As Payday lending stores close, credit unions, others touted as alternatives
Friday, May 16, 2008
Springfield, Ohio — As payday lending stores promise to close, alternative loan products can aid consumers.
Cash America, which runs Cashland and Cash America Payday Advance, announced it will close nearly all of its Ohio stores in response to state legislation regulating interest rates and other practices.
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It's not known yet whether that will include the Springfield stores, a company spokeswoman said.
Several other companies testified during hearings that the legislation would cause them to shut their doors.
The pending legislation includes creating a program to offer incentives for nonprofits and banks to make small loans, said Tom Allio, chairman of the Ohio Coalition for Responsible Lending.
Consumers also can turn to credit unions, he said.
"That's a much more affordable product," Allio said.
International Harvester Credit Union offers a payday alternative loan with an 18 percent annual percentage rate and a $35 annual fee for $250, or $70 for $500.
The credit union began offering the loans about four months ago and has 50 to 60 outstanding, President and CEO Jim Kitchen said.
"Our members were getting strapped by going to too many payday lenders," he said.
Wright-Patt Credit Union offers a similar product.
Both have requirements, such as membership for 60 days and a verifiable income.
Wright-Patt has offered its stretch pay loans for about seven years and has expanded it to 40 credit unions in five states, said Jeff Carpenter, vice president of membership and development.
About 8,600 loans totaling $2.4 million are outstanding.
The loans require repayment before another one can be taken, Carpenter said.
"It's not going to get you stuck in it," he said.
Another option is pawn shops, said Sam Beloff, partner of Rose City Fine Jewelry and Loan.
Pawn shops are tightly regulated, he said. Consumers can sell items or receive a 30-day loan with 5 percent interest.
