Union and Day Air Credit Union.

“The fees saved by members are incredible,” said Bill Burke, CEO of Day Air Credit Union. “And if people are in a repeat pattern of borrowing, we make every effort to get them into financial education counseling so that they can break free of the payday lending merry-go-round.”

Doug Fecher, CEO of Wright-Patt Credit Union and chairman of the Ohio Credit Union League, said predatory lending continues to be a real and pressing problem in society. “It’s an evil practice,” he said. “Credit unions are working collaboratively to be part of the solution. It’s incumbent upon us to come to the aid of the consumer. If credit unions can’t solve this problem, no one can.”

Ten credit unions from across Ohio and the Ohio Credit Union League have formed Credit Union Outreach Solutions, Inc., a cooperative organization to fuel outreach and community commitment initiatives. StretchPay is one of those initiatives. Credit unions participating in StretchPay include: Affinia Credit Union, Dayton; Atomic Employees Credit Union, Waverly; AurGroup Financial Credit Union, Fairfield; Communicating Arts Credit Union, Cincinnati; Day Air Credit Union, Kettering; Fiberglas Federal Credit Union, Newark; FirstDay Financial Federal Credit Union, Dayton; Incenta Federal Credit Union, Dayton; Kemba Credit Union, Cincinnati; KEMBA Financial Credit Union, Columbus; Kent Credit Union, Kent; MidState Educators Credit Union, Columbus; Ohio University Credit Union, Athens; Parish Federal Credit Union, Toledo; River Valley Credit Union, Miamisburg; Seven Seventeen Credit Union, Warren; Toledo Area Community Credit Union, Toledo; Western Credit Union, Columbus; and Wright-Patt Credit Union, Fairborn.

Other credit unions across Ohio and around the nation are invited to participate in Credit Union Outreach Solutions. Credit unions and leagues in a number of other states have already expressed interest.

“Our mission as credit unions is to be of service, and our goal is to make financial services accessible and affordable for everyone,” said Paul Mercer, president of the Ohio Credit Union League. “Credit unions have done this with great success for many decades, in Ohio and across the country. The Credit Union Outreach Solutions collaboration and the StretchPay program are terrific examples of credit unions’ cooperative spirit and commitment to purpose.”