A small but mighty response to payday lenders and fintech competitors

Credit unions are experimenting with employee-sponsored small-dollar loan programs at the urging of Filene and the FINRA Foundation.

NorthCountry Federal Credit Union($641.6M, Burlington, VT) began offering employer-sponsored small-dollar loans (ESSDLs) a dozen years ago as a way to help borrowers and their bosses alike.

Today, the Vermont cooperative has more than 40 private and public employers enrolled in its ESSDL program — what NorthCountry calls income advance loans — and encourages cooperatives everywhere to consider doing the same.

The idea is simple but powerful. Employers enroll in the program and then offer the loans as a benefit of employment, sometimes with loan reserves bolstered by company contributions.

The credit union offers these short-term notes at rates far lower than those extended by payday lenders and takes payments from the employees’ direct deposit paychecks. Borrowers must ask their HR department to stop the direct deposits, which serves as a disincentive to non-performance and helps dampen delinquencies. Typically, NorthCountry does not pull credit reports but does report successful repayment to the credit bureaus.


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