Lending Perspectives: The 5 Cs of small-dollar lending

Where does your credit union stand on payday lending?

It seems like there is no other topic that divides credit unions like small dollar loans, or perhaps more to the point, payday loans. I’ve heard all kinds of arguments for and against having such a program, including:

  • “If my credit union doesn’t make these loans, our members will go elsewhere for them and pay more.”
  • “Just because the consumer wants something, doesn’t mean we should give it to them. There’s a demand for illegal drugs; legalizing doesn’t make them better.”
  • “We need to focus on educating members regarding the issues of payday loans so they find a better way to manage their money.”
  • “The consumers that use them know exactly what they’re doing. If getting a $300 payday loan at a cost of $45 for two weeks saves them from bouncing five checks they’ve already written, they’ll save $150 in fees from their bank and at least $150 in returned check fees from the merchant.”
  • There’s a segment of society that does not have the educational background to give them a job that supports a reasonably sound financial life. We can’t fix that. If we don’t do payday loans in an emergency they may not be able to fix their car, which will lead to losing their job. Or they may not have money to put food on the table on a Wednesday night before payday.”


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