Credit Union Better Choice program's
By Joyce Moed, Reporter

HARRISBURG, Pa. ­ Since the Credit Union Better Choice program’s launch last October, 54 credit unions agreed to offer Credit Union Better Choice loans to those seeking an alternative to payday lending. Forty-one of these CUs have made 1,661 loans–totaling $869,149.

The Credit Union Better Choice program was developed by the Pennsylvania Credit Union Association, in conjunction with the Pennsylvania State Treasury.

"The idea was initially started by our state banking regulator at the time (Bill Schenck)," said Michael Wishnow, vice president of marketing and communications for the Association. "He challenged credit unions in Pennsylvania to develop an alternative to payday lending. He planted the seed. As we had begun to develop this program, the State Treasury got involved. They reached out to us, and we explained what they were doing. They asked ‘How can we help get it off the ground?’"

The Association’s answered the State Treasury that it could help by making an investment. The Treasury then requested for the Association to present them with a footprint for them to consider before deciding whether to make an investment.

"By January 2007 we had built a sufficient footprint," Wishnow said. "And the Treasury invested $20 million. This was the first time Treasury dollars were invested in credit unions."

A typical $500 payday loan costs consumers $15 for every $100 borrowed, or approximately $450 over 90 days, according to the Pennsylvania CU Association. A $500 Credit Union Better Choice loan costs consumers approximately $42.50 for the same 90 days, and at the end of the loan term, the consumer has $50 in a savings account that allows them to develop a savings habit. The loan can be for any amount up to $500 for a 90-day term. Payments can be made monthly, weekly or bi-weekly, as the specific credit union’s discretion. There is a $25 one-time application fee, and an 18% APR.

The program is also designed to help borrowers gain more financial stability in the future.
"Ten percent of the loan amount goes into a savings account, and the credit union is required to provide some financial counseling," Wishnow said.

Wishnow explained that there are two types of lending institutions: ones that build wealth, and ones that strip wealth. Those that build wealth include banks, credit unions and stockbrokers, he said. Ones that strip wealth include payday lenders, title lenders and check cashers.
"Our goal is to take people being stripped by their wealth and move them into a wealth-building situation," he said.

Borrowers must also become members of the credit union to be able to get the loan, Wishnow said, either by being part of the CU’s field-of-membership for seg-based CUs, or joining a community chartered credit union.

"Through Pennsylvania’s credit unions, consumers, especially those living paycheck to paycheck, are able to access affordable small loans," said Jim McCormack, president and CEO of the Association.

The initial results show that Pennsylvania consumers saved an average of 80 cents in loan fees and costs for every dollar borrowed through a Credit Union Better Choice loan rather than through a typical loan from a payday lender. This translates into more than 619,000 that consumers kept in their own pockets by using credit unions that offer Credit Union Better Choice loans, according to the Pennsylvania CU Association.

"We are extremely proud of these early results," McCormack said.

These initial results, which were released earlier this summer, were gathered from semi-annual results provided by participating credit unions. The yearend numbers will be reported in early 2008, said Michael Wishnow, senior VP of communications and marketing for the Pennsylvania Credit Union Association.

"While the numbers for the first reporting period are indeed impressive, it is our hope that as more credit unions offer the Credit Union Better Choice program, the savings to consumers will continue to grow," McCormack said.

Robin Wiessman, Association treasurer, agrees.

"I am very pleased by the success of this program in its first eight months and look forward to its continued growth and expansion, so that few and fewer Pennsylvania consumers suffer from the exorbitant fees and demanding repayment schedules enforced by many payday loans," she said.
Wishnow is also expecting growth for the program.

"My gut tells me that amount will double or more-than-double in the next six months," he said.