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News : Faxless Overnight Payday LoansCredit unions, churches step in to provide payday lending alternativesJanuary 13, 2008RICHMOND, Va. - Brett Noll figures what his credit union loses in profit on its payday loan alternative it makes up for in good will. Noll's Langley Federal Credit Union is one of a growing number of credit unions, churches and nonprofit organizations that are providing low-cost cash advances as states like Virginia grapple with a growing payday loan industry and those left drowning in debt because of it. As of Friday, legislators had filed more than a dozen bills to either repeal the 2002 law that brought the industry into Virginia, reform it or cap the annual interest rate on the loans at 36 percent. Legislators balked at a rate cap last year because payday lenders said it would put them out of business and leave Virginians with nowhere to turn for cash in a fix. Industry opponents hope the new alternatives will help persuade lawmakers to get tough on payday lenders. "The situation is that payday lenders can advertise and have a store front in every strip mall in the state because they collect these large sums, whereas the alternative providers don't have the profit to go advertise anywhere and everywhere," said Daniel Morrisey, volunteer treasurer of Queen of Peace Arlington Federal Credit Union. Langley Federal Credit Union was one of the first in the state to offer payday loan alternatives. It has jumped from about 100 to 200 cash advances a month in 2004 to between 600 and 800 now, said Noll, senior vice president and chief marketing officer. At Langley, borrowers can get loans up to $1,000 at 18 percent interest. Morrisey's credit union offers loans of up to $600 at 16 percent interest. Most require fees to be a member of the credit union. Payday lenders are allowed to charge $15 for every $100 loaned up to $500. The loans usually are paid back in two weeks at the borrower's next payday, pushing annual interest rates to around 390 percent. The lenders argue that's not a fair assessment, because the $15 is a fee that doesn't accumulate. But opponents say it is when borrowers take out one loan to pay off another that they spiral deep into debt. Payday lenders have said they couldn't survive on a 36 percent rate cap--charging just $1.38 for a $100 two-week loan. Noll said that's what separates credit unions from payday lenders. "A credit union typically, almost always, will have the person's best interest in mind as opposed to making a profit off the person," Noll said. "We're a not-for-profit organization and we truly exist to provide good service and act in the best interest of our membership." Unlike in some other states that have had legislative faceoffs over payday lending, the Virginia Credit Union League has not taken a side on the issue and does not plan to, said Lewis Wood, a spokesman for the organization that represents nearly all of the state's more than 200 credit unions. Source : http://www.dailypress.com/ |
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