RICHMOND, Va. (3/27/15)--The credit union mission stood out during a Consumer Financial Protection Bureau hearing in Richmond, Va., Thursday, as panelists addressed various aspects of payday lending. The field hearing was held in conjunction with the bureau's new proposal on payday lending.
While some at the hearing defended such lending as a consumer's choice, and others compared payday loans to "giving a starving man food laced with poison," panelist Stan Leicester of BayPort CU, Newport News, Va., offered a simple alternative: come to a credit union.
"Credit unions have two primary objectives: get the member out of the payday lending cycle from week to week and improve credit scores," said Leicester, senior vice president/chief financial officer at BayPort CU.
"We feel like our two primary objectives have been reached: We've done over $50 million [in short-term loans] since we started our program, and we've converted about 3,300 members out of the payday lending cycle. We're really proud of that."
BayPort started its short-term lending program in 2007, Leicester said, and it also offers a line of credit good for up to one year with a small fee and interest charged. Borrowers are required to pay off the loan within 30 days.
Leicester also added that borrowers are provided with financial counseling when they look into those types of loans. Counselors on staff look at ways the member can improve their credit score and get out of the payday loan cycle.
During the question-and-answer portion of the panel discussion, Leicester was asked what features credit union loans have that protect consumers.
"We carefully underwrite those loans to make sure the borrower has the ability to repay. Our main goal is to get them out of that payday lending cycle and get them into a more traditional product," he said. "We also do feel like many people end up improving their credit score and then once we ultimately get them into that newer product, we can do that at a lower cost."