CU Overdrafts & Payday Loans Featured in USA Today Posted by AVCU on 12:24 PM

The 8/4/09 issue of USA Today carries two reports on credit unions that were anticipated:

First is a follow-up column on payday lending alternatives by personal finance columnist Sandra Block. As expected, the headline reflects the original premise of the consumer group that criticized credit union payday lending: Some Short-Term Credit Union Loan Rates May Be High. The good news is that Ms. Block's column presents a much more extensive analysis, including a strong defense of many credit unions' payday lending alternatives, than yesterday’s story. Ms. Block spent much time following yesterday’s story exploring payday lending issues with Lois Kitsch and Steve Delfin of the Nat’l. CU Foundation, as well as several REAL Solutions credit unions offering affordable short-term loans. As a result, today's column features significantly more credit union perspectives than the original story. Ms. Block's column may appear in Gannett newspapers that choose to carry it, as well as on Gannett TV stations that may decide to air a "local angle" of the story. The only Vermont or near-to-Vermont outlet we could find is the Burlington Free Press. But for reference, here's a link to a list of Gannett newspapers and TV stations.

Second is a story in USA Today on overdraft protection written by Kathy Chu entitled, Courtesy Overdraft Fees Hit Credit Union Customers, Too. The article offers a fuzzy look at credit union overdraft protection programs, also known as “courtesy pay” in a number of credit unions. To help clear up any misunderstandings by members generated by the article, here are some key, fundamental points to keep in mind regarding credit union overdraft protection:

· Overdraft protection is a service consistent with credit unions’ philosophy and mission to meet members’ financial needs and resolve short-term financial problems.

· It protects members from the cost and embarrassment of bouncing a check or multiple checks (most merchants charge an NSF fee of $30 per check on top of the financial institution’s NSF fee).

· It’s a convenient service, which is why many choose it over options like overdraft transfers from other account or lines of credit.

· Overdraft programs are a way that mainstream lenders like credit unions can keep consumers out of the hands of payday lenders, pawn shops and the like.

· Credit unions that charge fees for the programs do so in order to make the business model work on a service that a number of their members value and are willing to pay for. Credit unions typically charge less than other financial institutions offering similar services. The average overdraft fee at a credit union is $25, less than the $35 average fee at the nation’s big banks.

In response to articles such as these, if you feel so inclined as a credit union employee or official, you may want to . . .

• Offer on-line reader comments from the credit union perspective to the online version of these articles. Quite a few of the comments already posted are very favorable toward credit unions. Remember though, these are open forums. So you may get countered by those who feel these financial services are inappropriate. Also know that the banking industry and consumer groups monitor these discussion.
• USA Today has a Twitter account where you can find these stories and link back to make comments.
• Put a human face on these complex issues. The most powerful way to get a message across about the need for these services is to have members tell their stories. If appropriate, pitch your credit union’s story by citing people who have been helped by credit union payday loans, overdraft protection, and other consumer-friendly alternatives.
• Go to REAL Solutions Lending, where you’ll find examples of credit unions with sound payday lending alternatives as well as a REAL Solutions Payday Lending Toolkit.
• Missing from these discussions is why alternative financial services are needed by some people. There are many resources out there to provide that context. One is on the IMPACT Center in a section called Reaching Low Wealth Households. Where would people turn if there were not viable payday lending alternatives through credit unions? Why do people need payday lending alternatives? These are questions that are answered by testimonials from members who have gotten out of the cycle of debt promoted by for-profit payday lenders by using their credit union's services.