American consumers need access to cash
There are staggering new statistics every day about the personal financial struggles faced by American consumers. Just last month, Bankrate.com reported that “Only 39% of Americans have enough savings to cover a $1,000 emergency¹.” So, when consumers are in need of quick liquidity, many are forced to turn to expensive payday loans. In fact, each year 12 million Americans take out payday loans, spending $9 billion on loan fees². For some consumers, a payday loan is a financial lifeline that occasionally helps them with emergency medical bills or other unforeseen expenses. For others, it becomes a cycle of increasingly unmanageable debt, taking out multiple payday loans with interest rates as high as 400% and sometimes beyond 1,000%.
The big financial institutions have lost – and keep losing – consumer trust
The low-income, underserved community is largely the consumer group that struggles with poor credit, and is often unable to obtain liquidity via traditional sources. In fact, there’s a certain big bank that received a stern reprimand from the Federal Reserve this past week for failing to meet its obligations to consumers and the community³. In short, this bank failed its Community Reinvestment Act exam, due to violations impacting minority and low-income communities. That’s a big blow. Loss of trust from the most vulnerable, underserved community is not easily recovered. Consumers have lost faith in the big financial institutions, and what little trust they have left continues to be jeopardized by bad decisions and bad management.
Now is the time for credit unions to step in and provide low-risk and affordable small-dollar loans for their members in need of emergency cash. Here’s why:
- Provide a new valuable service to your members, increasing loyalty, retention and lifetime value.
- Generate a new source of revenue from members paying high fees elsewhere.
- Protect your members from predatory lenders.
- Acquire new members for your credit union by promoting an affordable and convenient small-dollar loan option.
With CashPlease™, providing small-dollar, short-term loans is easier and more affordable than you think.
CashPlease™ is an innovative new short-term, small-dollar loan solution that allows credit unions to implement a consumer loan product efficiently and compliantly. Here’s how:
- No additional loan officers or other additional staff needed
- Underwriting technology that is automated and proven
- Assistance with compliance best practices
- Data-driven marketing to educate consumers about the availability of lower-cost loans
What about the CFPB’s Payday Lending Rule?
On October 3, 2017, the CFPB issued its final payday lending rule, restricting lenders’ ability to profit from high-interest, short-term loans. The tough new restrictions were predicted to essentially decimate the storefront payday lending industry, potentially resulting in up to an 80%4 plunge in payday loan volume. Although there has been much media speculation about the possible repeal of the rule, it is far from certain that the rule will be rescinded by the CFPB itself, and it is unlikely Congress will use its authority under the Congressional Review Act to overturn the rule.
So, if and when the rule takes effect as scheduled next year, consumers will be desperate for sources to obtain emergency cash with the storefront payday lenders closing shop. But even if the rule is overturned, it’s still just as critical to offer your members smarter, more affordable loan options, and to help educate consumers that these superior options exist. You need a strategy NOW to provide short-term loans in a way that isn’t financially and operationally untenable for your credit union.
Contact us today for a free CashPlease™ demo
Don’t be THAT credit union. You are a community financial institution, so serve your community! It’s time to provide affordable and responsible short-term liquidity to your members. Contact us today for a free CashPlease demo.
CashPlease™ is powered by Velocity Borrower Logic, LLC, an affiliate of Velocity Solutions, LLC
Bankrate.com, Most Americans don’t have enough savings to cover a $1K emergency, January 18, 2018
¹The Pew Charitable Trusts: Press Release: CFPB’s Proposed Payday Loan Rule Misses Historic Opportunity, June 2016
American Banker, Well-Run Banks Prioritize the Communities They Serve, February 12, 2018.
New York Times, Payday Lending Faces Tough New Restrictions by Consumer Agency, October 5, 2017.