Credit unions offer payday loan alternative
September 15, 2006 - Fayetteville, North Carolina
The Federal government is looking at ways to protect soldiers from predatory payday loans that charge high interest rates. North Carolina has already cracked down on lenders, so local credit unions are now offering alternatives.
The promise of thousands of dollars in just a few minutes seem appealing, but in reality, cash advances can be very costly because of high interest rates which cause some people to have to take out multiple loans.
"You get in a cycle of debt where you can't get that repaid," said David Elliott, the President and CEO of Fort Bragg Federal Credit Union.
While payday lenders were found near major cities like Raleigh and Charlotte, studies have shown that companies target areas with a military presence as well. In 2005, Wayne County, which is home to Seymour Johnson Air Force Base, had the state's highest concentration of lenders. Cumberland County, which has Fort Bragg and Pope Air Force Base, had the third highest.
Payday lenders are now essentially gone from the state, but that's left a gap for those who need emergency loan service. That's where credit unions come into play.
"If you're going to try to do away with something, you have to have a product out there to take its place," Elliott added.
Fort Bragg Federal and Pentagon Federal Credit Union offer ARK loans, which stands for Asset Recovery Kit. It's a no-interest loan of up to $500, and there's a one-time $6 fee. If someone takes out more than one loan, they have to go to credit counseling.
Local credit unions are now offering alternatives to payday lending.
"99% of the people who come see us, the primary reason for their problem is a lack of having a spending plan or a budget," said Tom Luzon, who works with Consumer Credit Counseling Services, which has partnered with the credit unions.
Luzon said the loans are successful because it includes education. He said no one has defaulted on a loan since the program started in February.
News 14 Carolina, Staff Writer
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