It has been more than ten years since REAL Solutions began working with credit unions to find the right products and services to help low-wage working families build economic capability. As a country, we have weathered the recession and we are looking towards a brighter future. Yet, millions of Americans are still struggling. 66% of Americans are living paycheck to paycheck and even more startling is more than half of Americans have no savings to withstand an economic set back. According to Business Insider, each year, 12 million of your friends and neighbors turn to predatory lenders to pay for that car repair, those school clothes or other emergencies.
One very typical predatory loan is a payday loan which is a small short term unsecured loan which relies on a consumer’s (or in our case a member’s) next paycheck as a form of collateral. Most of these loans are lethal to a person’s ability to accumulate wealth. While some states do have limits to these types of loans, people are paying in interest 35 times that of the charges on a credit card or 80 times that of a mortgage or a car loan.
I am saddened that while more information is in consumers hands, borrowers are still paying up to 574% and are entangled in a seemingly never ending cycle of debt. In our early research around this issue, we found that not only were members of credit unions using payday loan products, oftentimes so were employees. So what are credit unions doing about it? A lot.continue reading »