Affordable mainstream credit still key for underserved after record 2022
The year 2022 reemphasized the reason small-dollar lending has consistently delivered on member need over and over since the beginning of the credit union movement over 110 years ago. The effect affordable mainstream credit had on the financial health of cooperative members and its value to the marketplace – due in no small part to the accessibility and affordability of digital fintech like QCash – was put on full display when the numbers eventually came in earlier this year.
The results are staggering: according to Pew Charitable Trusts, with the advancement of fintech and its increased adoption in 2022, those credit unions who took part in the National Credit Union Administration’s (NCUA) Payday Alternative Loan (PAL) program set a new record for loan volume at $227 million, demolishing the previous high of $174 million set in 2019.
It makes sense, seeing as six of the eight largest financial institutions in the country (by location count), who manage 23 percent of all branches, collectively, debuted small-dollar lending programs that cost at least 15 times less than average predatory payday loans.
When you make small-dollar lending available at an accessible and affordable rate, the demand will be there. That’s fortunate, because unlike the high-priced, predatory lending industry that scams consumers and wayward cooperative members to the tune of more than $20 billion annually, small-dollar loans from credit unions incorporate consumer protections, significantly lower rates, negotiable repayment terms, and regular payment programs that take up only a small portion of the member’s annual income.
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