One of the things that supporters of payday lending have claimed is that they are the only ones willing to make these loans. As an article in today’s Virginian-Pilot points out, this is not necessarily the case.
Five years ago, tellers at State Employees’ Credit Union in North Carolina noticed a different group of people coming in to cash checks: payday lenders with checks written by members of the Raleigh-based credit union.
This concerned the credit union, which realized that its customers paid interest rates in the triple digits, charged by the payday lenders. State Employees’ responded by devising a low-cost alternative that provides loans as large as $500 at an annual percentage rate of 12 percent.
Since then, State Employees’ has made more than 1.5 million of the loans, amounting to $600 million.
Our neighbors to the south, North Carolina, gave payday lending a go for four years and then allowed the statute which authorized them to expire. No one in NC is clamoring for their return. Instead, other lenders stepped into the breach.
Here in Hampton Roads, Langley Federal Credit Union began offering “Quick Cash” loans to its members two years ago. Most of the loans are for $500 and carry an 18% interest rate.
FDIC has issued guidelines encouraging banks to make “small, short-term loans,” acknowledging that the demand is there.
While Delegate O’Bannon’s (R-Henrico) bill to repeal the payday lending statute was defeated in committee, he has indicated that he will propose the legislation again. In the meantime, Delegate Jennifer McClellan (D-Richmond) has already prefiled a bill (HB 1684) to eliminate payday lending effective 7/1/09.
With others stepping up to the plate to provide these loans, an appeal of the payday lending statute, with its exorbitant interest rates, is appropriate.
VIVIAN J. PAIGE | All Politics is Local 
Vivian, thank you for taking on this issue. Payday loans are nothing more than legal loan sharking. Those places prey on people who desparately need to learn financial literacy. They also prey on immigrants and charge exorbitant fees to send remittances back to the immigrant populations’ countries of origin.
I’m glad that credit unions and other financial institutions are stepping up to the plate to devise loans and other financial services for this population. But people also need much more education on how to manage their finances.
Please report more on this important topic.
I am quite happy to hear that credit unions are stepping up. What a great move.