Alternative To Payday Lending
By Joyce Moed, Reporter

PHOENIX, Ariz.– Arizona State Credit Union is partnering with a nonprofit healthcare employer to offer its employees an alternative to payday lending.

University Medical Center Foundation's employees can take advantage of the CU's FlexCash program as a way to pay off debt they may have to a payday lender.

"The University Medical Center is a seg group of ours," said Paul Stull, senior vice president of marketing for Arizona State CU. "And basically they have experienced an issue with their employees running to payday lenders."

Stull said they are utilizing payday loans for various reason including mortgage or rent payments. Paying these high-interest loans back leads to problems for the employee that in turn impact the Medical Center, Stull said.

"These employees are under stress," he said. Sometimes these employees terminate their employment, causing the expense of turnover. [University Medical] had talks with us about finding a way that we could do something to help break this cycle of payday lending. We've created an alternative to payday lending, to break the cycle of payday lending."

FlexCash is a loan with a 60-day repayment plan. The Medical Center also requires its employees that utilize FlexCash to undergo the credit union's financial counseling program, BALANCE.
For the FlexCash program, Stull said that University Medical is "actually a financial partner with us."

"It's a unique," he said. "They agreed to partner with us to defray the costs. It's been really great to partner with the employer. It's really been a win-win situation. I am not aware of any other credit union partnering with an employer to offer an alternative to payday lending. It shows the value an employer can bring to their employees. It's a very unique approach."

Employees requesting to participate in the credit union's FlexCash program must be referred by the Medical Center.

"Our rate is 42% over the six-month term," Stull said. He compared that to rates that can run up to 1,400% or more from payday lenders, "depending on how many times it has been rolled over."
With a typical payday lender a $500 loan with a 50-day repayment plan will add up to about $260 in fees. With FlexCash, that amount would be $35, Stull said. The minimum loan amount for FlexCash is $100, with a maximum loan amount of $750. All loans must be repaid within 60 days.
Equally important, Stull said, is providing financial education.

"We want to provide a vehicle for them to break that cycle," he said. "A lot of people get trapped by payday lending. We are giving them the tools to pay it off."

So far, two FlexCash loans have been granted. Because the program is so new, it is too soon to monitor any results.

As for feedback from the Medical Center's employees, Stull said "I have not heard anything yet."
"I have tried to put my shoes into the person who has this problem," he said. "Maybe I'd be happy about [FlexCash] but I'd be skeptical. You just have to hope they see the value. We're hoping to make them understand this is a matter worth paying attention to."