1. Short Term Credit Landscape Meeting the Need: Affordable, Responsible Short Term Credit The Problem: Lack of Affordable, Responsible Short Term Credit Woodstock Institute www.woodstockinst.org

2. Short Term Credit Landscape WOODSTOCK INSTITUTE PROGRAMS Regulation of Existing High Cost Products Consumer Education on Alternatives New Product Development

3. Short Term Credit Products THE CONSUMER CREDIT LANDSCAPE ProductAvailabilityCostConstraints Payday LoanNowHighAny Checking Account Credit UnionVariesLowCredit Union Member Credit CardApplication Processing LowCredit Rating OverdraftNowHighNo Repayment Mechanism Bank-Based Product Branch Hours Only LowChange Bank Account Easy Difficult

4. Payday lenders in the Chicago market area Customers have easy access to high cost debt Minority and lower-income communities see a slightly higher concentration Short Term Credit Products PAYDAY LOANS ARE JUST ONE OPTION LMI Tract Payday Loan Store

5. Short Term Credit Landscape 0.5 0.8 1.2 1.6 0.4 0.8 1.2 1.6 2.0 Minority MUIWhite LMIMinority LMIWhite MUI Income and Minority Tract Composition Locations per 10,000 Payday lenders in the Chicago market are located in minority and LMI tracts

6. Short Term Credit Landscape 573 percent APR Average loan was $331 Average finance charge $144 Average attorney’s fee $303 98 percent resulted in garnishment Of 444 debt collection suits filed… Source: Greed: An In-depth Study of the Debt Collection Practices, Interest Rates, and Customer Base of a Major Illinois Payday Lender. 2004 Monsignor John Egan Campaign

7. Short Term Credit Landscape MAKING CREDIT SAFER IN ILLINOIS Five Key Consumer Protections Loan fee limited to $15.50 per $100 Principal indexed to income 7 day recovery period Fee-free repayment plan Limit of two loans not to exceed 45 days Source: Payday Lending Under the Illinois Payday Loan Reform Act. 2005 Woodstock Institute

8. Short Term Credit Products THE CONSUMER CREDIT LANDSCAPE ProductAvailabilityCostConstraints Payday LoanNowHighAny Checking Account Credit UnionVariesLowCredit Union Member Credit CardApplication Processing LowCredit Rating OverdraftNowHighNo Repayment Mechanism Bank-Based Product Branch Hours Only LowChange Bank Account Easy Difficult

9. Small Banks and CUs Small banks and CDCUs are payday loan alternative innovators Limited scale and accessibility Short Term Credit Products PAYDAY LOANS ARE JUST ONE OPTION Austin Bank Northside FCU Southside FCU

10. Large banks and mainstream credit unions offer many of the services of banks Geographic FOMs allow them to serve entire regions Short Term Credit Products PAYDAY LOANS ARE JUST ONE OPTION Austin Bank Northside FCU Southside FCU Mainstream CUs Large banks and mainstream CUs

11. Short Term Credit Products THE CONSUMER CREDIT LANDSCAPE ProductAvailabilityCostConstraints Payday LoanNowHighAny Checking Account Credit UnionVariesLowCredit Union Member Credit CardApplication Processing LowCredit Rating OverdraftNowHighNo Repayment Mechanism Bank-Based Product Branch Hours Only LowChange Bank Account Easy Difficult

12. Short Term Credit Landscape CREDIT CARDS Blindfolded into Debt 75 percent of Americans qualify Misleading terms and fees “Universal Default” Only the rate range is advertised Convenience checks have different rates Source: Blindfolded into Debt: A Comparison of Credit Card Costs and Conditions of Banks and Credit Unions. 2005 Woodstock Institute

13. Short Term Credit Products THE CONSUMER CREDIT LANDSCAPE ProductAvailabilityCostConstraints Payday LoanNowHighAny Checking Account Credit UnionVariesLowCredit Union Member Credit CardApplication Processing LowCredit Rating OverdraftNowHighNo Repayment Mechanism Bank-Based Product Branch Hours Only LowChange Bank Account Easy Difficult

14. Short Term Credit Landscape HIGH-COST “BOUNCE PROTECTION” Banking on Bounced Checks $25 to $35 per overdraft plus daily fee Overdraft privilege included in balance Multiple fees for multiple bounced checks Cost for a $200 14 day loan Average Fee $29 Average total fees for 5 debits: $186 Effective APR 2,424 percent Source: Banking on Bounced Checks: Federal Proposal on Bounce Protection Still Exposes Consumers to Hidden Fees. 2004 Woodstock Institute

15. Short Term Credit Landscape GOING FORWARD Enforcement of Illinois Payday Loan Reform Act Extending protections to other short term credit options, such as title loans Monitor the impact of credit cards, bounce protection on lower-income households Promote short term credit options at larger regulated financial institutions Improve access to these products for lower- income households