Payday Loans by Credit Unions Come Under Fire

May 20, 2013
American Banker  
payday lending news

Nine federal credit unions are making loans bearing what amounts to triple-digit annual percentage rates, similar to payday loans attacked by regulators. Of the nine, three are directly offering the loans -- Kinecta Federal Credit Union in California, Tri-Rivers Federal Credit Union in Alabama, and Louisiana Federal Credit Union -- while six others use third-party service providers not subject to National Credit Union Administration supervision. While normally bound by an 18 percent usury cap, the credit unions have been charging customers fees that do not count toward the cap. Exposed thanks to research by consumer groups, the offending institutions now will have to answer to NCUA Chairman Debbie Matz. She vowed to also scrutinize the three credit unions over which she has no authority. "I care very deeply about protecting consumers from predatory payday loans and providing credit union members with affordable alternatives," she declared, adding that "the vast majority of credit unions offer responsible loans to their members."
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