HONOLULU (6/23/14)--Pearl Harbor FCU, Waipahu, Hawaii, with $341 million in assets, has launched a program that offers members an alternative to predatory payday loans.
Called the Smart Advance, the program offers short-term loans to members without forcing them to navigate the traditional application process, all with an interest rate substantially lower than what payday lenders tag people with (Hawaii Reporter June 19).
"Our goal is to help our communities with products and services that will empower them financially," Neal S. Takase, Pearl Harbor president/CEO told the Hawaii Reporter. "Many individuals in our state, unfortunately, have experienced the negative consequences of a payday lending cycle. With products like the Smart Advance, we can assist and hopefully prevent members from becoming victims of financial abuse."
The advantages of using Pearl Harbor's program include: receiving longer repayment terms, having access to small-dollar amounts, receiving fast approval and securing manageable rates and fees.
The NCUA's short-term, small-amount loan program permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. Currently, this amounts to an interest rate ceiling of 28%.
Pearl Harbor also offers a discounted 18% rate as well.
On average, those who borrow from storefront, predatory payday lenders are given two weeks, or until the next payday, to pay back the entire loan, which typically pack interest rates of about 400%, according to a study by Pew Charitable Trusts.
The upfront cash allows the consumer to pay off bills on short notice, but the untenable terms often leave the borrower indebted for months--forcing them to roll over the loans repeatedly.
When accounting for the fees and the finance charges, paying off the payday loan becomes very difficult, if not impossible, said Glen Fukunaga, Pearl Harbor vice president of lending. The Smart Advance is a better, more affordable alternative than a traditional payday loan.