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Credit union to offer cheaper alternative to payday loans

October 24, 2006 - Tucson, Arizona

The interest rates might reach 460 percent, but MesaCAN clients often tell the nonprofit's executive director, Pat Gilbert, that payday loan stores are what keeps them afloat.

"They say, 'Don't mess with them. That's how we access our money,'" said Gilbert, who runs the Mesa Community Action Network, an organization that provides services to the poor.

So Gilbert and Robin Romano, chief executive officer of MariSol Federal Credit Union, decided to offer another way.

A local MariSol branch is scheduled to open next month within the MesaCAN building at 635 East Broadway Road.

Borrowers may obtain loans with a maximum interest rate of 18 percent, a limit set by federal law.

"The cleaner your credit, the lower the interest rate," Romano said. Loans based on a signature may be obtained for an interest rate as little as 9.25 percent, she said.

"Your credit score will not determine whether you get a loan, just the rate," she said. "We'll look at the whole package: Do you have a job? How much do you earn? How do you owe?"

Gilbert said the credit union would serve as an alternative to the payday loan operations that pepper Mesa's intersections.

As of July, the city was home to 111 of them, according to Gordon Sheffield, a Mesa zoning administrator.

That's nearly double the number, 63, that existed in July 2004. Most of them are concentrated west of Gilbert Road.

Many abhor the businesses, attacking them for preying on the poor, who don't know where else to go to obtain cash quickly.

A payday loan is a short-term cash advance that is given to a borrower who promises to repay the loan plus a fee after the next payday. They are easy to obtain: A borrower needs only a checking account and a steady job to qualify.

City Councilman Mike Whalen lauded Gilbert and Romano, though he said state and federal legislation still is needed to halt the ability of payday loan stores to exploit the poor.

"Anything they can do to make it easier for people to survive is wonderful," he said.

Whalen provided the swing vote last week in a 4-3 City Council decision that rejected an ordinance that would have prohibited new payday loan operations from being built within 1,200 feet of another one. Simply restricting the distance between those businesses would not have solved the problem, he said.

Others who voted against the ordinance, such as Tom Rawles and Scott Somers, said government has no right to regulate the free market.

Vice Mayor Claudia Walters championed the ordinance. Residents in her district say the payday loan shops seem to be overwhelming everything else in the neighborhood. In fact, one intersection, Alma School Road and University Drive, hosts payday loan stores on each corner.

"I wonder if people really understood the ordinance," Walters said. "It would've limited the numbers (of payday loan businesses) that could exist."

But she supports the MesaCAN MariSol credit union.

"It's definitely a way we can begin to address (the problem)," she said. "I'm hopeful."

A publicity and marketing campaign will ensure customers are aware of the new credit union, Romano said.

Flyers made to hang on doorknobs, in English and Spanish, will be distributed within a 2-mile radius of MesaCAN, she said. MariSol also is considering advertising on Spanish-language radio stations.

And, a neighborhood event with hot dogs and soda is scheduled for after the holidays to publicize the credit union.

News Source

The Arizona Republic, Mike Cronin, Staff Writer

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