The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

The Wild, Wild West of Lending

On June 13th, 2016, posted in: Uncategorized by

wild wild westWe should have been on the stage sharing with the packed house what St. Louis Community Credit Union (SLCCU) does from our corner of the world to combat payday lending. We have an alternative to the otherwise usurious nature of a loan product that is far from conducive to allowing families to build wealth. We’ve had the products for years, helping consumers save $8 million annually.

Literally, we could have told the world. Every major news outlet covered the announcement by the Consumer Financial Protection Bureau (CFPB) as to their newly created rules for payday lenders, the CFPB’s hope being that their restrictive rules will reign in those considered to be the wild, wild west of lending.

With loan rates being in the multiple of hundreds percentages (444% in Missouri), we would have told the world that we are at 36% APR or below on our current suite of products. People would have stood and applauded. Our payment terms are far from the standard “two weeks and the entire amount is due.” Please. We measure our terms in months not days. If the consumer doesn’t have $500 today, he or she sure in the heck won’t have it in two weeks. Our collection processes are fair and not demeaning to people struggling to make ends meet. And that’s just some of what we do. The audience response would have been deafening at this point in the proceedings, and very few would have heard that we create a savings account with 10% of the of the loan amount to help avoid future borrowing.

At the town hall meeting, multiple groups were handpicked to present their case. Payday lenders positioned their products as a necessity versus consumer groups whose position was antithetic, as predicted. It was a panel of experts who logically and with great verve held the equivalent of a playground scrap over whose dad could beat up whose.

The fact is that the CFPB can beat up anybody they choose. Their dad is the strongest for sure. They have no oversight and play the role of judge, jury and executioner in this case. And there was no question in this audience member’s mind that the payday lending industry is in serious trouble. Then what?

A real concern should be who serves the demand when the supply of payday lenders is reduced through the CFPB action. Yes, there is demand. Banks and credit unions don’t dabble much in this world of risk loans. Are loan sharks and non-regulated back-alley means of lending going to have a resurgence? Lord help us.

SLCCU hears both sides of the argument. We found a place in the middle to help. People in need don’t need to be judged, just helped. We’ll stand in the gap and do what we can. Ours is an investment to have a positive social impact. Not many think like us.

Tell everybody you know. We need more to do their part. We’ll do our part for sure.

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