1. Payday Lending and Credit Unions Lois I Kitsch National Program Director National Credit Union Foundation

2. Payday Loan Questions What is a payday loan? Very short term loans to consumers (mostly working families) using a check as collateral at very high rates of interest Why are these loans so controversial? 90% of revenues are based on fees from trapped borrowers A typical payday customer pays $793 in fees on a $325 loan Consumer Federation of America

3. Size of Market How big is the payday loan industry? 22,000 payday lending stores Combined loans of $28 Billion Total fees paid $4 Billion Average loan size$325 Payday Loan Questions?

4. A Credit Union Opportunity... Really?

5. Payday Loan Questions Why are payday loan alternatives a member value proposition? An estimated 7 to 15% of credit union members use payday loan products It is known that even credit union employees are using the product Our members are getting caught in the payday lending trap – making it difficult to honor other obligations

6. Payday Loan Questions What motivates credit unions to get involved? Good business decision – New members, new and often times profitable loans Good social decision – Our members are using payday loans – we need to help them and other consumers out of the payday loan trap Good advocacy decision –

7. Adding a Payday Lending Product Why does our credit union want to offer this product? Revenue To bring in new members To help our existing members To help my community To help the credit union movement

8. Adding A Payday Lending Product What other issues should we think about? Selling the product to your volunteers Selling the product to your staff Selling the product to your members Selling the product to your community

9. The Credit Union Opportunity How to make the Credit Union Difference How to make the Credit Union Difference - Add appropriate products to your menu of services Determine if your members are caught in the short term loan cycle – Members do want a low cost short term loan option - offer a product to help them move up a wealth path Price your product as low as possible to generate revenue Encourage your members to save and to become savvy borrowers Visit the FRI website for relevant publications